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    The Retail Revolution

    1stIndia Gold Conclave Chennai

    19th July 2008

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    Flow of presentation

    Background of Indian jewellery Industry

    Changes taking place within the Industry

    Coping with these Changes

    Gazing at the Future

    Future requirements for the Industry

    Some example from Tanishq

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    How big is the jewelry market in India?

    2.5

    8.6

    9.6

    75

    88

    111.87

    0 50 100 150

    Rs Thousand Crores

    Watch

    Apparel

    Telecom

    Relative Size of Indian

    Consumer Markets

    Series1

    Jewellery is amongst

    the largest and

    most broad based

    consumer markets in

    India

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    Background

    The Indian jewellery Industry is one of the largest domestically(and in the world) and has some unique characteristics

    Recent Changes in the Lifestyle goods industry and the diamondindustry have created some opportunities and challenges

    The family jeweler segment is the largest segment of themarket and hence most likely to be impacted by these changes

    If the industry needs to initiate changes at the firm or Industrylevel , the leaders need to agree on the challenges facing them

    and the strategies needed to cope with them

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    Indian Jewellery Industry

    Market Size

    Fourth largest consumer market in the world

    Jewellery Market Size: Rs75,000 crores

    Diamond jewellery: Rs10,000 crores

    Largest market in terms of volume of gold

    India accounts for more than 22% of the total gold

    used for jewellery purposes

    Growth

    Gold jewellery Market Growth: 8-10%

    Diamond jewellery Market:18%-20%

    2006 data

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    Per Capita consumption

    115

    170

    123

    12 10

    0

    2040

    60

    80

    100

    120

    140160

    180

    Per Capita consumption in US $

    Italy

    USA

    Japan

    China

    India

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    Whats Changed

    Gold as a share of wallet is decreasing in the younger

    generation. Traditional jewellery is still the dominant design

    pattern while contemporary styles are emerging fast

    Although guarantee of the retailer is important in ascertainingquality, hallmarking is gaining acceptance

    In the past choice of stores used to be 1-2 stores, but

    customers now look at 4-5 stores for range and choice of

    jewellery

    The main occasions to buy are still marriage and festivals

    Customers in the high value category are becoming more

    informed because of exposure to media and fashion trends

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    Organised retail making a dentRetail Segments Value- Rs CroresFood & Grocery 743900

    Clothing,Textiles & Fashion accessories 113500

    Jewellery 60200

    Catering Ser ices (F&B) 57000

    ConsumerDurables, Home appliances/Equipments 48100

    Pharmacetuicals 42200Furnishings, utensils, furniture - Home & Office 40650

    Entertainment 38000

    obile Handsets accessories & ser ices 21650

    Footwear 13750

    Books,Music & Gifts 13300Watches 3950Health & Beauty care ser ices 3800

    TOTAL 1200000

    ndian Retail Market -2006

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    Share ofOrganised retail in the market

    Despite its large size jewellery retail is unorganised and veryfragmented

    95%

    5%

    2005

    Famil

    je elleani e

    Re aile

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    US Retail Scenario

    4%

    20%

    23%

    53%

    7%

    20%

    24%

    49%

    9%

    20%

    22%

    49%

    1987 1992 2004

    ndependen s

    Disc uns res

    eweller

    Chain s resN n s reRe ailers

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    Organised retail making a dent

    % Organised Retail

    0%

    10%

    20%

    30%

    40%

    50%

    % Organised Retail

    % Organised Retail 46% 38% 19% 13% 11% 10% 9% 8% 7% 11%

    Watch

    es

    Footw

    ear

    Clothin

    g,Texti

    Books,

    Music

    Health

    &

    Consu

    mer

    Furnis

    hings,

    Mobile

    Hands

    Caterin

    gOthers

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    Industry standards are set

    Diamond Trading Company (DTC)

    World Gold Council (WGC)

    Platinum Guild International (PGI)

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    How they aid organised retail

    Educating the customer about different kinds of precious metals,stones and jewellery as a whole

    Creating Brand pull in customers

    Promoting jewellery by increasing usage and appeal occasions

    Putting a good vendor base to ensure continuous supply of productsand better service for the customer

    Positioning jewellery as a lifestyle product rather than a traditionalproduct

    Responsible for the emergence of a jewellery industry value chain

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    Value chain redefined

    Merchandising

    &Design

    Manufacturing Marketing Retail

    Unlik di i n l w l in w d ingl wnn g u u , l f i liz i n ging in indu y

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    Design Differentiation becoming the USP

    Traditional industry relied on Karigar skills

    Now, More emphasis laid on formal design training in jewelry

    category especially by the organized players

    Design Training in NIFT, SNDT,GIA, JDTI

    Players like Tanishq, Ganjam, TBZ have specialized DesignStudios which have won laurels at international forums as well

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    Manufacturing

    Hallmarking - Standardization in Material quality is fast becoming a pre

    requisite especially for Gold jewelry

    In case of diamonds, Increased awareness of diamond quality ( 4 Cs)

    Special EOU in hubs like Mumbai (SEEPZ) which supply to stores acrossthe world but face stiff competition from Hong Kong and China

    Platinum has few manufacturers in the country in comparison to Gold

    and Diamonds

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    Marketing

    Creating Newer opportunities to buy jewelry

    Festivals like Akshay Tritiya, Occasions like Mothers Day,

    RakshaBandhan, Valentines Day etc

    Fashion campaigns in vogue- Tanishqs Fashion Earrings, Colors of

    royalty

    Creating a desire in the Indian Woman to buy jewelry for its design

    value/for accesorisation/ to make a statement about her personality.

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    RETAIL

    Retail

    Seduce the consumer in the retail space as competition is not

    only within jewelry category but categories like electronics,

    wellness services and luxury items Evolve a distinct retail identity in terms of product,

    store look and customer experience

    Trend of the speciality Jewellery markets/ malls

    Increasing traditional players renovating/refurbishing storespaces

    Concept of strong retail brand in jewellery industry gaining

    strength

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    What else is changing?

    Disposable income rising faster as the economy is growing

    Rs One Crore Per Anum Income households among the fastest

    growing population segment in the country

    This Trend also visible further down the pyramid

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    Mapping of Indias Income classes

    Classes 1994-95 1999-00 2006-07

    Rich

    (above 2.15 lac)

    1million

    Households

    3 million

    Households

    6 million

    Households

    Consuming

    (0.45 2.15) lac

    29 million

    Households

    66 million

    Households

    75 million

    Households

    Climbers

    (0.22-0.45) lac

    48 million

    Households

    66 million

    Households

    78 milion

    Households

    Aspirants

    (0.16-0.22) lac

    48 million

    Households

    32 million

    Households

    33 million

    Households

    Destitute

    Less than 0.16 lac

    32 million

    Households

    24 million

    Households

    17 million

    Households

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    Projected Growth

    0

    20000

    4000060000

    80000

    100000

    120000

    140000

    2005

    2006

    2007

    2008

    2009

    2010

    2011

    2012

    2013

    2014

    Indian jewellery market is expected to grow at an overall rate of 8%

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    Entry of strong players into the jewelleryindustry

    Reliance

    Big Bazaar

    Giant

    Subiksha

    Metro

    Bombay stores

    Big Bazaar has already launched a gold section

    Departmental stores like Shoppers Stop have jewellery outlets

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    New Channels of Distribution

    Direct selling

    Modicare launching jewellery sales

    Pantaloon acquiring a 10% stake in Goldiam

    E-retailing

    Fabmall/Gold Palace starting e-retailing of jewellery

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    Transition

    Different stages-Different strategies

    Strategies

    Jewellery is used

    asastatussy b l Jewelelry as little

    differentiati n and

    ad ta eto

    strategy

    Local artnershi s

    are i ortanttosucceed

    isks

    Lossofcustomer

    trust

    Low customerprotection

    isks

    Unclearmarket

    segmentation

    Unclearoffering

    Lossofcustomer

    trust

    Strategies

    Costcutting measures

    adopted by most

    jewellers Managementofthe

    distribution chain

    Alliances

    Risks

    Industry Restructuring Lossofcustomertrust

    Strategies

    Creation ofa

    local brand Useof

    innovative

    distribution

    channels

    Local alliances

    Fragmented

    Consolidated

    Mature

    Time

    Market

    maturity

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    Lessons to learn from apparel

    Traditionally dominated by small

    and family run stores

    Strictly madetoorder

    Fashion elementand design

    contentminimal

    Emergenceof big brandsand retail

    outlets, tremendouscompetition

    Increasing preference forready-madegarments, withrise in urbanization

    Increasing importanceofFashion, style

    and brand management

    FactFiles:

    Second largestorganized

    sector in thecountry

    TotalApparel industry

    worthRs 1000 billion with

    readymade garmentsworth 300 billion

    ExportofReadymade

    apparel constitute 46%oftotal

    Percentageofapparels

    sold throughsingle largeformatstores is 44% Indiaviewed asahot

    destination forglobal

    retailers

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    The rapid growth of the organized retail market was unforeseen in theapparel space, and this is predicted to continue growing the market asa whole

    An industry that believed that individual customization that a familytailor offered was irreplaceable, found customers increasinglyamenable to picking up off the shelf alternatives, now available in awide range of design and size

    Primarily driven by people who found they had a lucrative domesticmarket when fighting pitched battles in the export market

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    What do we need ?Expertise to be developed in..

    Areas Success factors

    Marketing

    and

    Brand building

    Capabilities

    Identification of valuable target

    segment and effective positioning

    Communication of differentiating factors

    Consistent communication

    Strong customer relationship management

    New Product

    Development

    Strong design capabilities

    Strong manufacturing support

    Strong product planning process

    Strong IT integration

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    What do we need?Expertise to be developed in..

    Areas Success factor

    Distribution

    Management

    Strong retail management capabilities

    Strong franchisee management capabilities

    New avenues, e-tailing, mail order catalogue Strong IT integration

    Supply -Chain

    Management

    Efficient sourcing and procurement

    Efficient production & inventory management

    Efficient logistics management

    Service Quality Store staff reliability, responsiveness,

    assurances, empathy

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    Therefore

    As the retail boom has arrived in the country, jewelry industry

    cannot ignore it.

    Will have to take giant steps so that can meet customer

    expectations and offer value to the customer which is higher

    than the material cost they pay for

    Separation of the ownership from the management in the

    jewelry industry

    Need for more specialized people in each of the above

    mentioned fields

    Immense opportunities for young professionals from varying

    fields

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    The Tanishq StoryBuilding a successful retail brand

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    Retail has traditionally been regarded as a sales and

    distribution channel

    Brands - inFMCG, durables, fashion categories like

    to dwell on their extensive retail distribution reach

    But, truly speaking, retail can impact the minds and

    hearts of customers as strongly as it can reach the

    vicinity of their homes

    Because retail can make the magic of brands come

    alive, in an environment that consumers can

    experience, feel and touch

    Retail can deliver the brand value proposition to

    consumers in a compelling yet cost-effective manner

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    Products need to tell a story- RetailShowcase

    Retail space can showcase product far more brilliantly than

    advertising ever can

    sexy product displays, which completely mesh with brand

    personality Attractive store windows

    the alluring play of colour and lights

    key product features can be emphasized, often dramatically

    relatively long consumer attention span

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    BRAND is what the customer sees

    Retail space is uniquely positioned to surround the customers

    senses with multiple facets of the brands personality

    Can deliver visual, audio and olfactory cues

    in-store visual merchandising

    music that brings alive the moods of the brand

    online audiovisuals that inform, excite & stimulate

    in many cases, even the fragrances and smells that define

    the brand and draw the consumer

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    Communication with the customer

    Unlike most advertising, retail space permits an interactive process of

    communication about brand

    - An effective salesperson can communicate brand in a clear,

    compelling, customized manner

    - Catalogs, take-one leaflets, online dialogue counters in the store

    can further enhance this process of speaking to the customer about

    key brand benefits

    - Within the retail space, the customer is captive audience as he

    listens to you and experiences your brand

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    Captivate

    The first three Ss (showcasing, surround effect and speaking

    effectively) make the captivating magic of the brand come alive

    This is truly the moment of truth for every retail brand the point of

    seduction, leading to consumer choice & purchase

    Magic, by its very nature, cannot be captured in words but we see it

    in our showrooms, 365 days a year

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    Unanimity in the story- Paheli

    Communicate to create brand association and generate

    interest

    TVC

    Print and Magazine Instore

    Outdoor

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    BRAND PROPOSITION- NEW TALES OFTRADITION

    Communicating your brand values and your unique

    proposition to the customer.

    Synergy between your products, store,advertising.

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    CHALLENGE NORMS

    Challenge existing norms and wake customers

    Taking a strong stance in our campaigns

    Education into why customers should buy into organised

    retail.

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    Own an Activity- Anmol Saheli

    Seeing ourselves as a complete wedding jeweller was one

    proposition but communicating the same to the right TG

    another task.

    Anmol Saheli- Emotional Bonds talked about rather thanhardselling jewellery.

    Hit the right cord with the right TG and overnight walkins

    grew and sales as a factor of this.

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    The best way to predict our future

    is to invent it