Platinum poses threat to Gold market

Nicolas Graham Smith, COO, PGI

Nicolas Graham Smith, COO, PGI

India’s platinum jewellery market is likely to grow by 35% in 2014, according to Platinum Guild International (PGI). The rapidly changing consumer preference is one of the key reasons for growth of platinum.

PGI’s Retail Trade Barometer, the first platinum jewellery market research in retail sales predicted that platinum jewellery market in India is likely to rise by 35 per cent in 2014. The reason given is rapidly changing consumer preferences, especially from the bridal segment, earlier confined to gold and diamonds.

A recent study by PGI forecasts India’s demand in this regard at 40 tonnes in 2014, compared to around 30 tonnes in 2013, itself a 41 per cent growth from the previous year. According to the study, 2013 saw a growth in both chain stores and independent stores. In fact despite of a slow market, platinum was the fastest growing category in the Indian jewellery sector.

“Platinum has captured the market in engagement and love band segments. Other segments in branded platinum jewellery have also recorded a significant jump in the past few years,” said Vijay Jain, chief executive, Orra. The study shows platinum witnessed 35 per cent growth with the help of couple bands and concepts linked to eternal love through the Platinum Day of Love gave good momentum to the metal. Another key driver sales was the Men’s jewellery range (chains and bracelets) grown rapidly at 53 per cent with platinum being a lead category within men’s jewellery.

In India, the price gap between gold and platinum has narrowed from 100 per cent more for the latter to 10-25 per cent now, depending on the type of ornaments.“With the price difference narrowing, platinum has become a preferred choice for even auspicious occasions. The metal continues, though, to see a lack of investor interest,” said Jain.

The platinum jewellery retail trend that has been noticed includes rings or couple bands. They account for 60-65 per cent of platinum jewellery stocks at the showroom. According to the study, while couple bands continue to be the volume driver as they are fast moving items, most retailers intend to increase stocking of ‘heavier’ items, which include men’s range, necklaces, bangles, etc. for increasing their PJ sales volumes and average ticket sizes. Vaishali Banerjee, Country Manager India, PGI said, “Platinum Day of Love couple band is the volume driver. Men’s jewellery is a nascent category and it delivered very strong figures – some retailers reported doubling their sales. Also many have shown interest in stocking heavier items in terms of jewellery and PGI is evaluating the next segment of growth for the market.”

Platinum versus Gold Performance ($/oz)

She adds, “We have been very successful at utilising digital media and integrating marketing programmes that have positioned it well among the younger audience, making it emotionally significant for them. Once the knowledge of the value of platinum deepens, the demand will increase.” The research reveals that the retailers are bullish about 2014 with platinum jewellery expected to be fastest growing sector to continue to a further 35%, ranging from low of 25% to a high of 60%.

Most retailers aim to push men’s range but few also want to see traction in bangles. The uncertainty caused by the general elections and on the new government policies on imports, taxes, the market is described as being “optimistic but anxious.” G. R. Ananthapadmanabhan, MD, GRT Jewellers comments, “Our focus for this year will continue to cater to this growing consumer demand with exclusive platinum designs of rings, chains and bracelets that appeal to men. With the support of the PGI’s communication program and considering the market trends and consumer behaviour, we expect the scope of this precious metal to develop further in 2014.”

Globally, the retail demand for platinum jewellery is forecasted to grow by 5.3 per cent across the 4 key global markets namely China, India, Japan and USA that accounts for 92 per cent of global demand in 2014. Nicholas Graham Smith, COO, PGI says, “The Indian Retail Trade Barometer’s results indicate very strong consumer desire for platinum jewellery. The Indian market is still relatively small in a global context, but has been growing at an exponential rate. The outlook for 2014 and beyond is also extremely positive. There are many factors which provide the basis for continued growth – the success of the Platinum Day of Love programme, increased distribution across India with more retailers stocking platinum, product innovations and exciting designs, and platinum’s powerful emotional connection with consumers”.

While palladium is in an uptrend, platinum is still stuck in a sideways trading pattern. US $1,490 seems to be too much of a challenge at this stage, Saxo Bank’s head of commodities research Ole Hansen said. The four-month action against Anglo American Platinum, Impala Platinum and Lonmin, has disrupted 40 per cent of platinum output and could cost 1 million ounces of production this year. The strikes turned violent this month, with four miners killed as more employees tried to report for work, ignoring calls by the union to continue protesting.

Platinum jewellery sales to cross Rs 2,500-cr mark in India

Platinum jewellery, which has become young India’s choice, could cross the Rs 2,500-crore mark this fiscal, according to research by IKON Marketing Consultants.

The platinum jewellery market was pegged at Rs 1,880 crore in 2013-14. Changing population demographics with the rise in disposable income with young India perceiving it to be fashion jewellery, coupled with growth of organised retail are among the key growth drivers.

Also, factors such as reduction in price gap between gold and platinum have led to the segment growing at 45 per cent CAGR year on year, according to the report’s estimates.

In addition, branded players have managed to effectively utilise celebrity endorsements to capitalise on, ‘pure, rare, precious, eternal, and emotional attributes attached with platinum jewellery, the report said. Popular with urban consumers, cities such as New Delhi, Mumbai, Kolkata and Bangalore are top contributors to platinum jewellery sales in the country.

‘Though the market is growing at healthy double digit, still platinum jewellery has been adopted by upper class urban segment, said Azaz Motiwala, CMD, Ikon Marketing Consultants. He said increased visibility in retail stores may lead to increase in adoption rate of platinum jewellery.