At the Retail Jeweller India Forum 2018, the opening presentation took a hard look at the challenges and opportunities that the jewellery industry as a whole faces from the accelerating growth of the organised sector. The Retail Jeweller India Forum is India’s most sought-after platform for the exchange of knowledge and best practices by the gems and jewellery industry. This year, the Xth edition of the Forum began with a presentation on the future of the Indian jewellery retail industry. Delivered by Ankur Bisen, senior vice president, retail & consumer products, Technopak Advisors, it was titled “Retail 2020”.
Using the two key parameters of gross domestic product (GDP) and private consumption, Bisen explained that among emerging economies, India has a very high rate of private consumption. “In 2017, India’s GDP was equivalent to $2.4 trillion. By 2021, it will be $4 trillion,” he said. “Retail is a subset of private consumption, which is itself a subset of GDP. If we compare growth in the world’s gross product (GWP) to that of India from 2000 to 2018, GWP has risen by 3.5 per cent per annum while India’s GDP growth rate has reached about 7 per cent.”
On the second parameter, Bisen said, “In Southeast Asia or China, private consumption is 40 per cent of their GDP, while it is 60 per cent in India. As 50 per cent of India’s private consumption comes from retail, we can infer that this trend augurs well for Indian retail in the coming years.”
The growing consumer “basket” is also helping jewellers make inroads into the shopping lists of middle-class and upper-middle-class households. In 1991, Bisen said, “Eighty per cent of the expenditure of the average household happened in seven categories such as food, clothing and footwear. In 2017, we have 20 categories, each of which commands a separate retail and after-sales experience.”
Offering some examples, he noted that “In 1991, for instance, one would never have thought that salons, spas or casual dining would emerge as industries, but here they are now.”
He also observed that “the share of food retailing in private consumption is decreasing, and discretionary consumption is increasing in India.” In this last category he included jewellery, apparel and consumer electronics, all of which “have registered a 5–7 per cent increase in 2017.”
Bisen saved the best for last: “By 2021, jewellery and watches will reach 8 per cent, second only to food and groceries.”
Not coincidentally, said Bisen, the retail industry is getting more and more organised. “In 2012, the retail industry was worth $400 billion, of which just 7 per cent was organised retail. The share has crossed 11 per cent in 2017, with $83 billion coming out of organised formats in the now $730 billion retail industry.” Setting aside organised retail in food, he said, “we’ll see a 25–28 per cent increase by 2021 in sales of discretionary products, namely jewellery, apparel and accessories. Twenty years ago, organised retail was completely absent.”
Talking about how important organised retail is for today’s customers, Bisen said, “There are 250 million working consumers in India, aged 20–59. They are aspirational and organised retail is better equipped to cater to them. Urbanisation and migration disrupt the previous chain of local retail experience, and in the absence of physical shops, consumers may opt for ecommerce, thus fuelling organised retail. Again, supply-side reforms such as GST are creating a level playing field for organised retail as they ensure that informal retail sectors remain compliant. Retail-led brands in ethnic wear and footwear like Zara, Manyavar, Fashion Big Bazaar and others are fuelling organised retail, taking a considerable share of the market from the unorganised sector. In FY 2017, the size of jewellery retail in India was $53.5 billion, and 28 per cent of that was sold through the organised environment. This is projected to reach 32 per cent in FY 2021.”
Consumers today are looking for eclectic jewellery. Any organised retailer that wishes to address this demand must have the necessary design capability. “Consumers want to try studded, mix-and-match and other options. They are inspired by international designs,” said Bisen. “The jewellery retailer’s goal is to adapt and produce the required designs.”
What’s more, he said, “Jewellery retailing has also changed. There is no longer a captive market. Consumers have evolved to expect a better retail experience, transparency and after-sales support. Buybacks and insurance schemes are two of the many after-sales options that can encourage a customer to patronise a brand.”
The growing demand for studded jewellery is another pressure point. “Although 25 per cent of jewellery sales are of studded jewellery, in ecommerce this rises to 80 per cent,” Bisen said. “Studded jewellery is a high-margin category, and increased demand for it will improve margins for jewellery e-retailers.” Does this mean that ecommerce poses a threat to offline jewellers? Bisen urged his audience to see it as an opportunity. Becoming a successful e-retailer, he said, is one of the ways of staying ahead in a fiercely competitive segment.
Bisen also flagged an underserved market: “Retailers should explore the semi-urban and rural sector,” he said, “which accounts for 40 per cent of jewellery demand. Retailers will have to devise ways to bring their urban model to rural areas, as the demand there is dispersed” rather than concentrated.
Regarding the heavy presence of government and regulation, Bisen said retailers should liaise with the authorities and try to lessen the multiple regulatory interventions, in order to streamline business.
“As the industry becomes organised, its supply chains and practices will be more closely scrutinised,” he said. Inevitably, jewellers will have to pay careful attention to their vendor ecosystem. “You can’t have an arm’s-length relationship with your vendors. You should insist on good work practices, working conditions and security.”
If the jewellery retail industry wishes to gain the full benefits of organisation, Bisen summed up, “These are the key concerns.”