RAPAPORT... "I think for the jewelry business all across the world, very little branding is done. The whole business structure, I would say, is quite wrong,” stated Mehul Choksi, chairman and managing director of the Gitanjali Group, one of India’s largest integrated diamond and jewelry manufacturer-retailers. Choksi was speaking at the Rapaport International Diamond Conference (IDC), held on September 10, 2009. He attested that even before the recession, a large number of players in the diamond value chain were surviving on “wafer-thin margins and overleveraged assets.”
Choksi, who led the expansion and integration of his firm, believes that all retailers and manufacturers must do the same. “If you are a retailer, you will need to go into manufacturing, and manufacturers will need to go toward retailing. Otherwise there is too small of a profit,” he warned.
After consolidation, Choksi strongly advised exploring emerging markets. “If you don’t do anything else this year to grow revenue, you must step out of your comfort zone and explore India and China as your new customers.”
Choksi also urged increased marketing to boost turnover and profits. “You should invest aggressively in marketing. It pays, and I am telling you this from my personal experience,” he declared. In India, Gitanjali’s brands have turned to influential Bollywood film stars, cricket players and bridal marketing to drive sales. “Basically, I feel that most diamond jewelry is sold without any promotion, with very little marketing.”
Regarding his firm’s acquisition of Samuels Jewelers and Rogers Jewelers in the U.S., Choksi commented, “I will tell you very frankly, I am very happy with my position because 85 percent of my product is backward integrated. Sales were down maybe 6 percent to 7 percent last year and this year we are up. When I bought Samuels and Rogers, 80 percent of the inventory was memo. Today, we are manufacturing in India for those stores.”
Choksi then broke down the Indian marketplace for his audience, dividing up the nation by region. “Northern Indian people prefer medium- to low-quality diamonds with heavy designs, while in the west the preference is for medium-quality diamonds and fine designs. The southern community likes to wear high-quality diamonds because they wear them only in temples or for weddings. The eastern region demands medium- to low-quality diamonds with handcrafted designs.” Overall, the top two factors that influence Indian jewelry purchases are peer groups and lifestyle publications, he noted.
Optimistic for the future of India’s jewelry industry, Choksi pointed to its long history in the country and India’s rapidly growing consumer class. About 75 percent of parents’ lifetime savings are spent on their child’s wedding, he said. Of that amount, 65 percent to 70 percent is spent on jewelry. Choksi reported that 95 percent of the people in India have not yet worn jewelry, so he has no worries about market saturation anytime soon.
In the future, the Gitanjali Group is working toward creating private labels for a number of foreign players looking to explore India. Choksi stressed that, despite fears of a doomsday for the industry, the diamond jewelry marketplace is actually offering “a once-in-a-lifetime opportunity for players who are ready to grab it.”
Article from the Rapaport Magazine - October 2009. To subscribe click here.