Gitanjali Rural

8/2/2019 Gitanjali Rural

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Indias $9.6 Billion Rural Jewellery Market Solitaire International, India

Design and style innovators and jewellery brands thought their target markets were confined to urban pockets in

largely rural India. It turns out they were wrong! The rural Indian market is huge, as wealthy in parts as its urban counterpart and most importantly just as design and style conscious. A number of jewellery brands now actively target this huge and still largely untapped market, reports Shanoo Bijlani .

Urban India has been the engine that has driven the growth of consumptionin the country. Brands and premium goods have all first been embraced by

the city-dwelling Indian before they or toned-down versions percolatedinto the countryside. Not any more. The great Indian urban-rural divide isgradually narrowing at least among the top and middle segments of therural and semi urban areas. The rural rich are now displaying buying

behaviour akin to the most downtown of city Indians.

Thanks to the rapid growth of rural income in some segments at least the Indian consumer goods marketer has a huge and exciting new target toaim at. A look at the figures reveals the scope of this new growth. Urbanconsumers constitute 40 per cent of the total Indian population who are

still the primary sales and growth drivers but it is the other significant 60per cent of the population some 750 million in all living in 160 millionhouseholds in semi-urban and rural areas who today account for more thanhalf of I ndias consumption.

Rural India is no longer dependant on agricultural income. Thirty- five per cent or 60 million of Indias middle classlive in villages, drawing incomes of between Rs.200,000 ($4,573) and Rs.1,000,000 ($22,800) per annum. The

number of middle income households, defined as those earning between Rs.45,000 and Rs.215,000 ($1,027 and$4,900) per annum, in rural India is around 27 million, while the number in urban India is just a shade more at 29million. Moreover, rural per capita income has grown at exactly the same rate as in urban India for the past 10years. The percentage of people living below poverty line has reduced from 36 per cent in 2003-04 to 22 per cent in2006-07. Every year, the gap between the urban and rural market is narrowing. In 1973, rural India spent 72.9 per

cent of their earnings on food, and only 27.1 per cent on non food items. In 2005, they spent 55 per cent on foodand 45 per cent on non food items.

Thanks to the government initiatives, literacy levels are improving. Otherfactors like increasing incomes from non-agricultural avenues like hotelsand tourism and the IT industry, media penetration through satellitetelevision, the influence of Hindi films, declining poverty and last, but not

least, increased loan facilities have led to higher aspirations and anincrease in rural consumption.

To quote from Rama Bijapurkars book We Are Like That Only, RuralIndia is not poor nor is it totally agriculturally dependent. Rural Indiarepresents 50 per cent of Indias GDP (but 70 per cent of its people) and Even ascetics are connected today


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50 per cent of rural GDP is non-agricultural: it comes from the self

employed in all kinds of services. Indian consumers are very valueconscious.

They may be poor but they are not backward. Theyre not overwhelmed by western brands... Consumer India islarge, it is mostly poor, and it is getting richer and less poor

Rural India and Jewellery

Given this situation, the Indian jewellery industry is beginning to shift its hitherto urban focus to make the most of rural Indias market potential. The World Gold Council (WGC) estimates that the Indian jewellery market is wortharound Rs.70,000 crore ($16 billion). The urban jewellery market is valued at Rs. 28,000 crore ($6.4 billion), whilethe rural and semi-urban market is valued Rs.42,000 crore ($9.6 billion). Dissecting the rural figures further, the

family and regional players here corner a Rs.14,200 crore ($3.24 billion) portion of the market, the share of branded

jewellery is a minuscule Rs.3,000 crore ($686 million), while the small and fragmented players corner a whoppingRs.30,800 crore ($7 billion). The jewellery industry has realised that clearly, the last segment is large and significantin terms of generating a high volume market, and if properly catered to, the industry can upgrade this buyer, whichin turn, can change the complexion of the Indian jewellery industry.

In five years time, the rural jewellery market could grow toRs.50,000 crore ($11.4 billion) at todays gold prices, estimates L. Natarajan, vice president of GoldPlus, a jewellerydivision of Titan. GoldPlus sells gold jewellery only in semi-urban and rural areas, unlike its sister concern Tanishq, which

has an urban focus.Barring the small presence of the branded jewellery segment,which is organized, the majority of the rural and semi-urban

jewellery market is unorganized, fragmented, and dominated

by individual and family jewellers. Poor shopping experience, alack of transparency and a lack of designs, are some factorsthat have hampered the growth of jewellery industry.

A GoldPlus outlet in a small Tamil Nadu town

Of late, there has been a raft of organised players pushing into the rural market. Along with GoldPlus, Gitanjali, Adora, Ciemme, Kisna to name a few, have all launched rural marketing initiatives. Big players though they are,

their entry into rural India has been characterised by an unsure, testing-the-waters approach, mainly becauseinitially, none was sure there really was money to be made in this market. Some offered 18-karat hallmarked

diamond jewellery to a market that was traditionally oriented towards high-purity gold jewellery. Some triedbranded gold jewellery. All of them together brought about an explosion in the range of designs and price points forthe rural consumer along with assured buybacks and other incentive schemes.

An Eye-Opening Experience

For us, targeting these new consumers was a revelation as we only had published research to rely on, remarks

Natarajan. We did some market research of our own, trying to understand the type of jewellery the ruralconsumer wanted. The study was an eye opener according to Natarajan. We found that customers had plenty of expectations. They wanted high gold purity, and longed for firms that could deliver quality products, discounts,


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affordability, an excellent shopping experience, certification, and variety in designs. The GoldPlus survey also probed the reasons for the rural buyers preference for high -purity gold. The resultsconfirmed the fact that gold was used as an investment vehicle particularly long-term, as it was passed on todaughters at weddings (in south India 100 sovereigns or 800 grams is the minimum requirement to be gifted to a

bride) often mortgaged to tide over financial crises and seen as a traditional necessity.

Indias $9.6 Billion Rural Jewellery Market

Sensing a robust market in these areas, the firm established a Rs.50 crore ($11.4million) jewellery manufacturing plant situated in Hosur, Tamil Nadu. The companystarted making and outsourcing gold jewellery. The challenge then was to generate

profits through the scale of operations, which required a large amount of working

capital. It was also important to have good, active vendor partners. We screenedmany hopefuls, educating them about the manufacturing processes and hallmarkingstandards, explains N atarajan. The company also motivated them by offeringrewards for conformance. Additionally, the company trained around 3,000 karigars

(artisans) to impress upon them the need for maintaining gold purity and quality.

We targeted the lower middle - and the middle income group and began to upgrade them gradually, says Natarajan. In 2005, GoldPlus opened two showrooms, one inErode, Tamil Nadu, and the other in Ratlam, Madhya Pradesh. Today it has 27

showrooms in six states. GoldPlus is today the largest jewellery chain in Tamil Nadu

and its average sticker price is gradually increasing. When we started, the averageprice used to be around Rs.12,000 ($274); today it has moved up to Rs.18,000($411), says Sharad R., the head of retail and marketing.

Reports suggest that southern India consumes 40 per cent of all jewellery sold in the country. Thus having a base

in the south made sense. We did our learning in a high-traffic market and were able to build up a nice platformbefore moving on to other par ts of the country, says Natarajan.

First-Mover Advantage

If the south was a gold mine for GoldPlus, the Hari Krishna Group trained its sights on Mumbai, Gujarat and

Maharashtra. Since 2005, the firm has been selling Kisna, branded 18-karat diamond jewellery in these regionsthrough 1,091 jewellery retail outlets. Kisna is sold in a wide price range from 4,900 ($112) to Rs.250,000 ($5,716),and the brand introduces new designs every four months to cater to its design-conscious customers.


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At the India International Jewellery Show (IIJS) in August,they picked up orders from 3,416 retailers from other statesas well Madhya Pradesh, Chattisgarh, Bihar and Jharkhand.These retailers were keen to stock Kisna in their stores, says

Ghanshyam Dholakia, a partner of the Hari Krishna group. The field is open for innovative and smart players.

We are now asking ourselves, why didnt we tap thesemarkets earlier? Look at the growth potential! There are over15,000 jewellers in the three areas where Kisna is currently

sold. And we have tapped only 7.27 per cent of them so far! According to Dholakia, the rural consumer is very smart andknowledgeable and insists on certificates.

Thanks to the media and movies, the rural consumer is also getting design savvy. Western designs are popular and this Diwali, Dholakia predicts that their solitaire range ranging upwards from0.25 carats, priced between Rs.15,000 ($343) and Rs.100,000 ($2,286) will do exceptionally well. However, thefastest moving price points for Kisna jewellery in the rural areas are between Rs.10,000 ($228) and Rs. 30,000($686). For now, the brand is keen on expanding its footprint in the western and northern regions.

On the other hand, Ciemme Jewels has targeted the so-called Tier-3 and Tier-4 cities in Gujarat, the north-east,

central and north India since 2003. Deepak Raval, the firms general manager, says the Ciemme brand today isretailed through 250 outlets and 70 per cent of them are situated in semi-urban and rural areas. The firm iscurrently looking for franchisee showrooms in Mangalore, Karnataka. By 2010 we want to expand our reach to 500

stores, says Raval. It was very difficult at first, Raval notes . Selling branded diamond jewellery was tough. Most of the retailers weapproached offered to stock our jewellery, but wanted sell it as their own product and not use our label. It took usa while to impress upon them how to sell a branded product. Ciemm e uses only VVS diamonds up to I2 clarity andE-G colours. They offer 80 per cent buyback on the sticker price and deduct only 10 per cent if the product isexchanged. Raval adds, To cater to the superstitious buyer who prefers to keep the diamond jewelle ry for a week

or more to check if the stones prove favourable or not, we offer to take back the jewellery at 100 per cent if it isreturned within a month.

Ciemme caters to rural tastes and brings out limited editiondesigns. Their customers are traditional but want something

tweaked to suit their sensibilities. Minor alterations that look trendy are acceptable. If in the northern rural areas, the brandswhite gold and coloured gemstones are making inroads, thesouthern customers demand quality diamonds set in their

jewellery. Raval feels that the design element trickles down fromthe urban areas to the rural in no time, thanks to the influence of Hindi films. Buyers copy what film heroines wear. Longchandeliers, which came into vogue in urban areas only recently,

are already hot in rural areas.Rural areas are hooked up to global


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influences The brands 18 -karat diamond- and coloured stone jewelleryranges from Rs.999 ($22) to Rs.1,000,000 ($22,867), and thepopular price points that sell well in the rural and semi urban areasare Rs.15,000 ($343) to Rs.35,000 ($800).

The company issues certificates and arranges additional lab certifications if the consumer wants them. The brand

has registered a 100 per cent growth in volumes every year since its inception.

Natarajan feels that rural markets are traditionally dominated by yellow gold, with only 10- to 15 per cent favouringcoloured stones like rubies and emeralds, and only 4- to 5 per cent preferring diamond jewellery. But a deeperanalysis of these markets shows that the share of gemstones and diamonds will gradually increase in the monthsand years to come. Raval says that today about 10 per cent of the rural and semi -urban population has warmed up

to buying diamond jewellery. Five years down the line, he thinks, at least 50 per cent of this population will seek diamonds.

Lessons Learnt

So where is the rural market heading? The rural market will equal the urban market soon, says Natarajan. Therural customer is changing and so, the rural retail scene is evolving at a rapid pace.

Natarajan says, We thought they are price sensitive, butwe have been proved wrong. They are as design consciousas any urban customer and want design variety every six

months.

They are also willing to pay a premium for differentiateddesign. However, the wedding market, which accounts for

60 per cent of total sales, continues to be dominated bytraditional jewellery. The rural consumer is drawn to stylish

jewellery, but style as such is perceived differently byrural customers. Kisna

Ghanshyam DholakiaPartner, Hari Krishna

Group

Rural India offers the jewellery industry a huge opportunity. But Natarajan cautions, You have to keep pace with the change. You have to adapt quickly or lose your

customer. One constant is gold. Gold is a commodity dear to all Indian women,

irrespective of income group. Only the quantum of gold bought varies with differencesin income and savings. The growth of our business will depend on how efficiently we

catch the consumer traffic from the villages, which today travels all the way to thenearby Tier 1 or Tier II towns to buy jewellery.

As Dholakia points out, The field is vast, and open for all the organized players. Five

years from now, only brands will sell. Those who offer quality, certification and servicewill rule and reap the rewards. The turf is teeming with opportunities.

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Gitanjali Rural