Jewellery franchise Sep, 05 2016

Cashing in on the Bling Factor

What makes jewellery franchise a business worth investing in? Let’s find out.

By Utpala Ghosh
Cashing in on the Bling Factor

The tale of organized jewellery in India has been slow and steady. It has taken a lot of efforts to carve a niche in a nation that has been dominated by traditional family jewelers and make room for exclusivity and value in the customers’ psyche. Organized jewellery retail comprise of the 10% of the total Rs.3437.20 billion worth market size in India. Also, it is interesting to mention here that the gem and jewellery industry provides employment to 2.5 million people in India, as compared to IT services which provides 2.1 million jobs. Hence, this segment holds much potential particularly in a country like India where purchasing jewellery is perceived as the best form of investment. So what makes jewellery franchise a business worth investing in? Let’s find out.

India is country where no one needs to create value for fine jewellery. Precious and semi precious metal like gold and silver are seen not only as investment options but also auspicious by the Indians. Days like Diwali, Dhanteras, Akhsya Tritiya are some of the days that have been traditionally hailed to be auspicious days for buying gold and other semi precious metal. However, there was a need for creating value for fine jewellery and gems.

Creating the ‘Want’ for fine jewellery

The very first modern jewellery brand to have made impact on this category is Tanishq. Coming from a non-jewellery conglomerate, the name of TATA and smart marketing strategies had perhaps been the only reason that the brand enjoyed some mind share of the customer base. A Tanishq TVC dated a decade and a half back featured a mother convincing her reluctant-to-marry daughter with a contemporary piece from Tanishq. Today the TVC of same brand features a single mother getting remarried, a successful actress and a young woman entrepreneur. We have see Gitanjali Jewels position their various brands like Asmi, Nakshatra, Gili around the contemporary Indian woman. This clearly depicts the story of how these brands etched on the modern woman and then created a collection that creates a ‘want’ in them for contemporary fine jewellery.

Luring the New-age Customers

A global industry report by McKinsey has categorised the global customer base for modern jewellery into three segments. The same pretty much applies to India as well. The first is the “new money” consumers who wear branded jewelry to show off their newly acquired wealth (in contrast to “old money” consumers, who prefer heirlooms or estate jewelry). The second category comprise of the emerging-market consumers, for whom established brands inspire trust and the sense of an upgraded lifestyle—80% of the consumers belong to this category. Testifying the fact, T S Kalyanaraman, Chairman & MD, Kalyan Jewellers India Ltd says,“ We see a significant shift from the unorganized sector to the organized. Now people are brand conscious, quality-minded and also want variety before making any purchase. While there is price sensitivity they are willing to pay for quality, design and service.” And the third category comprise of the young consumers who turn to brands as a means of self-expression and self-realisation.

Saurabh Gadgil, Chairman & MD, PN Gadgil Jewellers opines, “Consumer has become more demanding and knowledgeable. They demand innovation and are ready to pay price for good design and quality. They have become more experimental and look for the right price and the right experience. As jewellery retailing has become more organized, it has also become more challenging.” He continues, “A clear shift is being noticed where customized jewellery (40%), which has now primarily been restricted to the bridal collection, is giving way to pick-over-the shelf (60%) merely because of the time constraint and propensity for impulse purchases by the working population.”

Why Franchise?

Earlier, traditional jewelers refrained from involving anyone outside their bloodline into the business. However, in an age where visibility of the brand has become most important to reach out to the larger customer base, jewellery brands have to shed this old-school approach. Just like technology helps the brands to communicate to the customers at diverse geographies, franchising helps them to be present at the places where these customers are. As a TVC would do its bit to invoke the desire for the brand at a remote locality, a franchise store present in the same place will help to convert sale in that particular place. Franchising across the sector has been instrumental in bringing the best form of capital which is debt free and equity free. And the jewellery segment is no exception.

Sandeep Kulhali, Senior Vice President, Tanishq says, “We believe franchising brings along the local understanding of markets, their social and financial standings. It creates a ready connect of the brand with the customer. The Tata Group commands immense trust in the market. We have a transparent relationship and have been in the business for a long haul. The franchisees feel secure with us. They can envision a future even for generations to come. Being associated with a market leader like Titan, puts you on a league above the rest.”

Business Interest of a franchisee

The most credible reason for any entrepreneur to invest in jewellery is the high returns. Though a very high value segment, a jewellery business in India is recession proof. The wedding tradition in India will never ever fail to support the growth of this segment. Moreover with the increasing purchase power of the financially independent Indian women who are increasingly looking for smart, light weight jewellery relevant to their professional profile, the demand for contemporary fine jewellery brands will always be on the rise. Investors who can align themselves with the brand’s vision and impart excellent shopping experience to the end customer are sure to have it glittering all the way.

Profitable Franchise Format

Traditional jewellery outfits in India can be divided in two formats – the 200-400 sq.ft family jewellers or the 10000-20000 sq.ft jewellery palaces. For making a standardised replicable format, branded jewellery retailers are breaking up the space into 1000-1200 sq.ft store sizes emphasizing on intelligent store layout out that ensures optimal buying experience of the end customer. Add to this the excellent pre-sale and after-sale customer service imparted by the store staff that takes good care of the apprehension of moving out of the known circle of family jewelers. And not to be forgotten the innovative designs and excellent craftsmanship makes it irresistible for any customer to turn it away. Kulhali says, “Indian jewelry market did not have Franchising as a model. We brought in franchising on a country wide level. It’s just that in the recent past some jewelers have started adopting franchising as mode for expansion. We have the early bird advantage. We have an efficient process of evaluating and short listing candidates for franchisee. The process includes meeting with the senior management team, visiting the corporate office and factory. Last but not the least we also get third assessment about the prospective franchise partner.”

Challenges

The biggest challenge in this segment is the lack of knowledge among the customers. Family jewelers thrive on the trust of the customers. This is because a lot of people hardly know anything about gold and diamond. This is where trusting your family jeweller – or trusting a particular brand comes into play. Hence the best way to build the trust in the brand is by educating the customer. Effective initiative by some of the leading retailers like kalian Jewellers and Tanishq who are emphasising on certification and hallmark have proven to be beneficial for their brands.

As compared to other industries, the jewellery industry is largely fragmented and non-standardised. There is a considerable effort that goes into educating the franchisee. In addition to this, the size of the investment is considerably higher around Rs 8-10 crore. Vijay Jain, CEO and Director, ORRA says, “When we started off, we began with selling at our own stores and built the entire model at our own cost. We then gradually worked towards scaling up the entire system. Despite all the challenges we faced with regards to reference to the set up and existing value, we are able to build a successful model that holds strong as a brand.”

Collaborations and tie ups

Collaborations and tie ups have been effective tools for product enhancement. Some of the major mergers and acquisition by leading franchise brands that made headlines include Titan acquiring 62% stake in online jewellery brand Caratlane.com, Ratan Tata investing in another online jewellery startup, Bluestone.com and PC Jewellers acquiring World Gold Council’s bridal jewellery brand ‘AZVA’. These mergers and acquisitions help the brands to up the ante as far as their design and quality of their product line is concerned. 

Related: Bejewelled benefits

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