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All that glitter does not seem to be pushing gold sales this festival season, as the prevailing economic slowdown, shrinking wages, and regulatory hurdles are set to impact the sales of gold retailers.
Traditionally, Dhanteras (a festival before Diwali where gold or metal is bought), and the marriage season account for about 40 per cent of the overall sales for retailers.
So while big retailers such as Tanishq, Kalyan Jewellers, Gitanjali, PC Jewellers and Joy Alukkas anticipate minimal growth, several small Mumbai-based retailers fear a sales dip of about 15-20 per cent.
According to two different surveys by Assocham and research-firm Zyfin, a majority of middle and lower income families are expected to slash their festival budget by over 40 per cent, reflecting subdued sentiments.
Usually consumers tend to spend nearly 25 per cent of their monthly salary during the Diwali and Dusherra festivals.
Despite negative sentiments, retailers are not putting in extra efforts to boost sales. Some have cut down on their advertising and promotional spends, while others have decided not to run any special offers and schemes.
C K Venkatraman, Tanishq’s Chief Financial Officer, said that low consumer confidence is the biggest challenge the industry is facing today. However, the company expects a marginal growth this festival and marriage season.
shortage
Besides, there is a huge shortage caused by central bank curbs on imports, Venkatraman said adding that the Government is looking at easing these norms. Gold imports have drastically come down to 10 tonnes in September from 142 tonnes in April, according to a gold analyst.
An independent gold-analyst and Mumbai-based retailer Ashok Minawala said, “Last year was also equally bad but people are not impacted by regulations and they buy gold irrespective of any slowdown or price rise. We don’t have special offers but are giving 10-15 per cent discount on making charges.”
He said that the last few days of muhurat buying has been encouraging. Muhurat buying is the advance booking of gold jewellery by people for marriage and Navaratri.
According to Minawala, the recent curbs by RBI on credit card buying are also unlikely to impact sales as it forms a mere 5 per cent of the total sales for most jewellers.
He also added that the sale of jewellery is likely to overtake the sale of coins and bars (bullion) this year.
According to Kumar Jain, Vice-President, Bombay Jewellers Association, recycled gold supply has jumped in the last few months following volatility in gold prices.
Gold prices since April have moved erratically from Rs 25,000 per 10 gm to Rs 32,000 per 10 gm in September finally settling at Rs 28,000 per 10 gm this month.
“People want to wait right now and we feel that the consumption will be less this festival season,” he said, but added that people are recycling (read exchanging) their old gold for large ticket purchases.
According to data given by the World Gold Council, the gold consumption was 864.2 tonnes in 2012, while imports totalled 860 tonnes.
In the first half of 2013, the consumption stood at 567 tonnes. The council expects the whole year consumption to cross 900 tonnes.
(This is the second part of a series on festival season in the time of slowdown)
> priyanka.pani@thehindu.co.in
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