Recently, GJC player Jatin Chheda of Chheda Jewels said about the Structure of a stand-alone jewellery retailer! He said, India’s retail jewellery sector has witnessed a structural shift over the last decade. From a landscape dominated by single and family-owned stores, a notable portion of the industry is now run by chain stores operated by corporates.
Moreover, from just a handful of organised retailers a decade back, India now has several large chains with a pan-India presence, with many others operating at the regional level. Amid all this, while single stores initially struggled to compete, many have adopted good practices and now co-exist in this highly competitive landscape.
Organised retailers with large stores and better access to bank finance can hold larger stocks and so can out-compete smaller and single-store retailers.
These economies of scale also allow them to offer more competitive retail margins. Stand-alone retailers on the other hand have faced challenges in inventory management, funding and differentiation in products. Over the last few years, the smaller retailer has taken on these challenges and is now better positioned in this new retail landscape. To start with, most of these stores are now focusing on specialisation and customisation as their unique selling proposition.
For example, in the bridal segment, which is the largest area of gold demand in India, independent retailers have been able to compete, utilising their flexibility, better understanding of local customers and design sensibilities, customising jewellery pieces according to customer budgets, and offering flexibility even with payments. Overall, this strategy has had a pronounced impact on their margins.
Furthermore, even in the daily wear segments, independent retailers are now offering customised solutions, which helps them to compete without the need for high stock levels. In terms of bank finance, the larger stand-alone retailers have managed to access bank loans, and working capital funding has helped many independent retailers to launch new stores. While the rate of interest and collateral is high, single-store retailers can now access banking finance.
Those who choose not to inject capital have turned to working with lower inventory and focus on specialisation. Many of the single-store retailers have been in the business for generations and so can fund daily operations using their own funds, but this can restrict their growth due to limited capital for ploughing back into the business. In a scenario of limited available funding the monthly gold saving scheme also presents an important form of working capital for a jeweller.
For many jewellers in small cities this makes up 20-30% of their sales, although in large cities the share is much smaller. Regarding the buyback of old jewellery, there is little to separate industry practices across large parts of
India, and so there is no specific advantage left with organised stores. Finally, with mandatory hallmarking, some of the traditional consumer apprehensions about the quality of the jewellery they are buying have eased, which will further benefit independent stand-alone retailers.
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