Post 2 months after demonetisation, the jewellery markets in India continues to register a dropdown in sales figure that would have been shot up otherwise on account of the wedding season.
The season of big fat weddings season that lasts till May-June — usually means a money-spinner for the jewellers. However, this season things are not looking same. Thousands of big, small jewellery shops and glittering showrooms across the nation eagerly await the elusive customers. Demonetisation has hit the world’s second-biggest gold consuming nation and consequently to the demand for gold.
The demand for gold jewellery has dropped as much as 80 per cent with jewellery shops witnessing drastically reduced footfalls and low volumes. Two-months later, footfalls continue to be lackluster, especially, at a time when weddings are held across the country. Business has thinned down to 10-15 per cent says jewellers. Demonetisation has been the biggest crisis ever for the business, said Ashok Minawala, partner in the Mumbai-based Danabhai Jewellers and Sons. The purchases have come down below 2 lakh, which is also the budget most weddings are trying to stick too with the cash availability issues in the country.
Jewellery is a high value purchase and customers are putting their decision to shop for the yellow metal on the back burner as they are focussed on taking care of the essentials items. People are focused on having cash reserves until they can access their money easily given the fact that banks and ATM are cash-strapped and are rationing money. Unless there is a wedding in the family which necessitates spending or buying a gift for a close relative’s wedding, people are reluctant to enter jewellery stores. “We do not see our regular customers coming into the stores anymore,” said Minawala. He pegs the drop in business to almost 40-50 per cent where cheques are given for gold purchases. Sales in cash purchases of gold has plunged to over 50 per cent, he said.
The jewellery industry has seen highs and lows in the current year. The industry had shut shop post the budget when the government reintroduced a one per cent excise duty on jewellery after four years. Industry estimates the loss incurred on account of the strike to be at `18,000 crore. Dhanteras brought a shine to the yellow metal which was otherwise lacklustre for nearly six months. The country’s gold demand had fallen 30 per cent to 247.4 tonnes during the first six months of 2016, from 351.5 tonnes in the year-ago period, as per World Gold Council.
Post-demonetisation, the demand is down to almost 90 per cent now, said jewellers. The reason for the fall can be mainly attributed to the limited availability of cash at ATMs and the banks in the country, said Sreedhar GV, chairman, All India Gems and Jewellery Trade Federation to Firstpost. “We are witnessing a drop of around 75-80 per cent. If there is not much circulation of money in the country due to demonetisation, business cannot be buoyant,” he said. Two-month after demonetisation, the situation continues to be grim. Shailesh Sangani, Director, Gitanjali Group, creators of Gili jewellery, said Firstpost that though the trade has undergone several challenges particularly in 2016, demonetisation was the worst of it all. “We have been affected as sales has been dismal.” Most jewellers said that they had clocked sales of 80-90 per cent during Diwali and post-Diwali too and also on the day the demonetisation announcement was made. Now there is hardly 10 to 15 per cent growth, they said.
Demonetisation has brought down business to almost 90 per cent in the South. But some of them are happy at the trickle of footfalls in their stores. “We thought there would be hardly any business post-demonetisation,” said Ananthapadmanabhan, MD, NAC Jewellers, a 43-year-old jewellery chain with nine stores in Chennai to Firstpost. “Usually, the big ticket buyers purchase their jewellery months in advance. It is the middle and lower middle classes who make their purchases closer to the wedding dates,” he said, adding that the latter’s purchases have been negligible so far.
After mid-December, non-resident Indians arrive in the country to attend weddings or to buy jewellery, said Ananthapadmanabhan. He was worried wondering how their shopping behaviour would turn out to be under the prevailing circumstances post-demonetisation in the country. Those jewellers dealing in small tickets like the south-based Muthoot Jewellers are seeing increased footfalls. The company deals in low-ticket purchases averaging 4 grams. “I don’t stock product and customers have to make bookings,” said Keyur Shah, CEO, Muthoot Pappachan Group, precious metals business to Firstpost.
In Calcutta too, limited shopping and footfalls have dampened the sales during the wedding season. According to reports, P C Jewellers said the demand for wedding jewellery has fallen up to 60 per cent due to demonetisation. The company expects the pent-up demand to drive revenue growth in the coming months. Jewellers expect this dismal phase in the gold jewellery business to continue until February. However, exchange of old ornaments for new is keeping the business going at showrooms, with prices holding firm after demonetization.