Jewelry retailing in India as received a major boost in the last couple of years owing to active participation from various jewelry brands and also the efforts put in by the Gems and Jewellery Export Promotion Council (GJEPC). Mehul Choksi, chairman, Gitanjali Group shares with us what 2013 would bring on the table for the Indian jewelry industry.
The Indian economy has just gone through a difficult year, witnessing a slowing down of growth that has led to tighter liquidity and a slackening of capital investment. Across sectors, industry has been affected by this scenario, and growth has by and large been difficult. The retail sector was impacted by the overall situation; resulting in weaker demand and delays in completion of upcoming projects. Jewelry, though stronger than many other categories, also witnessed some degree of slow down.
But, as often happens in gloomy scenarios, just as things were threatening to get darker and more difficult, a few rays of brightness that appeared towards the end of the year suddenly offered new glimmers of hope. For one there were early indications of the beginnings of an economic revival, and for another, the government finally gathered sufficient numbers to push through the long awaited (and long promised) reform allowing entry of FDI in multi-brand retail.
Together these two factors will play an important role defining directions for the retail industry in 2013 and immediately after.
The economic revival, even if weak, will bring consumers back to the stores in larger numbers, and also strengthen demand for what are otherwise considered ‘non-essentials’. Both are welcome developments that will yield relatively ‘immediate’ results, and probably be a cornerstone of retail growth in the first half of 2013.
Pickup in demand will also see more retail real estate projects moving to a finish. Analysts expect a near 100 per cent growth in retail project completions in 2013, with the backlog of a slower 2012 also being cleared to an extent. While concentration in the metros and Tier I cities will continue to be seen, there will be an exciting spread of modern retail real estate to smaller Tier II, III and even some Tier IV locations.
At another level the new policy on FDI will open out fresh avenues for growth in Indian retail. In an ‘immediate’ sense, the impact will be mostly indirect, unleashing a ‘feel good’ factor among retail players as they firm up perspectives for maximizing the potential benefits of this decision. Overseas brands that are keen to explore the Indian market will also begin drawing up plans and scouting around for opportunities.
It is only in later in the year, that the impact will take a more concrete shape as companies move from the drawing board to practical action. But full-fledged penetration of the Indian market by foreign retailers will probably only begin to be seen in 2014.
Two other important factors will continue to define the contours of retail in 2013, as they have been doing over the past few years – the changing face of the consumer and rapid technological developments.
A lot has been written and said about these two factors, which have become important over the last decade. And while there may be no startling or dramatic new developments on either front in 2013, the retail trade will have to give them due importance and factor them into all steps it takes as well.
Also, there are some important areas that retailers who wish to remain relevant in the coming decade will need to focus on, and 2013 will see more and more players moving towards making these goals a part of their daily practice.
Connect with your Consumers – In today’s world, it is just not enough to have a good product: the consumer must know that it’s out there. Brands in general will have to adopt innovative and creative methods to do this, and the ability to use all available mediums and technologies – including the newly emerged social media, phone apps etc – to do this, in an effective and cost-efficient manner, will be crucial to success.
Customized Messaging – Increasingly customization is being seen as a crucial step in retail success, whether it is through personalised sales messages; higher levels of staff training and other means, every retail customer needs to be made to feel like a VIP
Catering to the 2000+ Generation – In 2013, the children of the new millennium – those born in 2000 and therefore strangers to the last Century – will take their first step into teenage life. Born amidst the Internet and IT boom, they take these as a given, and are now familiar with the cutting edge of technology. Retailers will have to start thinking in terms of catering to this new generation and developing suitable formats especially for them.
Creating Innovative Channels – Technology has transformed the way we do many things and it has already impacted retail even today. Can we develop the means and ways to reach out to consumers by adapting these technologies to retail? Gitanjali has already been moving in that direction and three of our initiatives the Gold and Diamond ATM, online jewelry portals like gitanjaligifts.com and gitanjalishop.com as well as the E-Franchisee model for expansion have been tremendous successes.
Socially Concerned Retail – It will no longer be enough for companies to have CSR programs in general. At the retail level too it will be necessary to address the concerns of the new generation be it about the environment, ethical sourcing, giving back to society, caring for communities and so much more. Service and ambience are no longer sufficient; the ‘feel good’ factor will have to be taken to new levels.
How will these general principles apply to the particular conditions of the jewelry industry? What will be the top five retail trends in this segment?
To grasp that better, let us briefly take a look at the contours of the jewelry industry as it developed. Historically, it was a very closed business with limited visibility and virtually no marketing and publicity. It operated on a bond of trust established between jeweller and client over many generations of dealing with the same family, and word of mouth was the only way that new clients were introduced to the system.
Things began to change dramatically in the last decade of the 20th century, following the launch of the first ever branded jewelry line, Gili, from the Gitanjali Group, in 1994. Along with the broader changes taking place in the socio-economic sphere post liberalization, this set the stage for the emergence of a modern segment based on contemporary retailing principles and practices, within the jewelry industry.
This modern segment has been growing steadily ever since and accounted for about 2 per cent of the overall industry by 2005 which has risen to about 5 per cent currently. This is the segment that is the trend setter for the rest of the jewelry industry, and will define some of the key trends that will dominate jewelry retail in 2013.
Broadening the Base of Modern Retail – There will be a spurt in the completion of modern retail projects across the country in 2013. And while the metros will continue to see huge concentration of malls and lifestyle stores, almost a third of new development will be in the Tier II and Tier III cities. These will see the sharpest rise in modern retailing, with even stand alone stores opting for greater emphasis on visual displays, staff training and modern ambience. We will also see the entry of modern stores in some way into even smaller towns.
This New Development will have one Peculiar Feature – A lot of the jewelry that retails through the modern formats in smaller towns and cities will be more trendier in design and light weight; the youth of these smaller towns will put more emphasis on craftsmanship and less on the gold being used. The primary reason for this choice of jewelry in Tier II, Tier III and Tier IV towns consumers will be the aspiration to own brands and designs adorned by the Bollywood Divas and this will help Gitanjali Group because of its association with Bollywood to strengthen their footholds in newer markets.
Growth in Internet Based Retail Services – Many modern retailers will make the leap into internet based retailing, mostly through online shopping portals, though a few will also develop e-commerce enabled platforms.
Interestingly, those retailers who have already had an internet based retail presence for some time will seek new avenues of growth within the media. Use of social networking sites and smart phone apps will grow in importance for this section.
Upping the Ante in Service and Ambience – The new age customer demands a different level of service and store ambience than anything that the jewelry retailers were able to offer till a few years ago. Things have already changed for the better in many large stores across metros as well as in shop-in-shops in major department and lifestyle stores.
The prospect of foreign players entering the Indian market will see far greater concentration on these aspects of retail, especially at the very high end and in the larger metros and other big cities. Service and ambience are set to become mega differentiations in the years ahead.
Discounts and Instalment Purchases to Remain Key Sales Drivers – The pickup in the economy does not mean that sales will be smooth and brisk, rather ride back to former peaks will need to be driven forward by retailers. Customers always love a bargain, so expect more and more retailers to opt for lessening the burden on the consumer by innovative discounts and easy to pay installment based purchase schemes.
Continuing high prices of raw materials will also fuel this trend.
Aspirational Products to Grab more Shelf Space – Traditional gold ornaments will continue to be the dominant product category, but more aspirational products like diamond jewelry and platinum jewelry will be extra visible in retail shelves, especially in the metros and larger cities. This will reflect the changing nature of the jewelry purchase drivers – from being an investment, a ritual purchase on an auspicious occasion or adornments for special days and functions, jewelry in India is now catering to the fashion and aspirational needs of the buyer also.
Overall, I see a positive 2013 not only for the jewelry sector but the entire retail industry provided we undertake means and measures to keep our costs in control and pay attention to the changing needs and demands of the consumers. Consumer Centricity will pave way for a more stabilized market condition.
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