Industry expected to accelerate in H2 2016
It has been a rough phase for the gems and jewellery industry since the beginning of the year. Amidst a slowdown phase in the industry, traders are looking forward to favourable government reforms and upcoming exhibition season, which is expected to bring in positive momentum in the market.
Budget 2016 and new tax regime has attributed to the slowdown in the gems and jewellery industry. A strike by jewellers, surging gold price and expectations of a duty cut has led to a considerable slowdown in the first half of 2016. India’s jewellery market nearly came to a halt in March when the entire industry opposed to the government tax hike with widespread strikes.
Global gold demand reached 1,290 tonnes in the first quarter of calendar 2016, a 21 per cent increase year on year, making it the second best quarter on record. However in India, gold demand was down 39 per cent on a year-on-year basis to 116.5 tonnes during the quarter ended March 31, 2016. Indian jewellery demand hit a seven-year low of 88.4 tonnes, a 41 per cent decline year on year.
Though the market scenario continues to be troublesome, jewellers and traders see business in near future to be extremely good. The global market scenario continues to look favourable in coming months and jewellers can benefit from this opportunity.
Jewellers expect favourable reforms for the industry
Traders expect government to be supportive as higher customs duty, excise duty and other such reforms are restricting the business to prosper. Saurabh Gadgil, CMD of PNG & VP of India Bullion & Jewellers Association comments, “The government should implement as many new regulations as they can to control the high gold prices and to support the jewellers fraternity.”
Government should reduce custom duty on gold to boost the industry and exports. The higher customs duty, the recently implemented excise duty along with other issues, is resulting in an increase in smuggling, which is not healthy for the country. Jewellers observed that ‘unofficial imports’ have reportedly seen a sharp spurt in the past two months. “High taxes have left the gold business in the parallel trade. Stringent supply issues three years earlier and a multifold rise in Customs duty hit rural supply severely. Today, channelisation of the parallel trade has become deep rooted,” Rajiv Popley, Director of Popley Group said to Business Standard.
The industry is expecting reforms that will help the gems and jewellery industry grow. Hardik Kapoor, Founder of Jewelsify.com says, “The government should implement GST, promote digital transaction, promote exports, extend the Penetration of pan card, make the unorganised retail organised.” With the exhibition season two months away, jewellers are expecting good business at the shows too.
Jewellers adopt new marketing strategies to beat sales slowdown
Retailers have strategized a new model of business to beat the ongoing slowing in sales this season, due to the absence of festivals and weddings. Normally, in this season, farmers encash gold to buy seeds and fertiliser for kharif sowing. Faced with deficient rain in the previous two seasons and a monsoon delay this season, farmers are keeping their fingers crossed, resulting in a big decline in custom at jewellery retail stores.
Retailers are no longer offering discounts in making charges; instead they are giving an increase in the value of jewellery sales. Mumbai’s jewellery manufacturer and retailer Tribhovandas Bhimji Zaveri has introduced an additional sale value worth five per cent for gold and 10 per cent for diamond jewellery in exchange for old gold. For example, if a customer brings old gold worth `100,000, he can buy gold jewellery worth 105,000 or diamond ornaments worth 110,000. Popley & Sons is also offering diamond jewellery equivalent to the making charges on gold ornaments. “There has been a sharp increase in consumers’ footfalls, nullifying the impact of industry wide slowdown,” Popley said to Business Standard.
Given the rise in government taxes, few retailers have come up with an innovative idea of offering creatively crafted lighter weight designs so that it does not have a major impact on customer pockets. Also, the upcoming exhibition season will see more of light weight designs to deal with the ongoing market scenario.