India’s jewelers go online to earn $22 billion from e-commerce

Bombay: In India, where buying gold has traditionally involved a trip to a trusted family jeweler, a growing e-commerce market that is expected to be worth $22 billion in three years is starting to challenge conventional wisdom.

Gitanjali Gems Ltd, India’s largest diamond and gold retailer, expects online sales to account for about 20% of sales in two to three years, from about 1% now. The growth potential convinced Ratan Tata, former Tata Group chairman, to invest in Bangalore-based online jewelry retailer BlueStone last year.

Jewelers are joining forces with Amazon.com Inc., Flipkart Online Services Pvt. and Ebay Inc. after the government eased import restrictions on gold bars and coins last year. India’s total online retail market will be about $6 billion this year, thanks to free shipping and deep discounts, Gartner Inc. estimates. It could grow to $22 billion by 2018, CLSA Asia Pacific Markets predicts.

“Indian consumers prefer to touch and feel jewellery before buying, but the change in consumer behaviour will happen quite quickly,” Gitanjali CEO Mehul Choksi said in a telephone interview. “We have partnered with all the major online platforms and are always looking for more tie-ups.”

Gitanjali, which sells its diamond and gold jewellery through over 4,000 outlets across India, the US, the Middle East and Europe, has a host of Bollywood actors, including Shah Rukh Khan and Katrina Kaif, as brand ambassadors.

Providing comfort

The Mumbai-based company, whose sales fell 24% to ₹ In the fiscal year to March 2014, sales hit Rs 12,436 crore ($2 billion) due to import restrictions, Choksi said. The products are now sold through platforms like Amazon.com, Flipkart.com, eBay and Jewelsouk.

According to Gaurav Singh Kushwaha, founder and CEO of BlueStone, which sells jewellery in the form of solitaires, rings, earrings, pendants and bracelets, in addition to promoting their own jewellery, established retailers are also taking an interest in online stores that already sell it.

“Online retail offers convenience from the comfort of your home, and it also offers other incentives, like giving customers time to make a decision rather than forcing them to make a purchase on their first visit,” Kushwaha said. “Offline jewelers are seeing the potential and need for an online presence.”

The online jewelry market could be worth as much as $2.5 billion in the next five to 10 years, BlueStone estimates. It currently accounts for less than 0.1% of the $55 billion jewelry market, it says.

Topping in China

Indians bought 662 metric tons of gold jewelry worth $26.9 billion in 2014, the most since 1995, the World Gold Council said last month. Total demand, including gold bars and coins, was 842.7 tons, helping India surpass China to become the world’s largest consumer last year, the council said.

The council says demand for bars will rise to 900-1,000 tonnes this year. The bars are bought in India during festivals and weddings as part of bridal kits or given as jewellery by relatives.

Shares of some Indian jewelers rose after the government eased most import restrictions. Titan Co., the largest by market value, has surged 57 percent in the past year, compared with a 30 percent gain in the benchmark S&P BSE Sensex. PC Jeweller Ltd. has more than tripled in the same period, while Gitanjali has fallen 23 percent.

The online marketplace allows companies to offer customers a wider selection of designs without having to keep physical inventory, said Rajeev Sheth, president of Tara Jewels Ltd., which began selling through Amazon in December.

Global trends

“The main driver for online jewellery sales is changing consumer behaviour, especially among young Indian women who are exposed to global trends and are increasingly shopping online,” said Sheth.

Earlier this month, New Delhi-based PC Jeweller partnered with US-based online jeweller Blue Nile to assess the Indian market for potential long-term sales. The jeweller plans to develop its own website to replicate the convenience and comfort of shopping at its luxury showrooms, it said on March 4.

Titan may buy a stake in Chennai-based online jewellery retailer Caratlane, which is owned by Tiger Global Management Llc, the Economic Times reported last month. The jeweller said the report was “speculative in nature”.

Titan, founded by the Tata Group, currently sells its jewellery through its website as well as through a nationwide network of retail outlets.

Kushwaha, who founded BlueStone in 2011, says his biggest challenge so far has been building trust in an industry dominated by traditional retailers.

BlueStone, together with Caratlane, offers customers jewellery of their choice, delivered to their home for free trying on.

“We understand the concerns of first-time online jewellery shoppers and our ‘Home Try-On’ service is designed to help them,” he said. Bloomberg