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Feb, 04 2012

SPARK, SHINE & SUCCESS

If diamonds are a woman's best friend, its business is any entreperneur's dream come true. This is so because jewellery business is one of the most profitable ones due to its sheer size. The jewellery market is estimated at USD 9.7 billion, with gold cont

THE sparkling gems and jewellery sector, mostly dominated by small and medium enterprises, is shining once again. The sector that contributes over 16 per cent to India’s total merchandise exports has registered a growth of 46.89 per cent to reach $43 billion in 2010-2011. The total exports were worth $29 billion on the back of strong demand from reviving western markets and growing domestic market.

 

The two major segments of the sector in India are gold jewellery and diamonds. Gold jewellery forms around 80 per cent of the Indian jewellery market, with the balance comprising fabricated studded jewellery that includes diamond and gemstone studded jewellery. Besides, India is world's largest cutting and polishing industry for diamonds, well supported by government policies and the banking sector with around 50 banks providing nearly $3 billion of credit to the Indian diamond industry several companies have made inroads into the traditional jewellery industry, selling the product that was never really ‘marketed’ in ‘brand’ new ways.

 

Shining bright

The jewellery retail future in India is bright. There is around Rs 80,000 crore domestic jewellery market in India, in which the growth of branded jewellery is approximately 40% every year. The reasons contributing to this spur can be found in rising income levels across non-metro, large and small cities. It has further elevated the consumer spending on branded and luxury goods in the jewellery segment. All this coupled with franchisors help like regular follow-ups, daily sales reports and frequent visits to the store, help franchisees meet herculean challenges.

Tanishq (Jewellery division of Titan Industries Ltd)has around 131 stores spread all over India. Marching ahead, the company has plans to take the present count of stores to 150 in India. V Govind Raj, Vice President, Integrated Retail Services, Titan Industries Ltd, says, “Tanishq  has grown over 35 per cent in the last five years and will be able to maintain the same level of growth in the next five years.”

According to Karthikeyan V, Vice President (Retail), Gitanjali Jewellery Retail Pvt. Ltd, “The sales statistics shows a comfortable figure wherein the franchisee is not only achieving breakeven but is also performing over that. We have also launched country's first co-branded gold credit card with ICICI and streamlined the entire retail for the franchisee stores.”

Shubh Jewellers and Sia Art Jewellery are picking up pace to be soon juxtaposed with major players. According to officials of Shubh Jewellers, the company plans to open 125 stores in Karnataka by the end of this financial year and will concentrate on Tamil Nadu or Andhra Pradesh. Presently, the company has 73 showrooms in Karnataka and will be expanding by another 52, which would take the total number of showrooms to 125 by the end of this financial year. A Shubh Jewellers store can be started anywhere between 300 sq.ft and 3,000 sq.ft at a prime location or a jeweller street. In terms of investment, the franchisee would have to take care of all day-to-day expenses plus the refurbishment costs.

Gusti J Noria, Managing Director, Estelle by Nomak Fashions Pvt. Ltd (NFPL) says, “Estelle presently is on the expansion mode and the core focus is in the Northern states like Punjab, UP, Haryana and J&K. Prospective distributors with an investment of 18 to 20 lakh with an FMCG background have an added advantage. It is also statutory for a distributor to open an EBO in the prime locality of the region (around 250 to 350sq ft); this enables prospective dealers and customers to have a look at the complete of jewellery which may not be the case at other outlets due to restrictive space. The breakeven for Estelle is 18 months and RoI is 28 per cent.”

Tanishq is also planning to set up 25-30 large format retail stores every year across the country. As per recent reports, 80 per cent of the expansion will be done via franchise route. With new stores, new launches and investment in marketing, the brand targets to increase its share in the market. The stores in big cities would be spread across 10,000 sq.ft and in smaller towns, the average area would be around 4,000 sq.ft.

On Sia Art Jwellery's expansion, Rashid Selot, its Business Development Manager, says, “In the coming three years, we wish to expand via franchising and open four stores per quarter. In the next two years, 12-15 stores are in the pipeline. The preferred location is high street or a mall. For a high street, the area required is 600-650 sq.ft and an investment of Rs 40 lakh. In a mall, 400-450 sq.ft of area with an investment of Rs 30 lakh will be needed. The investment includes the stocks also. At present, we have around 29-30 stores pan-India, with nine stores in Mumbai and others in Gujarat, Delhi and Bangalore.”

 

Growth for greenhorns

Franchisees need to be given appropriate pre and post-opening training to start successfully. Gitanjali organises franchisee meets on a quarterly basis to ensure that the franchisor and the franchisee are on the same wavelength and that the targets set are being met.

Don't worry if you are a greenhorn in the franchise business, all franchisors have a rock solid support system. Tanishq offers franchisees full support in setting up a store, selection of relevant merchandise, recruitment and training of staff, promotion of store, handholding to run the operations of the store by the company staff, etc. Franchisees invest in the store interiors as well as stocks. The company has a system of fixing prices and the franchisee gets a margin on the purchases. Being a commodity, the product prices vary daily, there is no system of minimum guarantee. Tanishq has standard operating procedures that are followed by all members of the chain. The brand has a team of field sales staff that regularly calls the stores and ensures compliance to processes and procedures.

NFPL trains most of the staff including the distributor at the factory for jewellery understanding. However, when it comes to retailing, a team of marketing professionals train the staff at store levels for better understanding, apart from the monthly regional training programmes, wherein staff is trained in grooming, product knowledge, various raw materials used and colour coding. Retention is the most important part of our business and we as a Brand ensure motivational support financially and mentally.

Even Gitanjali, which has 68 franchise stores across India, is not behind in providing assistance to franchisees. It helps in demographic analysis of the location, facility planning and architectural designing, recruitment of staff, operations control systems, including employee handling recommendations, register, controls, and much more. Karthikeyan says, “We provide staff for the store, who undergo rigorous training programme in retailing skills, effective sales training and objection handling techniques. Employees are also provided incentives on achieving targets to boost their morale. We also monitor customer loyalty apart from offering discounts by entitling them to loyalty cards, Gitanjali credit cards, etc.”

The appeal of gold jewellery is enduring. Selot sees bright future for gold. He says 10grams of gold will cost Rs 40,000 in the coming time. Shubh Jewellers, retail arm of Rajesh Exports Limited, is world's largest manufacturer of gold jewellery. By end of the financial year 2012-2013, the company has a target to open 295 showrooms.

Looking at the humongous growth and potential in this glittering industry, Diya plans to strengthen its presence by opening exclusive stores. It is targeting tier-II and tier-III markets,” according to Anil Rathod, Franchise Manager, Diya Diamond jewellery, a brand of Gitanjali Brands Ltd.

 

Marketing, a potent tool

Marketing is an imperative tool to advertise brand and franchisors ensure they provide all help to franchisees. Shubh Jewellers provides quality stock to franchisees and takes care of the advertisement expenses. As far as brand promotion is concerned, Tanishq spends about Rs 100 crore on marketing. The brand has a full-fledged team handling visual merchandising, that work closely with store planners, merchandising, marketing and retail staff to create a “wow” experience for customers. There is a calendar for visual merchandising, in sync with the marketing calendar of Tanishq for maximum impact.

Gitanjali also provides support beyond agreement like area exclusivity, celebrity visits, marketing support staff recruitment and training and exclusive stock support during exhibitions. All national-level advertising activities in terms of print and television are taken care of by the company. They have a dedicated retail marketing team that looks after the entire store level advertising activities.

 

Rising returns

Jewellery has long enjoyed a unique status among luxury goods and as an industry it is easy to take this appeal for granted. But in today's competitive environment, it requires as pro-active functioning as in any other luxury business.

Noria says, “We expect the jewellery market to grow at least 15-20 per cent annually. Therefore, in five years time, the market size will double from the present levels. In India, Estelle is the only branded fashion jewellery and the market leader. We have supplied fashion jewellery to USA, UK, Canada and some other parts of Europe over the years to various distributors and international reputed brands.”

 

 

Franchise facts

Company                             Investment        Area

Tanishq                               Rs 10 crore          4,000 sq.ft

Gitanjali                               Rs 1-5 crore        -

Sia Art Jewellery                    Rs 30-40 lakh      400-650 sq.ft

Shubh Jewellers                                              300-3,000 sq.ft

Estelle                                 Rs 18-20 lakh      250-350 sq.ft

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