Watershed Moment

Chances are that sometime in the future Indian jewellers will look back at 2020 - 2021 as an inflection point; a watershed moment for what is possibly one of the oldest business sectors of the country (recall that jewellery was found at Mohenjodaro and Harappa!).

It is another matter, even a touch ironical perhaps, that this momentum for change actually gathered pace during a year that the industry itself would soon like to forget! 

Dramatic Decline, Promising Rebound

Figures released by the World Gold Council a few days ago indicate that total jewellery demand in India dipped 42% during 2020 (315.9 tonnes as compared to 544.6 tonnes in 2019). It’s a never before seen low; a level not touched over the last 25 years for which there are documented records!

Though the performance in monetary terms was marginally ‘better’, the drop in terms of value was still a significant 22% (Rs 133,260 crore as against Rs 171,790 crore the previous year). The divergence between the two figures was largely on account of a whopping 34% rise in the unit price of gold (which hovered at about Rs 50,000 per 10 gms for a good part of the year).

Hit by a lethal combination of pandemic-induced lockdowns, economic disruption and price spirals, most industry insiders say that the first half of last year was a virtual write off. But, as H2 2020 shows, there was some sort of a rebound post that. Easing of lockdown restrictions, pent up demand, especially for bridal jewellery, along with higher disposable income (spends on travel and dining were naturally curtailed) among those who were not affected by job or business losses and strong rural purchases on the back of a good monsoon; all these factors led to Q4 being by far the strongest quarter of the year.

As much as 43.5% of total annual consumption in volume terms (137.4 t of 315.9 t) occurred in these last three months, a period which also accounted for 46% of purchases in value terms (Rs 61,060 crore of Rs 133,260 crore).

Will the recovery continue to proceed smoothly? Is it a V, W or Y shaped phenomenon? Can these levels be sustained? Admittedly, it is difficult to give clear and definitive answers to these questions focused on the short and medium-term prospects. 

On the other hand, it is abundantly clear that the turmoil has forced large sections of the industry to come to terms with modern retail practices; and help these take relatively deeper roots than ever before. It has good portents for the longer term, though a lot depends on whether this thrust can be sustained in an all-round manner.

Changing Dynamics

The emerging new-look industry is being shaped by the following trends.

Retailing Redefined: The few months of total lockdown and restricted movement have changed the way most consumers will shop for jewellery henceforth. There can be no going back to a purely physical style of retailing, and omnichannel seems to be the new buzzword. A recent CRISIL report found that by November 2020, 55% of jewellery manufacturers had embraced online selling, up from a mere 13% in March of the same year!

Online is now integral to the selling process, and a web presence is a necessary (though not a sufficient) ingredient for success! 

Transparency to the Fore: Going digital has also meant going transparent, and the period of physical restrictions has fast tracked the onset of openness. Dealing with a relatively faceless consumer via a virtual medium made it imperative for jewellers to provide pricing details in a more upfront manner, and the rise of digital payments further accelerated the process. There can be no going back on this front for most.

The Enlightened Consumer: Six months, and in some cases more, of working / studying from home have greatly enhanced comfort levels in use of digital devices. Cutting across multiple boundaries of age, gender, culture, geographies and so on, surfing the net, utilising Apps and much more are now no longer the preserve of the digital generation. Many a senior citizen, not to mention most in the middle age-groups, now comfortably traverse the information highway at a reasonably fair clip.

Naturally, the consumer who now interacts with the salesperson, already has a wealth of information at her disposal and, in many cases, a self-taught working knowledge of technical terms and terminology. 

Quality, Consistency Will Count: Ironically, in a time when technology has given easy access to the widest possible range of options, the consumer tends to stick with the tried and (successfully) tested. The best customer loyalty scheme? Deliver a super product and a comfortable buying experience. While the former is what attracts the customer, the latter is what ensures she returns. One gets accustomed to the navigation tools and operations of a portal, knowing where and when to scroll or click, rather than starting afresh each time. (Auto-prompt drop-down suggestions only reinforce this feeling). 

Familiarity, it seems, now breeds high comfort levels, rather than contempt. 

Conversely, the opposite is equally true. One single bad experience can erase positive memories from our wired brains with the same speed as a single press of the Delete key!

Policy Prescriptions

All of this has created a conducive atmosphere for enabling policy formulations by the government and easier acceptance by the trade.

It will help smaller, individual jewellers embrace the agenda that some of the more far-sighted trade associations have been putting forward; a perspective that has also been mirrored in the NITI Aayog’s 2018 policy document ‘Transforming India’s Gold Market’.

In this context, the FM’s move to reduce import duties on precious metals by a net 2.5% comes at an opportune moment. It will curb the grey market that received a fillip with the price spiral in recent months and provide an additional incentive to bring back into the mainstream those who have flirted with the temptation of boosting their slender margins by off-the-record transactions.

A further push will be provided by the June 2021 deadline to make hallmarking of gold jewellery mandatory. Though a decade and a half has passed since this was first mooted, the trade now seems more prepared to embrace it as well, though inadequate infrastructure could be a bottleneck hampering a smooth roll out.

The finishing touches are likely to be provided by an internal industry initiative. It is expected that later this year, a Retail Code of Conduct will be rolled out under the aegis of the industry steering committee set up by leading trade bodies. It will be the perfect complement to the external forces driving change.