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Analysis
 
 
India’s $9.6 Billion Rural Jewellery Market
 
Solitaire International, India


Design and style innovators and jewellery brands thought their target markets were confined to urban pockets in largely rural India. It turns out they were wrong! The rural Indian market is huge, as wealthy in parts as its urban counterpart and most importantly just as design and style conscious. A number of jewellery brands now actively target this huge and still largely untapped market, reports Shanoo Bijlani.

 


Urban India has been the engine that has driven the growth of consumption in the country. Brands and premium goods have all first been embraced by the city-dwelling Indian before they – or toned-down versions – percolated into the countryside. Not any more. The great Indian urban-rural divide is gradually narrowing – at least among the top and middle segments of the rural and semi urban areas. The rural rich are now displaying buying behaviour akin to the most downtown of city Indians.

Thanks to the rapid growth of rural income – in some segments at least – the Indian consumer goods marketer has a huge and exciting new target to aim at. A look at the figures reveals the scope of this new growth. Urban consumers constitute 40 per cent of the total Indian population – who are still the primary sales and growth drivers – but it is the other significant 60 per cent of the population – some 750 million in all – living in 160 million households in semi-urban and rural areas who today account for more than half of India’s consumption.

Rural India is no longer dependant on agricultural income. Thirty-five per cent or 60 million of India’s middle class live in villages, drawing incomes of between Rs.200,000 ($4,573) and Rs.1,000,000 ($22,800) per annum. The number of middle income households, defined as those earning between Rs.45,000 and Rs.215,000 ($1,027 and $4,900) per annum, in rural India is around 27 million, while the number in urban India is just a shade more at 29 million. Moreover, rural per capita income has grown at exactly the same rate as in urban India for the past 10 years. The percentage of people living below poverty line has reduced from 36 per cent in 2003-04 to 22 per cent in 2006-07. Every year, the gap between the urban and rural market is narrowing. In 1973, rural India spent 72.9 per cent of their earnings on food, and only 27.1 per cent on non food items. In 2005, they spent 55 per cent on food and 45 per cent on non food items.

Thanks to the government initiatives, literacy levels are improving. Other factors like increasing incomes from non-agricultural avenues like hotels and tourism and the IT industry, media penetration through satellite television, the influence of Hindi films, declining poverty and last, but not least, increased loan facilities have led to higher aspirations and an increase in rural consumption.

To quote from Rama Bijapurkar’s book We Are Like That Only, “Rural India is not poor nor is it totally agriculturally dependent. Rural India represents 50 per cent of India’s GDP (but 70 per cent of its people) and 50 per cent of rural GDP is non-agricultural: it comes from the self employed in all kinds of services. Indian consumers are very value conscious.

    Even ascetics are connected today
They may be poor but they are not backward. They’re not overwhelmed by western brands... Consumer India is large, it is mostly poor, and it is getting richer and less poor …”

Rural India and Jewellery

Given this situation, the Indian jewellery industry is beginning to shift its hitherto urban focus to make the most of rural India’s market potential. The World Gold Council (WGC) estimates that the Indian jewellery market is worth around Rs.70,000 crore ($16 billion). The urban jewellery market is valued at Rs. 28,000 crore ($6.4 billion), while the rural and semi-urban market is valued Rs.42,000 crore ($9.6 billion). Dissecting the rural figures further, the family and regional players here corner a Rs.14,200 crore ($3.24 billion) portion of the market, the share of branded jewellery is a minuscule Rs.3,000 crore ($686 million), while the small and fragmented players corner a whopping Rs.30,800 crore ($7 billion). The jewellery industry has realised that clearly, the last segment is large and significant in terms of generating a high volume market, and if properly catered to, the industry can upgrade this buyer, which in turn, can change the complexion of the Indian jewellery industry.
 
 

“In five years’ time, the rural jewellery market could grow to Rs.50,000 crore ($11.4 billion) at today’s gold prices,” estimates L. Natarajan, vice president of GoldPlus, a jewellery division of Titan. GoldPlus sells gold jewellery only in semi-urban and rural areas, unlike its sister concern Tanishq, which has an urban focus.

Barring the small presence of the branded jewellery segment, which is organized, the majority of the rural and semi-urban jewellery market is unorganized, fragmented, and dominated by individual and family jewellers. Poor shopping experience, a lack of transparency and a lack of designs, are some factors that have hampered the growth of jewellery industry.

 A GoldPlus outlet in a small Tamil Nadu town

Of late, there has been a raft of organised players pushing into the rural market. Along with GoldPlus, Gitanjali, Adora, Ciemme, Kisna to name a few, have all launched rural marketing initiatives. Big players though they are, their entry into rural India has been characterised by an unsure, testing-the-waters approach, mainly because initially, none was sure there really was money to be made in this market. Some offered 18-karat hallmarked diamond jewellery to a market that was traditionally oriented towards high-purity gold jewellery. Some tried branded gold jewellery. All of them together brought about an explosion in the range of designs and price points for the rural consumer along with assured buybacks and other incentive schemes.

An Eye-Opening Experience

“For us, targeting these new consumers was a revelation as we only had published research to rely on,” remarks Natarajan. “We did some market research of our own, trying to understand the type of jewellery the rural consumer wanted.” The study was an eye opener according to Natarajan. “We found that customers had plenty of expectations. They wanted high gold purity, and longed for firms that could deliver quality products, discounts, affordability, an excellent shopping experience, certification, and variety in designs.”

The GoldPlus survey also probed the reasons for the rural buyers’ preference for high-purity gold. The results confirmed the fact that gold was used as an investment vehicle – particularly long-term, as it was passed on to daughters at weddings (in south India 100 sovereigns or 800 grams is the minimum requirement to be gifted to a bride) – often mortgaged to tide over financial crises and seen as a traditional necessity.

 
 L. Natarajan, Vice President, GoldPlus