Consumers shift to big players for buying gold

There is a transitional shift in buying behaviour of consumers for gold jewellery in North India. With buyers preferring organised retailers over unorganised traditional family jewellers, the battle between the two is getting intense with each passing day. In the past two years, almost 10-20% jewellery shops in the unorganised sector have already shut down their operations as the organised sector is eating into their market share.

According to World Gold Council estimates, there are 3,85,000-4,10,000 jewellers in India. Out of this, roughly 35% are based in northern states and constitute 15% of the total gold demand.

“The unorganised players are finding it difficult to sustain. According to estimates, around 10-20% of the jewellers have closed down and the outlook is also not bright for traditional one-shop family jewellers. Only those players will survive who have deep pockets and who can transform their business with changing times,” said Pankaj Arora, national chairman, Jewellery Division, Confederation of All India Traders (CAIT).

He said with non-banking financial companies (NBFCs) still in cautious mode, lending to small jewellers is unlikely to be normal in the near future.

According to industry watchers, the shift in buying preference to organised players gathered pace in the past two years with stricter implementation of compliance norms such as GST, tightening of lending norms by NBFCs and small players’ resistance to transform their business with the changing times.

Moreover, consumers are shifting to organised retailers because they offer newer designs, quality, buyback and their exchange policy is far more simple and transparent than smaller players.

Further, unorganised jewellery shop owners are also presumed to sell low quality gold and at times without issuing proper bills. Also, small jewellers are not able to provide digital payment options. Buyers with awareness prefer to buy gold with white money and proper bills.

So, buyers with clean money would not want to associate with small and unorganised players anymore. Further, informed buyers insist on ‘hallmark’ certification which many small shops owners don’t provide.

“Jewellers who can provide good quality products at competitive prices along with great buying experience will outperform their peers. Armed with such features, the organised retailers are eating into the business of traditional one-shop family jewellers,” said  Anil Talwar, founder, All India Gems and Jewellery Trade Federation. According to Talwar, in the past couple of years, the demand for gold jewellery has gone down on an average by 40%. However, the share of retailers in the organised sector has gone up.

Industry watchers said even in rural markets which have largely been the major buyers in North’s gold consumption story, prefer to buy from the organised trade. Perturbed over the issue, many players from the unorganised sector would be pushed into the organised sector.

Courtesy: The Tribune