Jewelers in India Jump Online for $22 Billion E-Commerce Pie

[Editor: In this connection, I suggest you buy in bulk the shares of Gitanjali Gems Ltd at around Rs.47 and keep holding. 

Also, I hope you have already taken position in the hidden gem, Jaiprakash Power Ventures Ltd (Rs.11.10) after lot of positive developments in the company. Now if the things go as per schedule, then the scrip could even touch the all time high of Rs.70 Plus. However, for the moment the target is Rs.22, which I feel is easily achievable. Meanwhile, yesterday's call Elecon Engineering Co Ltd (Rs.68.50) at around Rs.59.30 is up more than 15 % today. Those Premium (Paid) Members, who bought me, say Cheers!!]
March 17, 2015: In India, where buying gold traditionally means a trip to the trusted family jeweler, a growing e-commerce market forecast at $22 billion in three years is starting to challenge all conventional wisdom.

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

Jewelers are tying up with Amazon.com Inc., Flipkart Online Services Pvt. and Ebay Inc. after the government last year eased import curbs on gold bars and coins. The total online retail market in India will be about $6 billion this year, driven by free delivery and heavy discounting, Gartner Inc. estimates. That may grow to $22 billion by 2018, CLSA Asia Pacific Markets predicts.

“Indian consumers prefer to touch and feel the jewelry before buying, but the change in consumer behavior will happen quite fast,” Gitanjali’s Chairman Mehul Choksi said in a phone interview. ‘We have tied up with all the major online platforms and we are always looking for more tie-ups.’’

Gitanjali, which sells its diamond and gold jewelry through more than 4,000 points of sales spread across India, the U.S., the Middle East and Europe, uses a battery of Bollywood actors including Shah Rukh Khan and Katrina Kaif as brand ambassadors.

Offering Convenience

The Mumbai-based company, whose sales declined 24 percent to 124.36 billion rupees ($2 billion) in the year through March 2014 because of import restrictions, now retails through platforms including Amazon.com, Flipkart.com, EBay, and Jewelsouk, Choksi said.

Established retailers are looking at online stores already selling jewelry, besides promoting their own, according to Gaurav Singh Kushwaha, founder and chief executive officer of BlueStone, which sells everything from solitaires, rings, earrings, pendants, bangles and bracelets.

“Online retailing offers convenience from the comforts of an individual’s home and moreover allows other incentives like giving them time to decide, not make it obligatory for customers to purchase at their very first visit,” Kushwaha said. “Offline jewelers realize the potential and the need for being present online.”

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

Topping China

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

Bullion demand is seen expanding this year to between 900 tons to 1,000 tons, the council says. Bullion is bought in India during festivals and marriages as part of the bridal trousseau or gifted in the form of jewelry by relatives.

Shares of some Indian jewelers have advanced after the government relaxed most restrictions on imports. Titan Co., the biggest by market value, has rallied 60 percent in the past year, compared with a 32 percent gain in the benchmark S&P BSE Sensex. PC Jeweller Ltd. more than tripled in the same period, while Gitanjali declined 22 percent.

The online market allows companies to offer customers a wider choice of designs without actually keeping physical stocks, said Rajeev Sheth, chairman of Tara Jewels Ltd., which began selling through Amazon starting December.

Global Trends

“The major driver for getting jewelry online is changing consumer behavior, especially of young Indian women, who are exposed to global trends and are increasingly shopping online,” Sheth said.

Earlier this month, New Delhi-based PC Jeweller tied up with U.S.-based online jeweler Blue Nile to evaluate the Indian market for potential sales in the long term. The jeweler plans to develop its own website to replicate the comfort and convenience associated with shopping at its luxury showrooms, it said March 4.

Titan may buy a stake in Chennai-based online jewelry retailer Caratlane, which counts Tiger Global Management LLC as its investor, the Economic Times newspaper reported last month. The jeweler said the report was “speculative in nature.”

Titan, founded by the Tata Group, currently sells its jewelry on its website besides its nationwide network of retail outlets.

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

Along with Caratlane, BlueStone offers customers jewelry of their choice delivered at home for trial at no cost.

“We understand the concerns of a first time online jewelry shopper and our ‘Home Try-on’ service is designed to help address them,” he said.

Courtesy: Bloomberg