Value chain

Digitization of the retail gold value chain

Gold jewelry has long been considered a symbol of wealth, financial security, and festivity in Indian culture. The popularity of gold jewelry only grew as the economy grew. At the same time, thanks to modern technologies and changing lifestyles, the manufacturing and retailing processes of gold jewelry are in transition. Millennials see jewelry as an important aspect of their personal style and are increasingly buying it to show it off. As a result, it makes sense for modern jewelry stores to prioritize consumer goals and desires.

To increase their sales, Indian jewelers are rethinking their traditional business models and adopting an omnichannel approach with an enhanced digital strategy. This is because unorganized jewelers face increasing competition from large corporations, which are eroding their customer base by offering better customer engagement, new financing methods and a wider range of styles. Consumers today expect better designs and seek assurance of jewelry quality, authenticity, and purity during their jewelry buying process.

Impact of Covid-19 on the jewelry industry

Prior to the Covid-19 outbreak, the jewelry industry was poised to grow at a rapid pace, jewelry spending is the third highest retail category at approximately 8% of the retail consumer basket India’s overall in 2020 and is expected to become the second highest by 2025 overtaking apparel and accessories. Indian consumers continue to love gold and jewelry, with India being the 2nd largest consumer of gold in the world. While the Covid pandemic initially led to a drop in demand for two years. However, demand picked up in the last quarter of 2021 as fears of the pandemic eased thanks to the large number of weddings. India, on average, has 10 million weddings per year, accounting for nearly 55% of jewelry demand. The demographics of the country will continue to support this demand.

India in recent years has also witnessed rapid growth in online jewelry retailing. Reflecting the global trend, the online penetration of organized jewelry retail is expected to increase over time. Most major national players understand the growing importance of this trend and hence have started investing in digital marketing and online sales. The Covid-19 disruption has also caused traditional jewelry merchants in India to reassess their current business model, and they have started looking to boost their digital presence.

Digitization is reshaping the industry

Let us look at some of the key ways technology is transforming or can transform the jewelry industry in India.

Customer Engagement

The biggest players have started to focus on pre-sales engagement with the customer. They create 3D digital catalogs and offer virtual try-on features to create an immersive experience for their customers. Where customers sitting at home can virtually experience jewelry and gather feedback before choosing. They also started creating video commerce tools to increase online sales. Numbers of new-age startups have started creating affordable tools for small jewelers who don’t have the ability or know how to build it themselves.

jewelry design

The bigger players have an in-house design team that never stops coming up with new design ideas. They usually test these designs with a set of customers before launching them in stores. With the advent of Al-based design tools, it has become very easy to recreate and incorporate natural features as well as intricate shapes into jewelry designs. The huge possibility of personalized jewelry has also been created through AI-based design. Buyers can now select their jewelry, designs and have unique items made to their specifications thanks to advancements in technology. Analytical skills can also help test customer acceptability in no time.

Manufacturing

Thanks to production techniques based on 3D printing, the possibilities offered by Al design tools can be realized. The procedure is known as additive manufacturing and involves layering different metals on top of each other depending on the design, enabling the manufacture of a highly engineered piece of jewelry in less than a day. Adding aluminum to the additive manufacturing process can improve speed and accuracy, while reducing material waste in 3D printing.

The traditional mold-based manufacturing method, on the other hand, can take up to a week. Online jewelers with a huge customer base are increasingly using additive manufacturing to improve their production. New designs are generated at the same pace as fashion designers hit the catwalks, with trends changing virtually every few months. In addition, additive manufacturing helps reduce production time.

Supply

Jewelry retailers depend on a mix of wholesalers, distributors, and manufacturers to purchase designs as well as jewelry. Small and medium sized jewelers do not have access to the best suppliers that supply inventory to large retail chains. Additionally, they can only store a limited number of physical coins as it requires them to invest in inventory. This limits their ability to offer variety to their customers and update their design to the latest trends. This problem is now solved thanks to virtual catalogs. New-age platforms have started offering jewelers virtual catalogs that they can display to their customers. They are not required to maintain inventory and can stock up if and when there is customer interest. Virtual catalog powered by virtual fitting and just-in-time manufacturing can help small jewelers compete with big players.

Sales and Marketing

Social media sites have become a major source of new lead generation. Having a strong digital presence on social media channels and being digitally discoverable is of utmost importance. There are a variety of easy-to-use digital tools, some of them specifically aimed at jewelry retailers that can help them create their own digital storefront, personalized marketing materials, and digital outreach.

Government push

Given the size of the market, the government is pushing for the industry to be formalized. Examples include KYC requirements, anti-money laundering legislation, goods and services tax, digital payments, hallmarking regulations, and gold monetization programs. It is now mandatory for all retailers (online or offline) to only sell hallmark certified jewelry. Regulating hallmarking, while initially difficult for unorganized jewelers, would lead to a level playing field in the long run. As customer confidence will be higher in hallmarked jewelry regardless of the outlet, and the unorganized jeweler with a lower operational advantage will have a competitive price advantage.

Summary

Digitization could bring major benefits to jewelry retailers, as keeping your customer base captive and finding new customers requires digital engagement and awareness. Digitizing the supply chain would ensure that every store will have access to best-in-class design. Retailers will then be able to provide their customers with a wider range of services, such as digital gold, insurance and finance, in a more transparent way.



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The opinions expressed above are those of the author.



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