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In this week’s newsletter, we will be learning:

1. The demand & supply characteristics of gems & jewellery retailers.

2. Key risks faced by gems & jewellery retailers.

3. Evolving Strategies used to manage risks & grow.

A Sparkling Guide to the Jewellery Sector

India’s sparkle shows no signs of dimming.

In the last three years, revenue CAGR jumped to 20% for the gems & jewellery retail market and 30% CAGR for its organised players, even though we import almost every ounce we adore.

Local jewellers have transformed into nationwide chains, and luxury giants like Cartier and Chopard now want a slice.

High capital investment, global risks, tight security, low margins, yet the lure only grows. Clearly, in India, jewellery isn’t just an investment.

It is an inheritance in glittering form.

In this week’s deep dive, we simplify how the gem & jewellery retailers are turning bling into big business, the risks and why demand shows up where it does.

Demand for Retail Jewellery

To understand the demand for gems & jewellery, you must understand:

1. High Regional Jeweller Trust

2. Seasonal Purchase Intents

3. Buyer Background-based Purchase Decision

4. Non-Jeweller Investments

High Regional Jeweller Trust

Most jewellery is bought from regional, rural players. There are two reasons behind this, long standing trust in sellers and the strong pull of regional tastes.

Jewellery buying in India has always been about trust. Till the 1990s, local family jewellers dominated, but purity checks and pricing lacked clarity.

In the 2000s, brands like Tanishq built trust through better design and technology like karatmeters and exchange schemes. From 2010 onwards, online jewellery picked up.

Players like CaratLane gained trust with curated designs, tools, and branding.

Slowly, there was a shift. Now, based on availability, purchase intent, among many other factors, customers either trust regional players or pan-India players.

But regional focus makes a difference. Most jewellery is still bought from regional and rural players, as trust is built locally.

To cater to this, pan-India brands like Tanishq, Kalyan, and Malabar are growing as rural sales drive 58% of total industry demand.

Further, brands like Kalyan meet regional tastes by controlling manufacturing and offering local styles like temple or antique designs.

Seasonal Purchase Intent

Jewellery demand is relatively inelastic during festivals and weddings. This means, even if prices rise, people still buy some because it's tied to tradition.

Families may buy smaller pieces, but they don’t skip purchases, making demand steady during key seasons.

Particularly, weddings drive 55% of jewellery demand in India, making them the top reason for buying gold.

Daily wear makes up 30–35%, and fashion jewellery adds 10%. Demand spikes during wedding months like October–February and around festivals like Diwali or Akshaya Tritiya, and especially in rural areas after harvest season.

Buyer Background-based Purchase Decision

Jewellery is deeply personal and shaped by the buyer’s background. Jewellers cater to these tastes by offering different jewellery segments for different target audiences.

Purchase decisions can be based on:

1. Regional Taste: Southern buyers prefer plain gold jewellery, hence margins are lower. Northern and Western consumers lean toward studded, lighter jewellery, which earns higher margins. This makes North and West more profitable for jewellers.

2. Based on Affluence: Brands like Senco target budget buyers with lightweight designs. Tanishq serves mid to premium, while Bvlgari targets ultra-rich customers.

3. Individual’s final decision: Design variety plays a role. Senco, for instance, offers thousands of designs across price points. Style, need, and budget shape the final choice.

A culmination of all three affects the average ticket price of the jeweller.

Non-Jeweller Investments

Jewellers don’t only trade in jewellery, but in raw materials or bullion too. Bullion refers to pure gold or silver in bars or coins. It’s often bought by investors who trade based on price changes.

A benefit of this is that it avoids jewellery making charges which can range from 5% to 30% of the total price. Once limited to elders, bullion buying now includes younger buyers too.

Supply of Retail Jewellery

To understand the supply for gems & jewellery, you must understand:

1. Jeweller’s Metal Handling

2. Jewellery making is still largely informal

3. Long-Term Jeweller Preference Trend

4. High Quality Jeweller Beachhead

Jeweller’s Metal Handling

Most jewellers buy gold from banks or authorised agencies. That’s because India doesn’t mine much gold on its own. But importing gold needs a lot of working capital.

But, Gold prices keep changing every day. So, jewellers use tools like forward contracts and Gold Metal Loans (GML) to manage price risk.

In GML, banks lend gold instead of cash, and jewellers provide collateral that’s regularly adjusted to match gold price changes.

Senco, for example, hedges 81% of its gold needs.

Jewellery making is still largely informal.

Jewellery manufacturing in India is mostly informal.

Given the fragmented nature of the Indian gems and jewellery industry and a relatively cheap workforce, there is limited investment in machinery and automation in jewellery manufacturing.

The government is trying to overcome this with Jewellery parks, but they are limited in number.

BlueStone and CaratLane stand out with strong in-house setups, offering better control, faster delivery, and higher product quality.

Long-Term Jeweller Preference Trend

India’s jewellery market is seeing a long-term shift. Once dominated by family-run stores, the industry is now formalising fast. Organised players made up just 22% in FY19 but now account for over 36%, expected to reach 59% by CT29.

Better designs, tech, and branding drive this shift. Government rules like mandatory hallmarking and PAN card requirements helped too.

With rising incomes and demand for quality, branded jewellery is becoming the preferred choice for young buyers.

High Quality Jeweller Beachhead

A beachhead is a strong base from which further expansion begins. In India’s jewellery market, many players are building such positions.

1. Regional players are using their home turf as a launchpad to expand across India. Senco, for example, still earns most of its revenue from its core markets, which gives it stability as it grows outward.

2. Pan-India players are now pushing into tier 2 and 3 cities. They often use a hub and spoke model, i.e setting up company-owned stores in metros and tier 1 cities, and franchises in smaller towns.

This is hard to do, few have cracked this at scale. Only a small share of top jewellers have truly pan-India reach, and even fewer, like BlueStone, have built a strong omnichannel presence.

Risks in the Gems & Jewellery Industry

To understand the risks for the Gems & Jewellery Industry, you must understand:

1. The Price Risk Sandwich

2. Regulatory Risk

3. Small Size Trap

The Price Risk Sandwich

The jewellery industry sits between two pressures.

1. Input Side Challenge: Jewellers face rising gold prices and currency volatility, as most raw materials like gold are imported. With prices near all-time highs, costs go up, but passing them to customers is difficult.

   Since gold prices are easy to track, some customers hold off on buying when prices rise, which reduces demand.

2. Output Side Challenge: Jewellery retail involves low value addition, which means jewellers have little control over pricing. This leads to high price competition, especially on making charges.

   Customers compare easily and switch quickly, making loyalty low. As a result, despite high ticket sizes, profit margins stay low.

Regulatory Risk

Jewellery retail faces heavy regulation. High import duties and GST raise gold prices and hurt competitiveness, although this burden has reduced in recent years.

Cash-based rural trade faces stricter rules like PAN card requirements for purchases above ₹2 lakh. Mandatory hallmarking adds costs and delays due to limited infrastructure.

These rules impact pricing, consumer trust, and create challenges for unorganised jewellers while benefiting organised players.

Small Size Trap

Small jewellers face a tough cycle. To manage working capital, they rely on debt backed by gold.

Good deal, right? But this dependence is risky, as any shock in lending, like after the Nirav Modi case, can freeze credit.

In such a situation, smaller players also struggle to access equity markets. With fewer stores, overheads stay high, and there’s less room for design R&D. Over time, weaker designs hurt sales and funding.

In contrast, larger players like Senco raised ₹459 crore to fuel expansion in FY24.

To truly understand these risks and how gem and jewellery retailers navigate them, it is helpful to know a few key terms used in the industry.

Key Terms

We need to divide this into two: Store-level understanding and business understanding.

Store Level Understanding:

1. Conversion Rate: Buyers divided by all visitors. Higher rates prove that staff and displays turn interest into sales. For example, Titan Ltd’s rate was 0.74% from online & app purchases in FY2024.

2. Average transaction size: Total sales divided by the number of bills. Bigger tickets lift revenue without extra footfall. For example, Thangamayil Jewellery Ltd’s transaction size for gold is ₹73,000 in FY2024.

3. Same-store sales growth (SSSG): Year-on-year sales change for stores open at least twelve months. Shows core growth without counting new shops. For example, Tanishq saw a 16% same-store sales growth in FY2024.

4. Inventory Turnover: The Turnover ratio is calculated by dividing total revenue by average inventory. It shows how efficiently a jeweller converts stock into sales.

Sector Specific Business Level Understanding:

1. Percentage of sales from customer loyalty program: Revenue from loyalty members divided by total sales. High share signals sticky repeat buyers.

2. Debt per retail outlet: Total interest-bearing debt divided by store count. Keeps leverage clear as the chain expands. For example, Kalyan Jewellers has ₹48 Cr per showroom.

3. Revenue Mix: Share of sales from gold, studs, coins and services. Balanced mix cushions swings in any one line.

   1. Stud Ratio: Sales of gem set pieces divided by total jewellery sales. More studs usually lift margins. Kalyan Jewellers has a best-in-class 28% stud ratio in FY24.

4. Revenue from Bullion Trading: Revenue from bullion deals divided by total revenue. Adds liquidity but can mask weak retail if too high. For example, Titan Ltd’s is under 10% in FY24.

5. Hedge Ratio: Hedged gold quantity divided by total gold inventory. A higher ratio shields profits from bullion price swings. For example, Thangamayil Jewellery Ltd’s hedge is 89% of its inventory in FY24.

How Jewellers Can Turn Bling Into Big Business

To understand how gem & jewellery retailers are growing, we must understand:

1. Demography-based E-commerce Growth Trends

2. Tailwinds Increasing Seasonal Inelasticity

3. Strategic Regional Focus

4. Transitioning from Regional to Pan-India

Demography-based E-commerce Growth Trends

Jewellery buying is shifting fast, led by a young, urban, fashion-forward consumer. Social media platforms now drive not just discovery, but also shape demand, especially for daily wear, studded, and lab-grown designs.

Brands like BlueStone have thrived by targeting these trends with online-first models and stylish, lower-carat offerings. Demand for diamonds and alternative metals has grown.

Traditional players like Titan (Tanishq), with CaratLane & Kalyan Jewellers, and with Candere are also participants. Here, jewellery is targeted specifically for the reel watching, office working and younger customers.

E-commerce strategies are now key, blending online reach with offline trust and better inventory control.

Here, sales from studded jewellery are also of a significant amount, which works in favour of brands as these sales contribute to revenue in off-seasons due to higher margins.

Tailwinds Increasing Seasonal Inelasticity

Jewellery demand in India moves in waves, led by weddings and festivals. But now, both the peaks and troughs are rising.

Wedding jewellery accounts for 22.3% of total wedding spend, with 30 to 250 grams of gold used per wedding. This segment is set to grow at a 5–7% CAGR till FY28.

Off-season demand is also climbing, with rising interest in studded and daily wear jewellery.

Meanwhile, growing UHNI and middle-class segments, backed by a 12.2% annual rise in per capita income, are driving consistent premium demand across seasons, making jewellery less sensitive to price swings.

Strategic Regional Focus

Regional focus can be built in two ways:

1. By local expertise – Jewellers scale within regions where they understand customer preferences deeply.

   For example, Thangamayil Jewellers has over 60 stores in South India, offering designs that match local tastes & its expertise.

2. By customer affluence – Brands choose regions based on wealth concentration.

   Global players like Cartier and Tiffany & Co. have entered metros like Delhi and Mumbai to target high-income buyers & cater to the global tastes of the surrounding elite.

Transitioning from Regional to Pan-India

Many regional players like Senco and Joyalukkas are expanding beyond their strongholds. They want to scale up, cut costs by spreading them across more stores, attract more customers, and tap into equity markets.

Here are a few ways they are doing it:

1. Asset-light expansion: Using FOFO (Franchise Owned, Franchise Operated) models, jewellers reduce costs and speed up expansion. This lowers inventory needs and allows more focus on design and business growth.

   Kalyan Jewellers, for example, is going further by extending customer support to 1,000+ local areas through its trusted partners under the ‘My Kalyan’ scheme.

2. Ad campaign support: New stores and collections are promoted through regional ad campaigns and celebrity endorsements. These help transfer trust from the influencer to the brand, hence driving traffic, and making jewellery demand more consistent across seasons.

In conclusion, shifting tastes, booming online sales, and the rise of national and global brands are reshaping Indian jewellery.

If execution keeps pace & with jewellers maintaining a sharp focus on core strengths and meeting customers’ evolving needs, this industry may have the potential to be a gold mine.

Till then, only time will tell.

And with that, we wrap up this month’s sector deep dive! I’d love to know your thoughts about our discussion, so feel free to comment below.

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Signing off.