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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

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