There’s an unspoken rule for diamantaires exhibiting at the annual India International Jewelry Show (IIJS): Bring your jewelry, not your diamonds. They’ve come to recognize that the show is, essentially, a reflection of domestic jewelry demand, providing an opportunity for retailers to stock up before the Diwali festival.
They also recognize what IIJS is not: An international diamond show like those in Hong Kong and Las Vegas. And that’s okay, says Anshul Mehta, a manager at diamond manufacturer Rosy Blue; “there are opportunities in the domestic jewelry market.”
A De Beers study from last year found that Indian diamond jewelry demand had more than tripled in the decade to 2014. And the story of that growth is far from over, as rising incomes and aspirations could afford the diamond industry an even bigger prize over the next 10 years, according to the study in the company’s “Diamond Insight Report 2015,” which focused on the Indian consumer.
The positive outlook is largely driven by economic factors. Deutsche Bank has projected that India’s gross domestic product will rise by 7.4% per year in 2017 and 2018. That makes it the world’s fastest-growing large economy, analysts at McKinsey & Company wrote last year, with a consuming class that’s expected to increase more than threefold to 89 million households by 2025.
However, it hasn’t been all smooth sailing for the diamond and jewelry trade, as businesses have had to navigate shock government measures intended to formalize the economy, raise transparency and simplify its tax code. In particular, the demonetization program in November — which eliminated 500- and 1,000-rupee notes, an estimated 86% of the currency in circulation — had an immediate impact on the cash-dependent jewelry industry.
Diamond jewelry sales consequently contracted by 13% year on year to about $3 billion in 2016, according to De Beers estimates. The weak rupee and a jewelers’ strike that lasted more than a month during the second quarter contributed to the drop as well.
But the decline was short-lived, and diamond jewelry consumption has returned to normal levels in 2017, as evidenced by steady visitor traffic and orders at IIJS. Furthermore, anything diamond and jewelry wholesalers had to say about demonetization at the show was, in fact, positive.
“People thought demonetization would diminish the industry, but it didn’t,” said Praveenshankar Pandya, chairman of the Gem & Jewellery Export Promotion Council (GJEPC). “Instead, electronic transactions have increased, and cash has been limited. It enabled us to achieve a level of transparency we would not have had.”
Similarly downplayed was the impact of the goods and services tax (GST), which went into effect on July 1. Pandya noted some teething problems that needed smoothing over, but exhibitors said the 3% tax on jewelry was only marginally influencing orders.
If anything, GST boosted sales in the second quarter as consumers and jewelers crammed much of their gold jewelry purchases in before the tax’s introduction, the World Gold Council (WGC) observed in August. Jewelry sales during Akshaya Tritiya, an auspicious gold-buying festival that took place in April, grew about 30% over last year’s figures, the WGC estimated.
Such spectacular results amid such policy turmoil highlight the unparalleled demand that Indian consumers have for jewelry. The factors driving their diamond jewelry purchases are different than in other markets.
In India, the non-bridal segment accounts for 96% of total demand among working-class women, the De Beers study showed. And in contrast to other main diamond markets, where bridal jewelry usually means solitaire diamond engagement rings and eternity-type wedding bands, bridal jewelry in India consists mainly of large gold pieces with numerous small diamonds, De Beers added.
That is changing to some extent as Indian millennials start taking their cues from the US. For example, there has been a strong shift toward branded, designer and bespoke jewelry among Indian consumers, explains Abishek Sand, a partner at Jaipur-based wholesaler Savio Jewellery. “Buyers are looking for something new, and we’ve seen a big shift away from generic pieces,” he says. “People want lightweight, wearable and practical pieces rather than a one-time purchase that’s going to sit in the safe. They want it for that special occasion as well as for everyday use.”
Meanwhile, loyalty is also shifting away from the traditional family jeweler, Sand observes, adding, “The emphasis now is really on design.”
The more established jewelers have the marketing budgets to capitalize on these changes in demand. The larger chains are also gaining market share, since they’re better prepared than the small independents — particularly those in the rural areas — to operate in the more structured and transparent environment that demonetization and GST have brought about.
As a result, the likes of Titan Company’s Tanishq brand, De Beers’ Forevermark and Rio Tinto’s Nazraana program are performing exceptionally well in India this year. India is set to overtake the US as Forevermark’s second-largest market, behind China, according to the brand’s CEO, Stephen Lussier.
These trends signal a certain maturing of the Indian market. But they also suggest that the country’s growth story is entering a new chapter. And as diamond manufacturers seek out better profit margins than loose diamonds can offer, it’s easy to understand why they’re developing their own jewelry collections and bringing those to IIJS.
Given India’s economic development, its improving business structures, vast population and inherent love for jewelry, they want to position themselves in the domestic jewelry market. It’s a space that’s worth being in — one that’s likely to see further long-term gains.
Image: Gem & Jewelleyr Export Promotion Council (GJEPC)Article from the Rapaport Magazine - September 2017. To subscribe click here.