Organised jewellery movers have gained from demonetisation, GST
The branded jewellery segment of Titan Company, Tanishq, has also recovered, after a sharp plunge post demonetisation
Organised jewellery logistics traders (movers of gems and jewellery) have struck gold post demonetisation if their recent growth trends are anything to go by. Also, much of the business of jewellery logistics seems to be shifting from informal and unorganised players to the organised sector after demonetisation and implementation of the Goods and Service Tax (GST), say industry players.
BVC Group, an organised logistics player, has seen a sudden spurt in growth after demonetisation. It saw its annual growth rate double compared to the years preceding de-monetisation. Not only has it maintained the high growth rate, but bucking the slowdown blues, BVC is confident of closing this year with a solid growth rate.
“Pre-2016-17, we used to grow at 15 per cent in the domestic market. After 2016-17, the year that saw demonetisation, we are growing at about 30-35 per cent every year in revenue terms in the domestic segment. This year, we expect to close with 30 per cent growth in the domestic segment,” Rajesh Neelakanta, Executive Director and Chief Executive Officer, BVC Logistics, told BusinessLine.
Preference for brands up
A jeweller, speaking on condition of anonymity, attested to the trend, adding that this is happening even though formal organised channels of moving cost more, and add to the overall price of the finished jewellery. A corollary to this is what analysts have observed anecdotally in the retail space, where consumer preference is shifting towards branded and organised retail jewellers, because of the shrinking price gap between organised and branded retail jewellery and jewellery at unbranded small shops.
“Consumers are shifting towards organised retail jewellery post de-monetisation, and GST implementation. This is partly because the non-branded jewellery retailers are losing the low-price edge, which to some extent they had because of tax evasion, which they could earlier pass to the consumer. It has become very difficult to evade tax, and the informal economy has been hit badly after the two concerned policy levers have been used,” said an analyst.
The branded jewellery segment of Titan Company (a joint venture between Tata Group and the Tamil Nadu Industrial Development Corporation), Tanishq, has also recovered, after a sharp plunge post demonetisation and was (in 2019) clocking growth in the 20s compared with about 8 per cent in the pre-demonetisation phase.
The growth of the organised logistics segment is also due to retailers preferring organised logistics players as complaints about products getting lost and stolen in transit have become more frequent, said another senior executive, who was working till very recently with an organised logistics player. “Traditionally, the industry has been using informal modes of moving shipments from manufacturing hubs to retail locations. Tier-3/Tier-4 cities’ jewellery retailers used to travel to manufacturing hubs (quite a few still do) for their purchases in private and public modes of conveyance, do their picks, and return to their locations. This is changing,” said Neelakanta.
To tap the sector, which is getting organised, BVC is expanding as well. “From 42 branches, we are looking to have 65 branches by 2022. We are scaling up this number. We buy normal trucks, and then fit them with bulletproof glasses, geo-fencing to protect the vehicle. Making a truck fortified requires an investment of three times the cost of the truck,” said Neelakanta. He estimates the country has roughly 3-4 lakh jewellery retailers.
“BVC Group has some 16,507 customers, of which over 11,000 customers are active, meaning they transact with us at least once in a quarter. We are targeting 30,000 such active customers by 2022 as a strategy,” added Neelakanta.
India’s gems and jewellery sector is one of the largest in the world, contributing 29 per cent to global jewellery consumption. The market size of the sector was about ₹5.2 lakh crore as of 2018 and is estimated to reach ₹6.9 lakh crore by 2025, estimates India Brand Equity Foundation.
Source- Business Line.
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