What’s the secret behind India’s gold obsession? It’s not what you think
Wed June 26 2024
The Indian wedding industry, valued at $130 billion, is dynamic and multifaceted, comprising a range of products and services. Among the major categories of these products and services are jewelry, apparel, event management, catering, photography, entertainment, etc.
From a spend perspective, wedding jewellery typically accounts for the largest proportion of the wedding spend, making up approximately a quarter of the total spend followed by catering at 20% and events at 15%, etc, according to a report by foreign brokerage Jefferies.
Service providers to the wedding industry largely fall in the unorganized and highly fragmented category, consisting of many small scale businesses and individual service providers who cater to both low and high spenders, it said adding that this is partly due to the extreme divergence in regional preferences which means smaller and regional players are better-placed in addressing consumer needs.
Opportunity for large organized players
“However, this is also an opportunity for large organized players to gain market share, as they build capabilities to cater to regional preferences. Several companies such as Titan, Kalyan Jewellers, Vedant Fashions, ABFRL etc. are well-placed from this shift to organised players in a growing market,” the report said.
Jewellery is often the largest purchase category in an Indian wedding, given its deep cultural and religious significance, the brokerage emphasised.
For the jewellery industry too, wedding is a key demand driver – 50% to 55% of the total jewellery market by weight is wedding jewellery, followed by daily wear at 35% and fashion wear at 20%, the report said. “India also has an age-old marriage concept of ‘Streedhan’ in which property, assets and jewellery are given to the bride to ensure future financial security. This remains deep-rooted in India further lending demand inelasticity to the jewellery segment.”
As per Indian laws, women have inalienable rights over ‘streedhan’, which can be claimed even after separation. Close family members of the bride also gift jewellery during weddings. In some cases, families tend to purchase gold bars or coins on a regular basis over a period of several years, which are then converted to bridal jewellery closer to the wedding date.
India was the largest global consumer of gold jewellery in 2022 and the second largest consumer in 2023 purchasing 600 MT in 2022 and 526 MT in 2023, with the overall jewellery market sized at USD 65-70 billion, the report said.
“Interestingly, rural accounts for a higher contribution versus urban, on account of rural consumers having limited options to save in other forms of saving instruments especially during weddings and post-harvest.
Additionally, the industry is witnessing a shift from unorganized retail to organized retail led by several initiatives including, GST implementation, mandatory hallmarking requirements, increasing urbanization, pricing transparency and better product & higher service quality.
Organized jewellery retail accounted for 6% of the total market in 2007, and currently accounts for 37% of the total market, key beneficiaries of this shift include pan India jewellery retailers such as Titan (Tanishq), Kalyan Jewellers, Senco Gold, etc.
Compared to daily wear or fashion jewellery, jewellery bought during wedding is largely plain gold jewellery which has lower margins. This segment also has much higher competitive intensity, greater sensitivity towards making charges and hence greater share of unorganised and regional players.
Further, regional preference play a key role with designs varying across states. The wedding sets of brides in south Indian states on an average are significantly heavier than that of non-south states. Even states with comparable per capita income from south and non-south regions have stark differences when it comes to jewellery purchase patterns.
Over the last few years, organised players have increased focus on wedding jewellery segment despite its lower margins, given its large opportunity size. Players such as Titan have introduced region-specific wedding collections to better compete with local players.
Jewellery retailers often collaborate with Bollywood movies, especially grand scale period dramas, to design and create jewellery sets which are used in the movie.
Titan (Tanishq) collaborated with producers of the 2018 period drama, Jodha Akbar, that created mass market appeal for heritage designs in kundan, polki and jadau jewellery.
Titan (Tanishq), collaborated with the creators of Padmavat, another grand period drama, to design, create and launch ‘The Padmavati Collection’ in 2018, consisting of chokers, ranihaars, jhumkis, hathphools, bangles, borlas, naths and maangtikkas. The Padmavati Collection took over 200 craftsman close to 2 years to create, and is still popular and available across Tanishq stores.
Source: https://www.financialexpress.com/