Moneycontrol PRO

Investor Diaries: Here’s what a customer visit to a Tanishq outlet tells you -- that its financial statements won't

Based on my experience, I can confidently say, that unlike unorganized jewellers, Tanishq doesn’t befool its customers by making money in any of the illegitimate ways.

January 28, 2019 / 07:50 PM IST
Tanishq store

Tanishq store

Jatin Khemani

The beauty about being in investing profession is that your mind is always curious and observing even when you aren’t ‘working’. Any occasion — a family holiday, house renovation or wedding — can effortlessly translate into scuttlebutt (primary research) where you experience so many products and services as a consumer, get to interact with dealers and also get to observe your family and other consumers engaging with those products and brands.

I had one such wonderful experience recently. There was a wedding in my family and like all Indian weddings, it meant shopping jewellery for the couple, relatives, gifting, etc. My family and relatives have been traditionally dealing with two jewellers in our neighborhood who belong to same community (Sindhi) - one of them specializes in gold jewellery and other in diamond studded.

This time my family wasn’t happy with the designs these two stores offered and so they visited six-seven other mom & pop stores only to find none as a good place to buy from.

I was then consulted to suggest a jeweller, and being in stock markets and having read so much praise about it, I instantly suggested Tanishq (India’s leading jewellery brand operated by Titan, a Tata company).

The suggestion was instantly turned down saying it levies a very high making charge (a common perception among masses buying jewellery from traditional/unorganized channel). I had never been to a Tanishq store earlier so I did not want to lose an opportunity to visit. Luckily, I found online that during that time period Tanishq was offering up to 30% discount on the making charges which helped me convince my family to give this place a try.

What transpired next is an amazing set of experiences which I am going to share in this post

We visited a store about three kilometers from our residence – it must be 12,000 square feet spread over four-storey building. There was a 30-minute waiting as the entire store was full. We were made to sit in the lobby and were promptly served refreshments.

The business model of Tanishq is predominantly around ‘making charge’ levied over cost of gold. It varies from 8.5% (on coins) to as high as 35% of the value of gold (on ornaments like necklace or bangles). The quoted rate which we see on financial portals, currently around Rs 32,000, is per 10 grams (equivalent to tola) for 22 karats (a sign of purity, maximum is 24 karat).

So, if you buy an ornament of 20 grams (22 karat), the value of gold will be Rs 32,000 per 10 grams * 2 = Rs 64,000 plus 25% making charge + 3% GST = Rs 82,400. Effectively, the gross margin here is the 25% making charge (Rs 16,000) from which Tanishq has to cover all its craftsmanship, store, employee, promotional and other administrative expenses and keep remainder as net profit.

The unorganized/traditional jewellers may make money in many other ways - some legitimate, some unscrupulous:

1. Their claims regarding their gold’s purity, may not be true and they could very conveniently be selling 18 karat gold at price of 20 or 22 karat, earning the balance 10% or 20% to their pockets, in addition to the ‘low’ making charge they earn from the customers.

2. Similarly, when customers exchange their old gold ornaments, they could pay as per 20 karat even though gold is of 22 karat purity.

3. Further, they deduct 8-10% from the value of exchanged gold. If one were to return the 20 gm gold ornament illustrated above, he would get Rs 57,600 after 10% deduction from gold value (purchased for Rs 82,400). Jeweller can further short-change by paying less based on purity check.

4. They may even peddle this ‘used’ ornament after polishing, to another customer and again earn 10-30% making charge on that same piece.

How does exchange work at Tanishq?

If one is returning an ornament bought from Tanishq, they will immediately adjust 100% of the value i.e. zero deduction. Every Tanishq ornament has the logo engraved which helps them identify originality.

We had an older piece of jewellery to exchange, however, it was a non-Tanishq piece, here’s how they did it:

First, the executive placed the ornament in a purity measuring machine called karatmeter. Within 90 seconds, the machine’s display showed us the ornament's purity to be 22 karats.

Img 1

Based on this estimated weight and purity, the executive mentioned the provisional amount to be adjusted in lieu of the gold ornament. Thanks to the machine, we further got a chance to decide whether we want to go ahead with the exchange or not. We chose to go ahead.

Then, she added, that the final amount would be based on melted gold. At this stage I was thinking they would keep the gold, send it to some lab and ask us to check what was exact actual weight/purity, in the next visit.

To my surprise, the executive took us along to their mini laboratory, where she had our piece of jewellery melted and molded into a brick, right in front of us. Finally, the karatmeter step was repeated to calculate final weight and purity. This entire process took less than 15 minutes. And the transparency with which the process was conducted, only showed how reliable the brand is.

Based on my experience, I can confidently say, that unlike unorganised jewellers, Tanishq doesn’t befool its customers by making money in any of the illegitimate ways mentioned.

Img 2

Gold Procurement

There are only three ways a jeweller can source gold – lease it from banks, buy from spot market/import or customer exchange. The most popular has been leasing as it involves no inventory risk, low capital employed, and high return ratios.

However, in 2013 amidst worsening current account deficit and rapidly depreciating rupee, the regulator made serious attempt to curb gold imports by banning gold lease and introducing 80:20 import rule which mandated only up to 80% of imported gold can be sold domestically while rest has to be exported.

The sector was badly hit and companies had to raise debt to buy spot gold which not only increased their working capital but also brought down return ratios drastically in addition to introducing inventory risk in the business model.

Over the last five years, the industry is estimated to have actually shrunk from 865 tons to 815 tons. Whereas, Titan has bucked the trend by registering an 11% CAGR over the same period, largely led by volume growth. How?

In 2013, the gold exchange contributed merely 15% to Tanishq’s overall gold sourcing. While industry was reeling under pressure during the last five years, the trust and transparency which Tanishq enjoys came to rescue. The share of gold exchange has risen to 40% by FY18 and management hopes to take it to 50% by 2023.

This has also been a great customer acquisition strategy - customers almost always end up buying at least twice the quantity they are exchanging and with every repeat visit there is an opportunity to up sell.

Jewellery retail is a 5,000+ year old industry, is humungous in size and continues to be dominated by unorganized players (standalone/traditional stores). The data shows branded jewellers like Tanishq have been winning market share from weaker counterparts rapidly - over last 15 years the share of organized players has increased from 10% to 25% and is likely to grow to 50% over next decade.

Some other observations:

1. We would have visited this store 4-5 times during Nov-Dec and almost every time there was a waiting period of up to 45 minutes. I thought the rush must be because of wedding season however the same shopping street has at least 15 more jewellers and none seem to have had this kind of crowd.

2. On our very first purchase, they enrolled us in their loyalty program ‘encircle’ which gives points based on purchases across titan brands of watches, eyewear, accessories etc. including online purchases from From second purchase onwards, the cashier himself offered to adjust the points against amount due. Their whole customer-relationship-management seemed very well structured; I received an OTP on my mobile to verify redemption. The points do not have any expiry and can be gifted as well. It also includes free services on watches and eyewear besides standard practice of giving special offers on birthdays and anniversaries, early access to new designs and schemes.

3. We were strongly persuaded to enroll for ‘Golden Harvest’, a collective investment scheme (CIS) run by Tanishq. Under this, the customers pay a monthly sum like recurring deposit (minimum Rs 2,000) for 11 months and company adds 12th one as bonus (interest) - effective return of ~12%. The maturity proceeds can then be used to purchase jewellery at any of the Tanishq stores across the country, however gold price applicable would be the one prevailing on the day of actual purchase. This is an attractive way for jewellers to get customer advances and also lock-in customers for their future purchases which is why almost all jewelers run such schemes. If I wasn’t there my family would have definitely fallen for it. I believe for investments in gold, e-gold (or ETF) is a far superior way than these saving schemes under which making charge ends up eating a lions share.

We ended up doing majority of our purchase from Tanishq and the experience was wonderful. The designs are appealing, steady and suited for every-day wear in line with the trend.

In an otherwise shrinking industry, it’s only the credibility built over last two decades that is helping them grow steadily.

The author is the founder & CEO of Stalwart Advisors(, a SEBI registered investment advisor.

Disclaimer: The post is for information purpose only and not to be construed as an investment advice. The author or Stalwart Advisors has no financial interest in the said company. Please consult your financial advisor before acting on any of it. 

Moneycontrol Contributor
Moneycontrol Contributor
first published: Jan 28, 2019 09:27 am