As per a WGS report, in 2000, around 95% of the jewellery industry was dominated by unorganised, standalone, family-run businesses. Cut to 2018 and organised players have gained significant market share, even though the unorganised sector still dominates the industry. The point is, the industry is in the middle of a systemic change. By 2020, WGS expects the share of organised players to rise to 35-40%.
The shift to organised players is driven by the difficulties that unorganised players are facing in coping up with increasing rules and regulations. In addition, Gen-Next (the next generation of small jewellers) is showing decreased interest in running family businesses due to high engagement and capital requirements. With a shift in consumer demand (less flashy and more classy jewellery is the trend nowadays) and the younger customers’ preference for leisure activities (rather than spending on jewellery, unless there is some occasion such as wedding), many organised players are shifting their focus towards promoting more versatile, simple, and light-weight products.
Despite structural challenges in the business, small jewellers will try to continue with their business. Unorganised players still hold an edge over organised players as far as compliance with laws and rules is concerned (since the former can more easily bypass laws). For now in India, regulatory authorities are not able to ensure that every law is followed by all participants, hence small jewellers get quite a bit of leeway. Of course, this will not continue in the long run.
Challenges – hallmarking not being implemented, a possibility of a lower threshold under the PMLA Act, and slow economic growth – cloud the medium-term potential of the organised jewellery sector. However, in the long run, given benefits of demographic dividend (more marriages) and a strong macro-economic environment, the Indian organised jewellery industry is poised for a dream run.
The key is how this sector will be marketed over the next 20-30 years. While it is unlikely to happen overnight, the way jewellery is consumed in India is assuredly going to change over the next one or two generations. It is very likely that the wedding jewellery craze – for example, young couples could start saving on wedding expenses and invest in a place to live after marriage instead (Love per sq. ft. on Netflix provides great insight into this area). The gold industry is likely to best survive if it is marketed as a combination of investment and adornment.
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