Group Project Report 1: Indian Jewellery Industry Analysis

A report submitted to
Prof. Prarthan Desai

In partial fulfillment of the requirements of the course

Strategic Management

By
Group D3
Aditya Soni - 188015
Rajaram Vennam - 188191
Sanjeev Kumar - 188211
Saumya Rao – 188215
Vaibhav Verma – 188263
on
15-02-2019

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Contents
Executive Summary:...................................................................................................................................... 1
Introduction: ................................................................................................................................................. 2
Industry Overview: ........................................................................................................................................ 2
Growth picture: ......................................................................................................................................... 2
Key trends: ................................................................................................................................................ 3
Competitive environment ......................................................................................................................... 3
Value Chain: .............................................................................................................................................. 3
Industry Analysis: .......................................................................................................................................... 4
Porter’s Five Forces: .................................................................................................................................. 4
Rivalry among existing competitors ...................................................................................................... 4
Threat of new entrants ......................................................................................................................... 5
Threat of substitutes ............................................................................................................................. 5
Bargaining power of suppliers .............................................................................................................. 6
Bargaining power of customers ............................................................................................................ 6
PESTLE Analysis: .................................................................................................................................... 7
Conclusion: .................................................................................................................................................... 9
References .................................................................................................................................................. 10

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Executive Summary:
Tanishq is the jewellery brand of the TATA Group and is a leading player in the Indian jewellery sector today.
Gold has always been a favorite of the Indian consumers, and Diamond has recently gained popularity among
the higher and middle classes. The increasing labor-intensive industry provides employment to over 5 million
people. People consider Gold as a safe means of investment of their hard-earned money. With increased
internet penetration, jewellery now sells online as well and this provides the buyers more choice of styles.
There is high competition in this industry as there are multiple jewelers and even more importers and exporters
of finished and unfinished jewellery. The change in governmental and economic policies over the years have
worked in the favor of jewelers and have promoted jewellery buying behavior in the Indian consumers. Another
factor working along the same lines are the creative promotion campaigns of the big-players in the industry
that have been focused on positioning their jewellery lines both as an elite luxury experience as well as a must-
have commodity.

This report contains observations and learnings recorded after studying the jewellery industry. We’ve focused
on the Industry Overview which reflects on the growth of jewellery consumption in India owing to increased
income of consumers and relaxation of governmental norms for jewelers. The Key Trends observed in the
jewellery industry have been recorded till date when Diamond jewellery is booming and the consumers are
moving more towards light and sober-looking jewellery. We’ve studied the Competitive Environment of the
Indian jewellery industry where there are few major players who’ve been in the market for years, but multiple
small family jewelers who’ve been in the business for ages have loyal customer base. Value Chain reflects on
the process from procurement of raw unprocessed minerals to the finished and polished jewellery that is sold
to buyers. The second-half of the report contains Industry Analysis with detailed study of Porter’s Five Forces
namely rivalry among existing customers, threat of new entrants, threat of substitution, bargaining power of
suppliers, and bargaining power of buyers. Further on is the PESTLE Analysis of the Indian jewellery industry
which focuses on Political, Economic, Social, Technological, Legal, and Environmental factors influencing
the growth and sustainability of the industry.

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Introduction:
TITAN group was founded in 1984. It is a joint venture between TATA group and Tamil Nadu Industrial
Development Corporation. The core business of the TITAN is manufacturing the watches. Titan is the India’s
largest watch manufacturer. In 1995, Titan entered jewellery business with a sub-brand name Tanishq. In a
span of two decades, Tanishq has become the India’s most trusted jewellery brand. Titan further launched
Caratlane, Mia, Zoya Jewellery brands in the recent years. We selected Titan group as our research company
for group project. We would like to focus on Jewellery business of the Titan for this project.

Industry Overview:
Growth picture:
Gold is considered as a valuable and important metal in India. Traditionally Indians are fond of wearing gold
and diamond ornaments, they are considered as a symbol of status. Initially, India had large gold reserves.
Over the years, its reserves have been depleted and the demand kept on increasing. Currently, India is the
fourth largest importer of the gold. Other precious metals such as platinum, Diamonds, Gems are also being
imported from the various parts of the world. Gems and Jewellery sector contribute 6% to the Indian GDP
(NSDC, 2018). The labor-intensive nature of the industry provides employment to over 5 million people.

India is one of the major demand cluster for the golden jewellery. Most of the Asian countries, Middle east
countries have higher demand for golden countries whereas western countries have a demand for diamond
jewellery. The increased disposable income, improved living standards are contributing towards the high
consumption of gold in India. Imports are the other major market for the jewellery industry, India is the one of
the preferred exporters for the fabricated jewellery products. The highly skilled workman, variety of designs
provided by the Indian jewelers is a key component in driving the demand.

Coming to the Indian market, gold is associated with festivity, celebrations. Also, most Indians consider gold
as a safe, reliable way to save their fortunes be it in the form of biscuits or in the form of fabricated jewellery.
There is statistic that Indians spend 30-40% of their wedding expense on jewellery, (NSDC, 2018) this shows
Indians fondness towards purchasing the gold. There are 350 million people in India, who are in the age group
of 25-30 in the period 2011-2021 (NSDC, 2018). This demographic shows that almost 150 million weddings
are expected to happen during this time. This shows that Indian domestic market has a strong growth prospect.
The average age of the Indian population is one of the lowest across the globe, the youth who are exposed to
various trends might drive the purchase decisions. The number of working women increasing steadily, as the
woman are the major buyers of the jewellery, their improved economic state and financial independence will
further increase the demand for the gold.

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Key trends:
Indian Jewellery sector is fragmented. Conventionally, majority portion of Jewellery fabrication is done by the
independent jobbers. The landscape of the sector changing slowly with more retailers entering to the business.
The footprint of the large-scale players is also increasing progressively. Sensing the raising demand in the
domestic market, these large players are focusing on expanding their operations. This trend helping the industry
in getting more organized.

With increased internet penetration and growing awareness of e-commerce, people started purchasing
jewellery via online. The online jewellery sales are steadily picking up. This is helping existing large organized
players to expand further. Through online, these players can provide standardized designs to a large-scale
market. This will help them in cutting down their costs and further improve their profitability.

The jewellery usage patterns are also changed over the years. Now, with the increased working women, there
is a high demand for work place jewellery. The demand for contemporary products and western jewellery is
gradually increasing. This shift in the consumer preferences is a huge opportunity for the jewellery
manufacturers and retailers.

Competitive environment
Since there is a huge opportunity to capture from the fragmented retailers, there is a huge competition in the
organized jewellery industry. Along with the jewellery fabrication, many firms are operating in Jewellery
import and export business. To reach out to more consumers, these players expanding their operations
aggressively. Some of the key players in this industry are: Malabar gold and diamonds, PC Jewellers, Tanishq,
Kalyan Jewellers, Joyalukkas, TBZ group. All these players are venturing in various initiatives to gain
customer trust and confidence which plays a vital role in the purchase decision of the Jewellery. These
companies have edge over other smaller retailers, as they have larger selection, greater variety. All these
companies are spending lot of money on advertising and promotions to gain public attention.

Value Chain:

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 Source: Report on Gems and Jewellery sector by NSDC and KPMG

The above diagram shows the value chain of the industry. The inbound logistic part is mostly taken care by the
importer. The fraction of gold supply from domestic mining is very low. Switzerland, UAE, USA, South Africa
are the major gold importers for India. Apart from selling or exporting the jewellery, India is a major player in
cutting and polishing the diamonds and exporting them. Overall India contributes over 15% to the global
diamond exports. (Indian Law Offices, 2018)

Conventionally Jewellery fabrication is done by the independent jobbers, who take orders from the consumers
and fabricate the ornaments at home. There are retailers who employ the skilled gold smiths to fabricate the
Jewellery. The third group is large scale players, who run manufacturing firms to fabricate branded ornaments.
Large players are betting on Automation, computerized manufacturing to boost the production and reduce the
cost of manufacturing.

Given the diverse geographies and varied demographics, the domestic market of Jewellery industry value chain
is majorly fragmented. Small, independent retail stores account for more than 80% of the total retail stores in
India. There are national players who operate large scale stores across India, but their operations mostly limited
to tier-1 and tier-2 cities. These national level retailers focusing on consolidating the retail stores and increase
their market share. As pointed in the previous section, the share online retailing of the jewellery is increasing
steadily. Majority of the national level retailers made sure that they are present online. This is done through
launching few new labels and collaborating with online retail partners.

Industry Analysis:
To analyze the industry, we are using Porter five forces frame work. Along with this, to get a clear picture of
business prospects in India we did a PESTLE analysis of Indian Jewellery industry.

Porter’s Five Forces:

Rivalry among existing competitors
The gold and jewellery products in Indian market are not very much differentiable. If we consider the national
players, everyone has access to similar resources and they produce similar designs. From the consumer
perspective, the brand doesn’t play a huge role as everyone providing similar offerings. The switching cost of
the consumer are insignificant. Though gold is not perishable, the price of these metals are volatile, this adds
pressure on the companies to sell the inventories as soon as possible. Large scale stores have large set up costs,
they do spend heavily on advertising, this creates pressure on the retailers to boost their sales. All this adds up
to a high competition among the existing players in the industry. The incumbents try to differentiate themselves
via quality assurances, exchange programs and buyback guarantees etc., Big players are focusing on building
brand equity through brand ambassadors. All in all, there is a high competition in among the existing industry
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players. They are trying to compete via lower price and higher quality model. Existing players are focusing on
entering new customer segments which are traditionally ignored by the large scale Jewellery companies.

Threat of new entrants

The growth prospects of the jewellery markets are looking good. There are no restrictions on new entrants.
Also, the customer switching costs in this industry are insignificant. So, when we consider the independent
retail stores, the threat of new entrants is low.

When it comes to the large-scale retail stores, the economies of scale come into the picture. Large players can
have agreements with the gold importers and suppliers. Often, they can hedge the price fluctuations. This
reduces the risk associated with the business significantly. The automated facilities for jewellery fabrication
help these companies in cutting down the costs significantly. These companies have a good visibility and their
brand equity is raising steadily. This will help the large-scale players in patronizing their brand and drive the
sales.

The government rules and regulations that govern the entry into this industry are really strict. Also, the
requirement of skilled manpower in this industry also plays a crucial role in influencing the decisions of players
entering this industry.

Overall, there are very low entry barriers for a small-scale retailer. The entry barriers are moderate to high if
someone is planning to enter the industry at a large scale.

Threat of substitutes
The most important substitutes to jewellery (gold and diamond) are artificial or imitation jewellery, stone
jewellery or the bagasra jewellery etc. But these substitutes cannot replace or play down the importance of
gold or diamond jewellery as such. This is because people nowadays attach special value to jewellery made up
of gold and diamond. It has become a status symbol and people are willing to spend large sums of money for
acquiring something that reflects their position in the society. Income levels are on rise and the need to display
one’s financial well-being is high as ever and no substitute can meet this incumbent need. Also, rising living
standards influence much of the purchasing decisions of a consumer and buying substitute products does not
often meet their standards.

Gold jewellery also represents a good investing options for most people. This is because the price of gold is
market regulated and it increases with increasing demand. Other investing options like mutual funds, stocks,
real estate, etc are somewhat more volatile than gold, which offers higher long term returns. Overall, it can be
safely concluded that the threat of substitutes to jewellery is quite low.

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Bargaining power of suppliers
The suppliers to the jewellery industry have low to moderate bargaining power. This is despite the fact that
India, being a key national player in the industry, has lots of suppliers, both national and international. Due to
this, the bargaining power of suppliers should be low, but it is not. Their power is greatly influenced not only
by the different type of gems and jewels they supply, but also their quality. The quality of raw materials, per
se, is one of the utmost important criterion that helps in establishing company’s reputation in the industry. The
supplier has to be reliable, to command its position in the national as well as global market. Also, the price
does not play any role in strengthening the bargaining position of a supplier because the rates are usually fixed
and the value of orders is quite high.

Bargaining power of customers

The buyers in India are price sensitive, especially when it comes to holding high value asset like gold or
diamond. The price of gold is market regulated that is highly affected by supply-demand. Also, the price of
other gems and stones is fixed by the sellers and is (usually) almost similar across different sellers. The fact
that India has high number of buyers (number increases manifold during weddings and festivals like Diwali,
Dhanteras, etc.) almost always ensures a steady demand of gold and diamond jewellery. All these factors
contribute to low bargaining powers of customers.

Bargaining
Power of
Suppliers-
Medium

Bargaining Threat of
Power of Substitutes-
Buyers- Low Low

Threat of New Competitive

Entrants- Rivalry-
Medium High

Porter’s Five Forces chart of Indian Jewellery industry

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PESTLE Analysis:
Political Factors:

Complete Foreign Direct Investment in the jewellery sector has enabled entry of international brands like
DeBeers, Tiffany’s etc. in the Indian market. Demonetization has introduced increased transparency for buyers
and jewelers as more people now purchase using plastic money and online transactions which ensures that no
illegal currency is parked in the form of jewellery. The scope of Gold Monetization scheme has been increased
by the Reserve Bank of India allowing more government bodies and charities to deposit gold. Indian is the
leading exporter of un-cut diamonds and jewelers can now export with regulated proofs and certifications
which increase their worth in the international market.

Economic Factors:

The improvement in living standards and per capita income of Indian consumers has resulted in promotion of
jewellery. The implementation of 3 percent GST on finished gold, diamond and silver jewellery has led to
promotion of jewellery investment trend. The Corporate Tax for micro, small and medium enterprises in
jewellery industry was cut down to 25 percent. The past few Pay-Commissions have enabled the working
classes to invest more and the increases reliability of jewellery sector has turned out to be a favorite for them.

Social Factors:

When procurement of jewellery became a trend in India, everybody used to buy Gold items. Gold was
exchanged in weddings and other functions as it was considered a token of love and good wishes. Gradually,
the trend shifted towards Diamond and other stone jewellery. The growing middle and upper classes now prefer
wearing light Diamond jewellery. However, heavy gold and gem jewellery is bought and exchanged in
weddings and family functions. Celebrities and movies play a major role in influencing the trends of consumer
behavior towards purchase of jewellery.

Other than for fashion purposes, people tend to buy jewellery as a means of investment. Gold or diamond
jewellery bought from certified jewelers gain value over the years, and can be exchanged for latest jewellery
or cash later when requirement arises.

Technological Factors:

The upgradation of technology has enabled the jewellery industry to provide better designs more efficiently.
Better equipment and machinery is now used for cutting and polishing of stones. The finishing of machine-cut
jewellery is unmatchable and this allows the jewelers to charge high Making Charges from buyers. These
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Making Charges are different for all jewelers depending on how big the brand is and how finely made the
jewellery is. Entry of technology has also reduced labor costs for jewelers as hand-made work has reduced
leading to lesser employment of goldsmiths.

Technological advancement has introduced machinery that can check the purity of stones and metals in any
jewellery. This enables the customers to return old jewellery, get it melted and buy new jewellery. Jewelers
can now check the purity of returned jewellery that was bought from some other jeweler to gauge the worth of
the item.

Legal Factors:

The Gem and Jewellery Export Promotion Council of India plays an important role in controlling the gem and
jewellery trade in India. It facilitates import and export of raw stones and finished jewellery to its members. It
is responsible for providing training and information needed to play fairly in the jewellery business. The tariff
rates to foreign locations and rates of import duty are communicated by the Council. There are set standards
of jewellery that will be sold in the market and the jewelers have to abide by Hallmark and Carat systems.

Stringent laws regarding record keeping of sale of jewellery have been introduced after Demonetization of
2016 according to which sale of jewellery worth more than 50 thousands requires the jeweler to keep a copy
of the Identification proof of the buyer. Sale of jewellery worth more than 2 lakhs requires the jeweler to keep
a copy of PAN Card of the buyer and this is the upper limit for cash transactions for sale of jewellery.

Environmental Factors:

Mining of Gold is extremely harmful for the environment due to the usage of chemicals in its extraction.
Arsenic, Lead, Mercury, petroleum by-products, acids, and cyanide are used in the extraction of Gold ores. In
the process, the land of that region is turned upside-down, the soil along with these chemicals is washed in the
rivers and other water bodies flowing in that region. Although there are laws regarding rehabilitation of area
mined after extraction, this rule isn’t followed and not properly enforced by concerned bodies. Mining of
Diamond is less harmful comparatively due to lesser usage of chemicals. The workers involved in the process
are exposed to extreme temperatures and washing and cutting procedures that harm their hands.

Jewellery is made from metals and stones that are exhaustive in nature and present in limited amount on earth.
Most of these valuables have already been mined by mankind and the remaining are not sustainable enough to
last all generations. Hence, the concern of non-replenishment of natural minerals looms over the jewellery
industry.

(adamkasi, 2017)

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Conclusion:
Gold is considered as a valuable and important metal in India. Traditionally Indians are fond of wearing gold
and diamond ornaments, they are considered as a symbol of status. The improvement in living standards and
per capita income of Indian consumers has resulted in promotion of jewellery. India is one of the major demand
cluster for the golden jewellery. The highly skilled workmanship, variety of designs provided by the Indian
jewelers is a key component in driving the demand. With increased internet penetration and growing awareness
of e-commerce, people started purchasing jewellery via online means. The jewellery usage patterns are also
changed over the years. This shift in the consumer preferences is a huge opportunity for the jewellery
manufacturers and retailers. There is a huge competition in the organized jewellery industry. Along with the
jewellery fabrication, many firms are operating in jewellery import and export business. Given the diverse
geographies and varied demographics, the domestic market of jewellery industry value chain is majorly
fragmented. Small and independent retail stores account for more than 80% of the total retail stores in India.
Large scale stores have large set up costs, and they spend heavily on advertising, so this creates pressure on
the retailers to boost their sales. There are very low entry barriers for a small-scale retailer but high if someone
is planning to enter the industry at a large scale. The buyers in India are price sensitive, especially when it
comes to holding high value asset like gold or diamond. The price of gold is market regulated that is highly
affected by supply-demand. Technological advancement has introduced machinery that can cut and polish with
efficiency and precision, and check the purity of stones and metals in any jewellery accurately. All that glitters
is not gold, hence, there are negative sides of the boom in jewellery industry as well. Minerals, metals, stones
used in making jewellery are naturally occurring non-renewable resources and Earth is slowly running out of
them while mankind continues to pollute the environment in mining these resources.

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References
adamkasi. (2017, June 25). Pestle Analysis of Gems and Jewelry. Retrieved from freepestelanalysis.com:
https://freepestelanalysis.com/pestle-analysis-of-gems-and-jewelry/

Indian Law Offices, I. (2018). Indian Jewellery Industry. Delhi: Indian Law Offices, ILO.

NSDC. (2018). Human Resources and Skill Requirements in Gems and Jewellery Industry. New Delhi: National Skill
Development Corporation.

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