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Gilt goes north
With Kerala's yen for gold having reached saturation point, it is time for Malayalee jewellers to woo customers elsewhere in the country.
Social anthropologist K George Verghese, who has extensively researched Kerala's grand obsession with the yellow metal, says that historically gold and silver have always moved in the opposite direction in India. Gold has moved from north to south, and silver from south to north, he says in his book Swarna Keralam. But current trends show that the first part of his hypothesis is being reversed.
Kerala jewellers are making significant gains in the northern market. The leading names among them, notably Kalyan Jewellers, Joyalukkas Jewellers and Malabar Gold, have opened showrooms in states like Gujarat, Maharashtra, New Delhi and West Bengal. They all say they are enthused by the welcome they received in these metro markets and have drawn up plans for massive expansions in Tier 2 and Tier 3 cities in these states.
Kerala, which accounts for a major share of gold trade in the country, was till recently the favourite destination of jewellers from states like Tamil Nadu, Gujarat and Maharashtra. But the current generation of gold entrepreneurs in Kerala is far more aggressive and sees no reason not to do their selling elsewhere in the country.
Ramesh Kalyanaraman, executive director of Kalyan Jewellers, says he is hoping to push up his turnover from nearly Rs 10, 000 crore last year to Rs 13, 000 crore in the next fiscal. This is higher than the Rs 7, 000 crore which a big chain like Tanishq, with 100 outlets across India, targeted in 2011-12. Joy Alukkas, managing director of Joyalukkas Jewellers, says his chain is looking at a business of Rs 8, 000 crore in 2013-14 from across India and the Gulf.
Kerala has never had the reputation of being a state that nurtures entrepreneurship. Its fragmented and Left-centric political ethos and endless rounds of hartals and protests that disrupt daily life here are not conducive to the growth of business. But there are two areas in which Kerala has been making big strides on the national scene in recent years - financial services, with firms like Geojit, Muthoot, and Manappuram becoming prominent players in other parts of the country as well, and gold jewellery.
The speed at which both are blooming outside Kerala has left analysts stumped.
There are divergent estimates of Kerala's share in the country's gold trade. Traders say it will be about 8 per cent of the nearly 1, 000 tonnes of gold traded in India, while other agencies say it will be at least 20 per cent. Having established a well-knit network of retail chains within the state, jewellers from Kerala went on to expand their operations to the oil-rich Gulf region which has a massive Malayali population. They followed this up by expanding to neighbouring states like Karnataka, Tamil Nadu and Andhra Pradesh, and eventually the north Indian states. "Now we are not targeting only non-resident Keralites across India. When people buy gold they don't look at the regional profile of the owner, " says Alukkas.
There are some domestic compulsions too that are pushing Malayalee jewellers to explore markets outside. Competition has become stiff in the home market with the entry of so many players and the market is close to saturation point. There is also the matter of high sales tax rates: 5 per cent in Kerala as opposed to 1 per cent in other states. Third, there are political uncertainties and frequent hartals.
Traders claim that their quality consciousness, transparency in dealings and organised strategies for marketing and client servicing help them position themselves well in other markets. The pro-business approach of other states also lures them there, adds a trader who does not wish to be named.
"We go into a market after we draw up a strategy prepared after three rounds of market surveys. We don't wait to be surprised and know exactly what is going to happen in each market beforehand. Wherever we go we try to get as close as possible to the local community there. This starts with the selection of brand ambassadors who command respect there and the appointment of employees who are well-versed with local cultures, " says Kalyanaraman.
Kalyan Jewellers and Joyallukas's brand ambassadors for different regions are all associated with the Indian film industry: Amitabh Bachchan and Aishwarya Rai for Gujarat and Maharashtra, Prabhu for Tamil Nadu, Akkineni Nagarjuna for Andhra Pradesh, Shivaraj Kumar for Karnataka, and Dileep for Kerala. Joyalukkas uses Madhavan for Tamil Nadu, Allu Arjun for Andhra Pradesh, Sudeep for Karnataka, and Shreya Ghoshal is its national ambassador. The Hema Malini-Mohanlal combine is associated with Malabar Gold.
"Many north Indian gold traders still operate as family business groups with just one or two outlets. But in Kerala we have been operating in a more organised and transparent manner, emphasising on reasonable margins but high volumes. This formula seems to be working for us in north India, " says Joy.
George Verghese believes Kerala's jewellers have drawn valuable lessons from their foray into the Gulf. "Exposure to the Gulf market seems to have brought them significant gains in the field of professional business culture, " he says. But he quickly adds that it is too early judge their success. "The gold trade is too complex to draw quick conclusions of any kind, " he says.
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