India and diamonds are the best known combination throughout the diamond industry. Though India was known to have diamond mines many centuries ago - the fabulous Kohinoor is an Indian diamond - it has virtually no mines today. However, India has continued to maintain its tradition of diamond cutting and thousands of people are involved in this skilled occupation.
Today, with its cut and polished diamonds, colored gemstones, gold jewellery, pearls, non-gold jewellery and fashion jewellery, India accounts for almost 50% of the international market. The gems and jewellery sector contributes nearly 55% of the world’s net exports of cut and polished diamonds in value, 90% in terms of pieces and 80% in terms of carats. Every 11 of 12 diamonds sold around the globe are processed in India, irrespective of where these are mined. With the right policy and regulatory framework, India could establish itself as a brand in the international Gems & Jewellery market, increase employment and create new breed of entrepreneurship.
Apart form being the world’s largest diamond processing (cutting and polishing) country with an 80 per cent share in world market India’s favorable trade policies have made India the hub for gems and jewellery. The burgeoning retail industry in India is instrumental in innovatively marketing and branding diamonds and traditional jewellery, making inroads in this sector and contributing to the nation’s economy.
The Indian consumer has lately become the focus of every retailer's eye, proof being the international brands flocking in to set up franchises in India. Economic boom coupled with retail sales explosion has made a smooth pathway for all those who understand the art of retail in India. Due to the Economic boom in the country, India is emerging as a very big Consumer Market for jewellery and other luxury products and offering a very lucrative opportunity for major brands to establish presence in the Indian market. The booming domestic market along with export advantage of the industry and the Government's decision to allow foreign direct investment of up to 51 per cent in single brand retail stores has attracted a large number of players to the sector.
Players like Reliance, pantaloons, Wal-Mart, etc have already set up shops in India. The Reliance group plans to spend $5 billion in new retail formats including malls and combined service and retail formats along the evolving Indian highway system. Global behemoth Wal-Mart has also officially entered India with a strategic tie-up with the Bharti group. Wal-Mart will provide the back-end services such as sourcing and supply-chain management for the Bharti group’s planned retail formats across the country as well as an initiative to supply the countless small, convenience stores that dot the countryside all across India- reaching out directly to the consumer.
Branded jewellery is the new mantra in the market, having rapidly acquired a niche over the past few years. Increasing purchasing power and disposable incomes of India’s middle class has resulted in consumption growth of this industry by about 11 per cent in the five-year period preceding 2006-07. Add to that the insatiable Indian craving for gems and jewellery, and the demand will skyrocket to US$ 20 billion by 2010 and US$ 30 billion in 2015, according to industry experts. Focused marketing creating awareness and demand for the products, innovative product range creating excitement and expanding the category as well as transparency and adherence to best practices will help build consumer confidence.
The surprising thing about retail investment is that about 20 per cent of retail effort – in a planned manner – is targeted at rural areas, which is defined as towns with a population of less than a million. India has seen a significant growth in disposable incomes as a result of the economic growth that it has been enjoying. This income is spread in the rural areas also. According to the Tata Statistical Outline of India – 2005-06, around 60 per cent of the rural income is from north and east. Depending on the size of the market, retailers work with multiple formats – currently they are partnering with local jewellers and these jewellers retail their brands, commonly known as the ‘shop in shop’. These stores would carry a merchandise mix and are in the range from 600- to 1,000 square feet.
Retailers are also looking at mobile store concepts and thinking of innovative ways to connect to the consumer. Brand building, and creating brand identity is the focus of every retailer in India at present. Indian retailers see a huge jewellery consumer market in India but there is a slight speculation that they might soon face stiff competition from within as well as from international brands who are rapidly setting up chain stores.
India consumes nearly 800 tonnes of gold accounting for about 20 per cent of the world gold consumption. Out of which nearly 600 tonnes goes into making jewellery. According to The World Gold Council (WGC) total gold supply in the second quarter this year stood (Q2FY08) at 840 tonnes, whereas the demand was 944 tonnes. A study by KPMG reveals the Indian jewellery market to be US$ 13.5 billion in fiscal 2006-07, accounting for 8.3 per cent of world jewellery sales. However the export of diamond-studded jewellery from India is merely 4 per cent of the total export of gems and jewellery worth US$ 18.06 billion. Since the demand of diamond-studded jewellery among Indian consumers has risen sharply, the industry should focus on the domestic market. Diamantaires, in Surat's US$ 11.29 billion diamond industry, are eyeing jewellery manufacturing in a major way, after DTC has decided to prune supply of rough diamonds to India. If India becomes a manufacturing hub for jewellery as well as a consumption market it will just prove India’s strength in both sectors.
The government has offered some concession to the industry by lowering import duty on platinum from US$ 13.82 per 10 gms to US$ 5.03 – exempting rough coloured precious gems stones from customs duty at the first stage itself, instead of claiming reimbursements later. Rough, semi-precious stones are already exempt, a move aimed at further promoting the exports of studded jewellery and platinum jewellery. Duty-free import of consumables for metals other than gold and platinum up to 2 per cent of f.o.b. value of exports and duty-free import entitlement for rejected jewellery up to 2 per cent of f.o.b. value of exports. There is increased duty-free import of commercial samples of jewellery to US$ 2.50 and import of gold of 18 carat and above under the replenishment scheme.
The Indian retail scene is set to flourish and there is no looking back for those who know how to sell jewellery to a Indian women, since jewellery is a part of Indian tradition and customs.