Although jewellery is emerging as a nationwide trend for several players, it still primarily operates on a hyper-local level. Effective inventory/SKU management and enhancing customer experiences will be crucial for success, according to a report by Motilal Oswal Research which was released today.
The acquisition of customers, upgrades, and frequency of visits to the store require strict local oversight and competitiveness. Some retailers are engaging in various expansion formats, tailoring their approach to suit the preferences of specific cities or neighbouring towns. Others are bridging the gap by attracting consumers from towns to nearby cities with a store presence.
The jewellery sector has been experiencing a significant trend towards formalisation, with the organised market accounting for 36-38% of the total jewellery market, compared to 22% in FY19. The total jewellery market reported an 8% revenue CAGR during FY19-24, reaching a market value of INR6,400b. The organised market clocked ~18-19% revenue CAGR while Titan, Kalyan, and Senco combined recorded 20% revenue CAGR during FY19-24.
“We are optimistic about the jewellery category and anticipate ongoing rapid shifts in consumer purchasing behaviour, transitioning from unorganised/local to organised channels. Factors such as increasing ticket prices, enhanced shopping experiences, greater product variety, etc are fueling this momentous trend,” the report said.
In addition, after achieving success in new markets/states, top players are further motivated to expand into newer geographies. The franchise-based model consistently achieved success, prompting several players to modify their business models. The franchise model is not only asset-light but also enables faster reach. Jewellery store penetration is at its peak, driven by small jewellers, which offers significant growth opportunities for organised players.
The key risks for the sector are gold price volatility, failure in-store unit economics, especially in new markets, capital inefficiency in rapid store expansion and pricing pressure (concerning making charges) due to competition.
Motilal Oswal analysed the organized jewellery market, which makes up 36-38% of the total jewellery market, by players to gain a deeper understanding of the industry. The top 10 players in the organized jewellery sector collectively control over 30% (90% of the organized market) of the total jewellery demand in India. We estimate that these players held less than 20% of the total market share in FY19. The proliferation of stores and consumers’ growing inclination towards purchasing jewellery from branded retailers, especially in the last 3-4 years, have brought about significant shifts in the market composition.
