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May, 16 2013

The sparkle of ‘REAL’ success

Do you feel thrilled at the sight of a piece of shining gold or sparkling diamond jewellery? Are you looking for jewellery business opportunities but can't decide due to lack of adequate information regarding the franchise of a jewellery brand? Here is al

INdia has the world's most competitive market for diamond and real gold jewellery. Traditionally, India has been the world's largest consumer and importer of gold. Further, India has emerged as the largest cutting and polishing industry for diamonds in the world.

Currently, the industry is largely dominated by the unorganised sector. However, the trend is likely to change in the near future as big players in the industry are foraying into the Indian market through the franchise business model for their expansion.

The Indian jewellery market, exemplified by its gold craftsmanship and skill of meticulous manufacturing, is burgeoning in the southern region.  The luster of gold and ease of fabrication have always made the yellow metal the jewellers' favourite, making it the backbone of the precious jewellery industry in India. On the other hand, diamonds have always enjoyed a special place in the precious gemstone category. India has the distinction of being one of the first countries to introduce diamond to the world. Earlier, diamond jewellery was limited to an elite segment of the population. But now with improving socio-economic condition of Indians, more and more people are thronging the market for it.

Burgeoning market

According to a study conducted by RNCOS, an industry research and consultancy firm, India remains the world's largest consumer of real jewellery with the consumption of gold and diamond jewellery pegged at nearly 24 per cent in 2008, while the share is expected to grow further.

The study states: “Highly skilled and low cost manpower, along with strong government support in the form of incentives and establishment of special economic zones, have been the major drivers for the Indian gems and jewellery market.”

Scintillating big shots

According to an Export- Import Bank report, gold and diamond jewellery are the two major segments of the gems and jewellery business in India. But, according to Dr Jonathan Butler, an expert on precious white metal, India and China are driving global demand for platinum jewellery.

Talking about the Indian players like Gitanjali, Tanishq, Orra, Malabar Gold and Kalyan Jewellers have set an organised sector in the jewellery industry. These brands have firmly entrenched themselves in the mind of the consumer.

The franchise model has enabled Gitanjali Jewels to establish a strategic presence pan-India. Today, Gitanjali Jewels is the most trusted jewellery retail chain that caters to the aspirations of millions across the subcontinent. Gitanjali Jewels, the flagship retail arm of the Gitanjali group, owns brands like Asmi, Nakshatra, D'damas, Gili, Diya, Sangini, Ananya and Gitanjali gold. The brand caters to women with its exclusive collection of contemporary and traditional jewellery for every occasion. In the coming years, Gitanjali anticipates around 300 more stores that would mark a new phenomenon in national and international markets combined.

Another big shot in the jewellery industry is Tanishq. The Tanishq saga began in 1994, fuelled primarily by the fabled Tata entrepreneurial spirit. Titan Industries' jewellery brand, Tanishq, has today gained recognition as the largest retailer of fine jewellery with a pan-India chain. Apart from Tanishq, the company has added brands such as Zoya and Gold Plus to its collection. Tanishq has a premium range of fine jewellery in diamond, gold and platinum. Tanishq assists in equipping the franchisees completely with the skills to handle operations right from the recruitment of staff. It also runs a structured training programme covering induction, product training and helps in developing required skills. It also provides behavioural and business-related training for both the franchisees and their staff.

Meanwhile, a few other nascent brands have also emerged as promising players in the industry and have adopted the franchise business model for expansion. Primmero Jewels, Ciemme, Anaira's, Nikka Mal Babu Ram and many other brands are operational via franchising in India, offering great business opportunities to potential franchisees.

“For any franchisee, real jewellery is a very attractive product with tremendous potential and Anaira's with its product portfolio of diamond and silver jewellery targets every segment of the end customer in India. Anaira's franchise format starts with a very affordable investment opportunity which helps even a low budget investor with the will to be a part of a real diamond jewellery brand,” says Nishu Tripathi, Director, Anaira's Diamond Jewellery.

Strategic ‘gems’

It has been seen that maximum consumers in India follow the unorganised jewellery sector i.e. the family-run jewellers. However, Gitanjali has strategies to change this trend as they believe that Indian consumers have now begun to understand the importance of quality.

Santosh Shrivastav, MD, Gitanjali Jewels, says:  “Consumers today understand that we have IGI-certified diamond jewellery and BIS-hallmarked gold jewellery and we only promote quality, purity, and variety with exceptional customer service to enhance the jewellery buying experience of our consumers.” He adds: “Our brands reach out to and address every conceivable need of jewellery buyers in India, from luxury to lifestyle, from gold to silver, from diamonds to coloured gemstones and from the very high end to lower points on the price spectrum, making headway in every corner.”

On the other hand, Rakesh Jain, MD of Chandigarh-based Nikka Mal Babu Ram Jewellers feels that in the last few years, there has been a visible shift in the buying trends of Indian consumers, from the unorganised sector to branded jewellery. The driving forces for this shift primarily are the aspirational value embedded in brands and the emerging mindset of consumers to buy jewellery like any other product. “However, the development of branded jewellery is still in its infancy here owing to the dominance of family-owned traditional jewellers. Nikka Mal Babu Ram Jewellers aims at becoming a popular chain of gold and diamond jewellery in India with international aesthetics, via the franchise route,” he says.

On the issue of how a franchisee of a brand sources the product, especially if he is stationed away from the headquarters, the brands have a well-established plan. Says Nishu Tripathi: “Franchisees stationed near the headquarters or away, get complete benefits of safe delivery of products on their doorstep.  None of the products of the brand are made by local craftsmen. Each product is manufactured at the factory and strict compliance to quality and product purity is adhered to. Hence, even a small repair item goes back to the production unit.”

Nikka Mal Babu Ram Jewellers also have a definite system in place. “Jewellery is transported to and from our franchisees by reliable distribution companies with whom we have tie-ups. We have an in-house workshop where the jewellery is crafted by our craftsman,” says Rakesh Jain.

Similarly, brands are very particular about logistics planning. “Jewellery logistics must be handled by a very safe and reliable service since this sometimes involves huge quantities and value of shipments. The brands logistics department has set defined rules and procedures which are followed for any shipment deliveries. Also, our freight forwarder is a trusted and reliable source for deliveries across India,” says Nishu Tripathi.

Lustrous growth drivers

In India, in the past few years, the increased awareness among consumers for investing money in authentic hallmarked jewellery rather than the gold of local gold sellers has increased. This is definitely encouraging more and more brands to enter cities and towns via franchising. Moreover, the presence of branded players has made the phenomenon even more popular pan-India. These major factors have and will continue to lead to increase in franchising in the jewellery industry.

Anaira's franchise format starts with an affordable investment business opportunity starting from Rs 30 lakh that helps even a low budget investor to be a part of a real diamond jewellery brand. Anaira's has schemes of investment for such low budget investors.

However, Jain lays stress on a long-standing legacy of 135 years of Nikka Mal which allows the brand to enjoy a competitive edge. He says: “The franchise business will have the luxury of possessing well-established business systems and procedure of Nikka Mal jewellers that have been tested and proven in the market.”

Outshining expansion

With over 90 per cent of its stores being franchise stores, Gitanjali jewels has plans for aggressive roll out in top 200 cities pan-India via the familiar route of franchising. The RoI for its franchise is between 18 per cent and 30 per cent and the brand has plans to open 300 more stores in future. Anaira's jewellery with 21 stores operational pan-India is also planning to open 5-7 stores by the end of 2013. Primmero Jewels and Nikka Mal being new entrants in the franchising business are also planning expansion pan-India.

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Shining amid golden dip

Gitanjali is expecting the volume of sales to pick up with the dip in gold prices. Many customers, who had to defer their buying decisions, would now be motivated to go on a shopping spree! Franchisees have better margins on volume of sales  but not necessarily on sale at better prices, i.e. the charges for franchisees (also for the company) are linked with per gram sales. Further, reduction in gold prices means franchisees now need to make less investment than what they would have needed earlier. Hence, it will be more lucrative for franchisees to invest in this sector and make high returns.

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