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Jewellery in India

Essay by   •  December 14, 2017  •  Case Study  •  2,348 Words (10 Pages)  •  869 Views

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Jewelart: Online Disruption

Jewellery industry remains fragmented in India but has always played an important role in the retail domain as evident by continuous growth in the past decade with a 14% value growth, reaching sales of INR 3,848 billion in 2017 (Exhibit 1).

Jewelart is a mid size fine jewelry manufacturing and retail based out of Jaipur in Rajasthan. Although the demand for jewelry has been on a rise, the small and mid size jewelers like Jewelart have not been able to benefit from it because of new entrants in the online channel. The director Dinesh Agarwal is looking for a possible plan of action to protect the company from this disruption and find innovative ways to counter the deep discounts given by competitors in the online channel.

Company’s Background

Jewelart was founded by Dinesh agarwal in 2004 when he saw an opportunity in the jewelry market due to rising incomes of middle class who was ready to move from upscale retail shops to more affordable local manufacturers. They opened a retail shop only recently to be able to sell their products directly to consumers. It primarily dealt in diamond jewelry.

Jewelart had separate manufacturing units which got it designs from an in-house designer who looked at trends on the Internet to prepare new designs. In total, the company in 2017 had 28 employees who handled sales, design and manufacturing. Since the brand just started selling directly to customers, the marketing was done only on social media but in the light of the emerging competition from online retailers, the management is thinking of new ways to reach out to the customers.

The procurement was done through vendors in Surat and Mumbai. They got the raw material for next manufacturing cycle that lasted for 2-3 months.  Once the designs were manufactured, they were sent to the retail shops where it was kept for a specified period. If it remained unsold for that period, it was recalled and melted so that it can be used for new designs.

Customer base in India

The jewellery industry can be divided into two product segments - Costume Jewellery, which is made up for inexpensive or artificial stones and Fine Jewellery which is crafted out of precious and semi precious stones.

As Manish agrawal, COO, Jewelart explained, “The shift in demographic of India from a largely rural to semi-urban young working population has contributed to the sale of lightweight and everyday jewellery. The customers have shifted to costume jewellery as it is cumbersome to take care of fine jewellery in everyday use. Historically, customers used to wear fine jewellery to maintain social image but now it doesn’t seem to matter too much and as the customer involvement decreases while purchasing jewellery, they would move to more convenient mediums like internet to get more variety and discounts”

Sukesh Luhadia, Jewelart’s chief designer stepped in, “In the product mix too, the traditional customers likes to buy neckwear & wristwear whereas the young population goes for rings or earrings”

The rise of gold prices, indian affinity towards gold and more players entering this segment has further aided to its growth. The fine jewellery market didn’t perform badly either. It has demonstrated a decent retail value sales of INR3,648 billion in 2017, with current value growth of 13% (Exhibit 4). This was majorly due to festival shopping and big marketing budgets of the branded players.

Role of Internet

In addition to this, the internet literacy has also played a huge role in the shift of customer preferences, it has already showed its effect in other sectors where e-commerce firms like Amazon and flipkart have taken advantage of growing internet subscribers (Refer Exhibit 1). This has affected how companies in these sectors communicated with their customers. India’s growth in increment of internet subscribers is only second to China which has already seen a boom in the jewellery e-commerce segment.  

The agenda to digitalise in India is bolder than ever before. As per a report by World Bank, 10% increase in broadband penetration can lead to a 1.4% increase in GDP. Hence, the Indian Government has left no stone unturned to promote digitalisation of business across the length and breadth of spectrum. A few of these initiatives are specified below.

Digital India initiative is launched on 20th August, 2014 by the Indian Government with the vision of establishing digital infrastructure of the nation. Apart from digitalisation of government services and portals, a fair share of focus has been spent in promoting digitalisation across both businesses and customers. Some of the policy changes in pipeline under the scheme include open software adaptation, electronic development fund and, electronic and digital literacy in smaller towns. The scheme also plans to bring broadband connectivity in 2.5 lakh villages and universal smart-phone phone connectivity by 2019. National Digital Literacy Mission has already trained 8.2 million Indians from rural areas in terms of digital skills by 2016.

Post the digitalisation push, a widespread change in browsing and shopping habits of internet users has been observed within the country. As per a research published by BCG, the adoption of internet in India is occurring at a rate much faster than the earlier technologies [Exhibit 5]. As per the estimate, India currently has 1.03 billion mobile subscriptions with 350 million internet users and should have 850 million online users by 2025, with majority of them being mobile first. The report also mentions that by 2020, half of the internet users will be rural, 40% women, and 33% 35 years or older. It is also noted that the behaviour of an internet user is independent of his demographic details, but depends on for how many years he has been online, i.e. digital maturity/.

Businesses

With the potential of internet as a market place increasing, businesses are not shying away either. Benefits for SMBs in India are highlighted by a joint study by KPMG and Google. The report states, 51 % of digitally enabled SMBs sell beyond city boundaries as compared to 29 % of offline MSMEs and end up growing profits twice as fast as offline SMBs [Exhibit 6]. The incentive to go digital has been further materialised by the government with the ease of filing taxes and company registration online.  

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