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India
By Zainab Morbiwala
A last-minute upswing in sales in the final days leading up to the October 23 Diwali holiday buoyed the Indian diamond and gemstone industry. “It is true that we were not witnessing much market movement and the overall mood in the market was not positive,” Dinesh Navadia, president of the Surat Diamond Association, told Rapaport Magazine. “But things seemed to change beginning in the second week of October. Even during Pushya Nakshatra — an auspicious day for Hindus and a popular one for shopping — there was an extremely good response generated by the jewelry showrooms in the city.” According to the Surat Jewellers’ Association (SJA), sales of gold and diamond jewelry in the city rose by almost 35 percent to approximately $26 million compared to the Pushya Nakshatra holiday in 2013. Navadia added that this year, there was very good demand during the holiday for diamonds below .30 carats and many buyers were shopping for loose diamonds instead of going to jewelry stores.
The online boom has dramatically changed the way people in India shop. Consumers buy everything from electronics to apparel online, and they are showing no inhibition in purchasing jewelry online as well. But because of the deep online discounts offered on electronics like phones and tablets this Diwali season, consumers chose those items more often than jewelry, according to Sanjay Shah, director, Gold Star Diamonds Pvt. Ltd. “So far, the jewelry business has been slow,” Shah explained. “There’s not much expectation. Either the spending power is low or the money is being spent on other products. Also, when we see the kind of prices Flipkart is offering on its special Diwali sales, we expect that will hurt us a lot. As the margins are low on jewelry, we are not able to give the kind of prices that can attract customers.” Flipkart is an online retailing giant in India. In other comments on the changing dynamics of consumer behavior, Shah said, “Even in the U.S., we have seen a shift in customer spending. The recent reports that we received from retail stores were that consumers were spending more on gold than diamonds because of the fall in gold prices. Consumers would spend $500 on gold jewelry but not $200 on diamond jewelry. This is hurting diamond dealers because stores are sitting with stock. To buy gold, they need capital, so the money received from the sales of diamond jewelry is diverted to gold suppliers for new orders to replenish inventory rather than to diamond suppliers. “We have seen a drop in demand and last-minute purchases by stores in anticipation of good Christmas sales but that is still a question,” added Shah. “I am not very familiar with what is happening in China but I have heard that compared to 2013, the demand there is low.”
Jewelry trends have also shifted. “The Indian jewelry market has been significantly impacted in the past year and a half by the regulatory changes on the import of gold,” said Vikram Raizada, executive director and chief executive officer of retail for Tara Jewels Ltd., referring to the new 2 percent import duty on gold. “This resulted in an increase in the gold price, which directly impacted gold jewelry, but had lesser impact on diamond jewelry, given the reduced gold content in diamond jewelry.” From a broader perspective, consumers still see gold jewelry as more of an investment over mere adornment, Raizada added. “In our opinion, they have begun to consider diamond jewelry as a good investment option also, especially given the robust certification, return and exchange policies adopted by well-organized retailers.” Jewelry design is also getting increased attention and respect. “Consumers are now more aware of trends because of greater exposure through media and online usage,” said Raizada. “That’s why the design aspect is gaining in importance. Well-designed, well-finished and well-merchandised product is doing better. The ‘accessibility’ aspect is also important. More affordable diamond qualities and lower gold karatages are attractive in certain regions. Consumers are generally better educated and better informed than they were and well-organized retailers are taking advantage of this.”
While banks have been showing some reluctance in lending money to diamond industry players, a new trend is emerging of private equity players investing in jewelry houses, the most recent being Kalyan Jewellers and Senco Gold. South India’s Kalyan Jewellers received an investment of almost $200 million from Warburg Pincus and Kolkata’s Senco Gold secured approximately $13 million from SAIF Partners. Going forward, there could be more such investments. In another money matter, Hari Krishna Exports received considerable publicity by gifting homes, cars and diamond jewelry to 1,268 employees as a pre-Diwali gift. It is commonplace for companies to give employees gifts or cash bonuses at the Diwali holiday. But this gift-giving made headlines with the distribution of 200 two-bedroom flats to those who had no house but did own a car, almost 500 cars to employees who had a house but no car and diamond jewelry to those who already had both. The gesture cost the company approximately $8 million.Article from the Rapaport Magazine - November 2014. To subscribe click here.
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