Jewellery Retail: Why do Indian jewellers shun malls? – Jun-Jul 2012

The jewellery & watches retail market in India is worth Rs.180,500 crores, making it the third largest in the world. The US market was estimated at $85 billion (Rs.436,000 crores) in 2011, more than 2.4 times the size of the Indian market.  The Chinese market was estimated at 300+ billion Yuan (Rs.244,000+ crores) in 2011, 35% larger than India’s.  The Japanese market, at ¥910 billion (Rs.57,700 crores) in 2010, is less than a third of the Indian market. It has fallen almost 70% in 20 years, showing the decline of Japan as a major economy.

The overall consumption of jewellery (including gold) in India is much higher at Rs.278,000 crores and represents almost 6% of our nation’s private consumption expenditure – the difference between consumption expenditure and the retail market size being accounted for by gold or custom-made jewellery which is not sold in retail outlets.

Within the overall retail market for jewellery & watches, organized retailers (those with a minimum of 10 outlets or minimum turnover of Rs.50 crores) account for Rs.76,800 crores, or a whopping 42.5% – the second largest organized retail penetration after automobiles. There are about 80 jewellery & watches retailers in the organized sector, with 3150 retail outlets. The Top 20, with 2250+ outlets, account for Rs.56,700 crores in sales, which translates to almost three-fourths of the organized sector market and almost one-third of the total market.

The top 2 spots go to Kerala based jewellers. Kozhikode based Malabar Gold & Diamonds is the No.1 jewellery retailer in the country, followed by Thrissur based Kalyan Jewellers. The two major national players Titan-Tanishq (including Gold Plus) and Gitanjali Group follow at No.3 and No.4.

India’s top 3 J&W retailers – Malabar Gold & Diamonds, Kalyan Jewellers and Titan-Tanishq – will rank amongst the Top 10 J&W retailers in the world, based on their sales.

Malabar Gold & Diamonds is expected to have an estimated turnover of Rs.8,800 crores in the just ended fiscal year from 44 outlets in India (it also has 20+ outlets in the Middle East). Kalyan Jewellers’ sales are estimated at Rs.8500 crores from 30 outlets across South India. It was recently in the news for buying an Embraer jet worth Rs.30 crores. Both are expanding rapidly. Malabar Gold & Diamonds, currently present in South India and the Middle East, is expanding nationwide in India and also has plans to open stores in South East Asia.

Eleven of the Top 20 are based in South India. It is surprising that most of the published research reports on this sector do not even recognize the existence of the South Indian jewellery retail giants, which have a combined turnover of more than Rs.40,000 crores.

The world’s largest retailer Walmart was also the largest jewellery retailer in USA, with estimated jewellery sales of about $2.9 billion (Rs.14,880 crores) last year. Signet Jewelers is No.2, with domestic sales of $2.74 billion (global sales $3.44 billion) from 1300-odd stores. No.3 is Zale Corporation, with 1160+ retail stores, 670+ kiosks and five online stores, and annual revenues of $1.74 billion, roughly the size of Malabar Gold & Diamonds.

China’s largest jewellery retailer, Chow Tai Fook, with 1450+ points of sale across 320 cities in China and 60+ stores in Hong Kong, and sales of $4.5 billion (Rs.23,000 crores), is also the world’s largest jewellery retailer.  Chow Tai Fook has a market cap value of Rs.79,300 crores, 3.75 times that of Titan.  Second largest Chinese jewellery retailer Lao Feng Xiang has estimated sales of $1.8 billion and No.3 Chow Sang Sang about $1.65 billion, which is less than that of Malabar Gold & Diamonds.

Tiffany & Co., with global sales of $3.6 billion, is the second largest jewellery retailer in the world. Only half of its sales are in the US, where it is the fifth largest domestic retailer.

The top two Japanese retailers As-me Estelle, with sales of ¥27.07 billion (Rs.1717 crores) and Kuwayama, with sales of ¥25.06 billion (Rs.1588 crores), would not even make it to India’s Top 10 in terms of sales.

Per capita consumption of jewellery in India is Rs.1480, compared to Rs.12,500 in USA, Rs.10,700 in the EU, Rs.4850 in Hong Kong, Rs.4530 in Japan and Rs.1825 in China. In urban India, it is Rs.3735 and if we account for only the urban middle and upper classes, it goes up to Rs.8360 per person.

Retailing of jewellery & watches accounts for 7.2% of the total Indian retail market (including automobiles), whereas organized jewellery & watches retailing forms 19.8% of the total Indian organized retail market.  Yet we don’t see this phenomenon represented in Indian shopping centres – why?

Based on different trading densities in different retail categories, Asipac has estimated that about 7.8% of the total carpet area in an Indian shopping centre should be dedicated for the retailing of jewellery and watches.  Therefore, in a shopping centre with 350,000 of total carpet area (GLA of 500,000 square feet), as much as 27,300 square feet should be dedicated to jewellery & watches. Assuming that a centre of this size caters to a catchment of 200,000 people in the middle and upper classes, we are talking about annual expenditure of Rs.167.2 crores (at Rs.8360 per person) on jewellery and watches. This translates to a trading density of Rs.5100 – which is in line with the trading density in this segment.

As jewellery and watch counters in department stores would account for about 2,300 square feet out of the 27,300 square feet, the balance 25,000 square feet has to be spread across 10-15 vanilla stores in this segment. Barring maybe one or two, no shopping centre in the country has done this.

What is the reason that Indian shopping centres do not have enough jewellery & watches stores? In my mind, one of the reasons could be that jewellery retailers typically like to buy property rather than rent. Therefore, shopping centre developers who do not wish to sell shop spaces can look at an alternative. If they are expecting a rent (including CAM) of Rs.125 per square foot on carpet area, with an escalation of 15% p.a., they could take a one-time deposit of Rs.9723 per square foot in lieu of 12 years’ rent & CAM. This is the NPV (net present value) of the future rent & CAM payments for 12 years (including 15% escalation in the fourth, seventh and tenth years), taking cost of money at 15%.

For a jewellery retailer, it would be quite easy to pay this one-time deposit of Rs.9723 per square foot, as he would be already investing more than Rs.30,000 per square foot in interiors and inventory. This would make it a win-win situation for both parties – the landlord and the tenant.

The Tanishq store at Inorbit Mall in Malad (Mumbai) is the best performing Tanishq store in the country. Reliance Jewels is doing well in good malls. Malabar Gold & Diamonds has signed up at Forum Mall Chennai. With roughly 25-30 organized sector retailers present in every region, it is about time that we see 10-15 of them in every shopping centre of 500,000 square feet. Otherwise the “Indian experience” is not complete.


Amit Bagaria is Chairman of ASIPAC, India’s leading mall development and leasing consultants and MEN & BOYS, Asia’s largest chain of retail stores for men’s skincare and grooming.

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