gems & jewellery industry4

Few other factors that may cause fluctuation in gold prices:

The dumping of gold into the market by several nations' central banks (whether through leasing or outright sales) may artificially increase supply, and therefore lower the price.

Higher demand of gold like during the wedding seasons can cause the prices to shoot up

The desire for gold as a "hedge" against inflation affects demand and it may increase the prices

Price of gold negatively related to price of dollar. Gold prices mainly affected by change in sentiments rather

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Impact of price fluctuation on G&J industry

1. Impact of price increase With price rise the entry level prices of

jewellery increases and many manufacturing companies fall out of market as it costs them more to make jewellery now

Decrease consumption volumes as it deters customers to make a purchase when prices are high

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Impact of price fluctuation on G&J industry

2. Impact of price decrease The decline in gold prices may actually

benefit jewellery retailers, as it will reduce costs and revenues by similar amounts leading to possible margin expansion

Fall in price would cause inventory losses to manufacturers and retailers

Fall in price boost jewellery sales



Pricing – Diamond Analysis

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High Inflation

High inflation reduces the value of money (notes and coins). If inflation is very high, then money can soon lose all its value. Therefore in periods of high inflation, people will seek to switch out of cash and into physical assets which retain their value. The most important inflation proof investment is seen as gold.



Regulatory and Taxation issues

Recent Regulations Impact on G&J industry

Govt. imposed restrictions on imports by banks, from which jewelers source gold, and higher import duties.

Domestic gold premiums could rise, driving up raw material costs and thus result in lower margins

Mandatory requirement for jewelers to collect a KYC (know your customer) document from every customer purchasing jewellery worth Rs 50,000

This may knock jewellery sales and has taken the wind out of the sails of jewellery stocks.

Governments decision to reduce the import duty on pre-forms of precious and semi-precious stones from 10% to 2% in the Union Budget 2013-14

Boost export of precious and semi precious stones

Government regulations and taxation structures impacts the industry a great deal. Below are certain recent regulations and their corresponding impacts on the industry



Content

SWOT Analysis Market Overview- Domestic Market Overview- Export Market Overview- Luxury Value Chain Analysis Demographic clusters in India Factors Impacting G&J industry Porter’s Five forces in jewellery industry Key demand drivers Government regulations and support Budget 2012-13 Impact Key Players Future Outlook Recent News and its implicationsVisit http://www.addimon.com/45-ready-to-ship-pendants| Premium

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Porter’s Five Forces in jewellery Industry



Competitive Rivalry amongst existing firms: HIGH

In the jewelry industry companies that are considered mass merchandisers or limited line jewelers generally compete on the basis of price.Specialty jewelry companies, have found great success competing on quality rather than competing on price. Brand recognition is the greatest asset.There is a high growth rate in the industry. As the jewelry industry expands globally, the industries top competitors are opening many stores in order to increase market share and capitalize on competition.The switching costs and degrees of differentiation lower as the industry grows. These low degrees of differentiation lead to consumers purchasing items based on price rather than quality.



Threat of New Entrants: MODERATE TO LOW

Several of the existing firms have contracts with well-known diamond distributing companies.

The entry into this market is getting increasingly difficult due to the growth of companies already established in the industry and due to high initial investment costs.

Existing firms experience economies of scale from large investments in research and development, brand advertising, or in physical location of stores.

The barriers to entry and to exit are very high in this industry.

Large economies of scale make it very difficult for new entrants to compete in an industry.



Threat of Substitute Products: HIGH

The threat of substitutes depends on the relative price and performance of the competing products and on customers’ willingness to consider substitutes

the growing demand of fashion and imitation jewellery specially amongst the youngsters has posed a threat to gems and jewellery sector

Products price elasticity is also affected by substitute products. For example, as more substitutes become available the demand becomes more elastic because customers have more alternative choices. Therefore a close substitute product constrains the ability of firms in the industry to raise prices.



Bargaining Power of Customers: MODERATE

When there is a large market of buyers the industry has the ability to set its price points as high or as low as they choose.

In India the customers have little bargaining power regarding price when they shop at luxury stores or branded stores.

While they have a bargaining power as well as at times the credit facility while buying from “family jewelers” who cater to 96% of the jewellery market



Bargaining Power of Suppliers: HIGH

Since diamonds, gold and other precious stones are scarce, mining companies have absolute control over the selling price.

Diamond-mining companies such as DeBeers control the price of the diamonds that are supplied to several firms in the jewelry industry. Since these precious gems are of great value to the firms, the power of the supplier is even larger.

The power of suppliers within the jewelry industry has skyrocketed within the last few years due to natural gemstone scarcity.



gems & jewellery industry4

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