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F O C U S ON I N D I A
he decision earlier this year by the government of Indto allow foreign direct investment in retailing markssignificant watershed for those in the jewelry business wh
have eyed, from distant shores, the promise that this markeholds. To date, it is mainly foreign-made luxury watcbrands tha t have been able to penetrate the red tape and reta
fragmentation that characterizes the current business climate. But evethese successes are often limited to franchises whose scope is, in turn, ofteconfined to luxury hotels in cities such as Delhi and M um bai. Investors nowhave a direct route to sell the ir wares, bu t what does India have to offerW hat of the new consumer generation that is often lauded as being the keto fast-growing jewelry sales?
The recently published McKinsey Quar-
terly, focusing on India, provides some
answers. It explains that there are "several
Indias," which can be seen most clearly in the
country's income pyramid. Sitting on top of
the wealth pile are an estimated 1.2 million
affluent households, referred to as "global
India." It's only a third as large as the c om-
parable segment in C hina, but it's expanding
by more than 20 percent a year. These house-holds buy branded products and generally
behave like their counterparts in developed
markets. At the bottom lie 110 million house-
holds—"struggling India"—earning between
$7,500 and $20,000 per year, and 40 m illion
households representing "destitute India." Be-
tween these rich and poorer segments lies the
key to India's retailing boom: "aspiring India,"
defined as the 40 million middle-income
households that earn $20,000 to $45,000
(adjusted for purchasing-power parity).
According to McKinsey's research, "Thisnew [aspiring] consumer group, growing
by about 10 percent a year, is expected to
comprise 65 million househo lds by 2010,"
Its emergence is signaled by the 55 million
mobile phones currently inuse in India.
The sector takes on added importance be-
cause of the youth factor—70 percent of
India's population is below the age of 36.
Though there's a strong economic case
for foreign investors to enter the market
directly, the main challenge rem ains g etting
the aspirational households to spend their
Foreign jewelry
-income
require a more
retaii environ-
ment.
early adopterSc
disposable income on jewelry. "Luxury h
been a characteristic of India's elite for ge
erations," say Merrill Lynch analysts, w
estimate the local luxury goods market
arou nd 300 million euros. However, forei
jewelry firms wishing to seduce the m iddl
income households will require a more s
phisticated retail environment, which w
boost the development of brands—a k
plank to lure aspirational, early adopters.
The development of brands is alrea
moving to another level, primarily as som
of the major Indian jewelry compan
invest more heavily in diamond jewel
as distinct from solid gold items, wh
change in retailing is coming not just fro
the outside but also within—luxury sho
ping malls are being built and many mo
are being planned for m ajor cities.
RETAIL: RINGING IN C HANGE
According toJames Courage, chief exective officer of the Platinum Cuild Intern
tional, which works with 130 stores in Ind
currently, the opening up of the retail sce
to foreign companies is interesting on tw
levels. "Clearly, there will be a lot of dev
opment on the retail front, with business
moving away from traditional local sto
concepts tobigger retail outlets, and se
ondly, as per China , we will see an increa
in jewelry targeted at young people."
also predicts that more "brands will co
in from outside" as a result.
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F O C U S O N I N D I A
Amo ng those who are often first to spot
on, are the luxury goods companies,
Middle East, India, and Turkey, says the
any is prepared to start selling jewelry
currently only watches, eyewear,
are sold through franchise o p-
is "Delhi and Bombay. We
the next two years."
Though Normand says the decision to
Tiffany sell
y only thro ugh franchises in India, a
retailing is not well developed, except
even here, visibility
nsumers to "sus-
Cherie Tandon Saldanha, the Diamond
"This is a very encouraging situation
r the Indian d iamo nd jewelry market. As
more brands make an appearance,
of new,
rands mo re com petitive, whOe
ensure that the diam ond jewelry market
"The retail sector is experiencing an ex-
ntial growth," says Saldanha. "The re is
suggest that there is a shift from
experience. The unorganized sec-
nil
eign
some
to drivebusinessi n "
tor is also realizing this and working tow ard
giving consumers the entire shopping expe-
rience." According to her, India's consumer
is becoming "quite choosy in terms of the
quality of goods, the shopp ing experience,
and the ambience in stores" and "the daywill not be very far away when India begins
to keep pace w ith the W est."
Rather than just com peting with foreign
jewelry brand s, some Indian companies are
collaborating with them to drive business
in India, Gitanjali Gems, for instance, one
of the most progressive jewelry firms in In -
dia today, was the country's first branded
jewelry manufacturer. It recently formed a
joint venture with the Dubai-based jewelry
manufacturer and retailer Damas to create
a new brand for the Indian market—
D'Damas, "The JV aimed to introduce
international quality jewelry with Indian
values," says a spokesman for Gitanjali. In
addition, Gitanjali will introduce some of
the "world's best-known brands into India
under this collaboration with Damas," as
the latter already markets most of the big
brand names in the Middle East. Gitanjali
already markets another three main b rands
in India: G ili, Asmi, and Nakshatra. "India
is a huge mark et, thoug h it has been largely
unorganized. Now with the opening up of
the retail sector for single-brand stores,we have received inquiries from some big
international brands interested in com ing
to India—initially, they could be retailing
through our outlets."
ROUTES TO SUC CESS
For foreign jewelry brands now planning
to enter India on the back of the changes to
retailing legislation, both the DTC and PGI
have already done impo rtant groundwork
in reaching the middle-market consumers.
Brands are playing a crucial role.There are more than 40 jewelry brand s
in India today, but the most successful and
those driving spending are the diamond
brands. According to the DTC, the Indian
diamond jewelry market is already worth
66 billion rupees, "It is one of the fastest-
growing markets in the world after the
United States and Japan," says Saldanha, and
"is expected to grow to $75 billion by 2010,"
A quick look at some of the DTC's figures
on the m arket illustrate how diamond s have
grown since the DTC launched its opera-
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F O C U S O N I N D I A
tions a decade ago: Diamond jewelry acqui-
sition has grown by 55 percent; in 1996, only
13 percent of consumers had a preference for
diamond jewelry—this is now 56 percent;
and average stock of diamond jewelry in
stores has risen to23
percent, for example.The DTC launched its first diamond
jewelry brand, Nakshatra, in 2000. "[It]
has revolutionized the branded jewelry
sector in India with its unique concept,
designs, and positioning," says Saldanha.
Having nurtured the brand, DTC recently
signed a contra ct w ith Brightest Circle Jew-
elry Pvt. Ltd.—a com pany owned by three
sightholders involved in the brand , includ-
ing Gitanjali, Mahendra Bros., and Dim ex-
on— to han d over Nakshatra in 2008. As
India's premier brand, its products range
in price from 8,000 rupees to 200,000 ru-
pees. The latest collection from the DTC is
Sangini—designed for married couples.
"PCI initially decided to market plati-
num jewelry to the self-purchase segment,"
says James Courage , which contrasts with
the metal's dominance of bridal jewelry
in more developed markets. "We've seen
a significant increase in the awareness of
platinum and its value and have seen take-
up in the gift and wedding segments." PCI
is excited by recent developments. "Local
companies' approach to marketing is re-
flecting other Western markets—it's get-
ting mo re sophisticated."
o o o
acquisi t ion
The success of platinum in India to da
has been based on marketing. "We focus
on m arketing right from the beginning. W
set up designated platinum areas, and
up a platinum brand look with point-
sales mate rial," says Courag e. According
the DTC's Saldanha, many marketing fa
tors need to be improved to push diam o
jewelry sales further, including high
spending on advertising, the scale of d
tribution in a fragmented industry, and t
"ram pant substitution by retailers."
However, as foreign companies consid
how best to enter the Indian market, th
should not lose sight of the importance
tailoring the business model to local con
tions. McKinsey offers four key guidelin
to opening a successful business in Ind
First is the importance of offering "val
at the right price," with affordability t
main component. Educate the consum
is another rule of thumb, which requi
effective marketing campaigns. Third, f
eign suppliers must "design to cost," as
challenge is to make a profit at prices th
Indian consumers can afford.
Finally, it's vital to get the distributi
right—no matter what opportunities ex
to change the retail scene, McKinsey stre
that "the traditional network of local reta
ers will remain important for years, even
modern retailing continues to grow at
current rate of 25 percent a year." •
A Contemporary IIJS 2006The recent India Inter-
national Jewellery Show,
held in Mumbai May 4-8, show-
cased India's emergence as a
global jewelry force.
while the event emphasized
traditional Indian jewelry much
of the focus has shifted toward
new brands and new lines featur-
ing upscale, modern designs for
the surging domestic market and
abroad. This was demonstrated
by the show's signature events:
• A gala fashion show, titled
Anokhi Expressions, that
actively merged the old and
the new in terms of styling;
• The ABN Am ro Solitaire
Design Aw ards, organized
by India's Gem & Jewellery
Export Promotional Council,
to honor India's most creative
jewelry designers;
• The local unveiling of Gold
Expressions, a new collection
of contem porary Italian jewelry.
IIJS 2006 drew some 17,000
visitors, considerably fewer than
the 30,000 that were expected.
Numerous exhibitors were
unhappy with the turnout, but
others said the "seriousness"
and quality of the buyers in
attendance was better than in
previous years.
Although IIJS 2006 drew
numerous international buyers
from the Middle East and Asia,
some exhibitors lamented the
lack of Western buyers— par-
ticularly for a show that's the
second-largest in Asia (next
to the Hong Kong Jewellery &
wa tch Fair) and billed among the
top five largest jewelry shows in
the world.
"U.S. buyers would be sur-
prised to find such a major trade
show here in India," said Sanket
Kothari, partner of Livingstones,
a Diamond T rading Company
sightholder and vertically inte-
grated jewelry manufacturer and
retailer based in Mum bai. "The
show organizers have been try-
ing to do a lot of international
publicity. But many of these
exhibitors already do a large per-
centage of their business in the
United States and Europe, and
the individual companies need
to send out their own invitations
to get their foreign customers to
come here." m— Glen A. Beres