Local jewellers run short of cash as branded chains thrive in gold rally

FIle photo

• Small jewellers face a 45% drop in gold sales due to high prices and low demand
• Gold price instability and liquidity issues hinder small retailers' stock refresh.
• Large chains gain market share as consumers prefer lightweight, branded jewellery.

Did our AI summary help?

Small, family-run jewellers, many of whom have served their local communities for generations, are facing a liquidity squeeze as higher gold prices sap demand and shifting consumer preferences draw customers towards larger chain stores.

Local jewellers and goldsmiths across the country have reported a 45 percent decline in volume, making it tough for them to operate amid the current volatility in precious metal prices, according to the estimates of India Bullion and Jewellers Association (IBJA).

"Middle-class buyers cannot afford gold anymore," said Ashok Sakaria, a private jeweller from Mumbai. “Their incomes are far too stretched to budget for such a purchase." These days, his shop in Worli rarely sees a customer walk in and make a purchase, and the situation has worsened since Diwali last year.

"Earlier, people could plan and buy, but now routine household expenses themselves are a challenge. Gold is considered safe, but it is no longer possible for normal people to buy and wear it," Sakaria said. With inventory piling up, he has delayed refreshing his jewellery stock in the past several months.

“Customers are waiting. It’s not just about high prices, but unstable prices. If prices rise and then stabilise, people adjust mentally. But when prices keep moving up and down, customers hold back unless there is a wedding or urgent need,” Sakaria added.

According to industry estimates, there are about 300,000-350,000 standalone and medium sized retailers with meaningful businesses in precious metals in India. These retailers focus on bridal jewellery, customisation, and developing personal relationships with their customers. Bridal jewellery accounts for 60-65 percent of this sector’s business.

IBJA national secretary, Surendra Mehta, said the jewellers have been facing a liquidity crunch since the beginning of the year. "Since India is dependent on gold imports, we have no control over prices, and we have started to see some payment issues surfacing for the informal players. They don't have enough reserves to refresh the inventory as well," Mehta said.

Although festive season demand did lift the mood, it was not on par with 2024, according to Noida-based jeweller Deepak Rastogi. Rastogi said he is focusing on faster-moving designs, lightweight jewellery, and made-to-order pieces to reduce idle inventory.

Unorganised jewellers (~53% of the market) are under pressure due to outright inventory buying, lack of hedging, and limited liquidity, leading to delays in design refreshes and store expansions, brokerage PL Capital said in a note on December 16.

"The worst thing for business is price instability. Prices can go high, but they must stabilise too. This affects our minds also. We cannot plan purchases. If we melt old jewellery and make new designs again, there is a loss. There is a loss during polishing, cutting, and making. Not only making charges, but even the gold weight also reduces slightly. We have to bear all that," said Bharat Waldaria, a Mumbai-based jeweller.

Many regional and local players are limiting design offerings and inventory depth, which is starting to reflect in lesser assortments versus large, branded chains, a key beneficiary in the current environment. Analysts expect the consumers to largely opt for lower grammage, with clear shifts toward 18k/lightweight designs in Tier-2/3 markets and studded jewellery in urban areas.

Branded players such as Titan Ltd's Tanishq, Kalyan Jewellers, Senco Gold and Diamonds have doubled down on this opportunity. Market leader Tanishq launched  9-carat jewellery in a country that mainly buys 22-carat gold, amid higher demand and an ongoing shift towards formal players.

These players reported stellar Q3 numbers, with each reporting sales between 40 and 50 percent.

"The sharp rise in gold prices is inflating inventory costs across the value chain, making incremental store additions and design refreshes more capital intensive for smaller players. We believe this will accelerate market share consolidation in favour of large and organised jewellery chains," said PL Capital.