India moves to online shopping but gold, silver jewellery market still obsessed with visiting stores

The coronavirus pandemic has further enhanced consumers’ interest in online shopping across various product categories; however, the retail jewellery market is still being driven by the touch-and-feel factor. While online sales have increased, its share of revenues remains insignificant at less than 5 per cent in the retail jewellery market, said a report by rating agency ICRA. Unlike other retail products, customers prefer to see jewellery designs in person as the touch-and-feel factor took prevalence, the report added. The survey conducted to assess the impact of  Covid-19 on business, consumer sentiments post-lockdown, and their expectations on gold prices, festive / wedding demand, etc post-lockdown revealed that retailers have reopened all their showrooms and footfalls across stores have improved in the last 2-3 months despite the continuing pandemic-related uncertainties.

The demand for retail jewellery is generally strong during the festive period and the wedding seasons. Therefore, the retailers expect the demand sentiments to rebound in the second half of the current fiscal year, after a challenging first half. The expectations of a further rise in gold prices, shifting preferences towards gold as an asset class, better rural demand, etc are other factors supporting a demand revival, the report underlined. 

The retailers expect gold prices to remain at elevated levels, ranging between $1,900 to $2,100 per ounce over the next six months, although the prices may witness interim volatility. While sales volumes are likely to contract sharply due to loss of business during the lockdown, its impact on revenues and earnings are likely to be restricted due to the favourable realisations.

However, lending to the gems and jewellery sector continues to remain cautious due to the jot faced by the banks after Nirav Modi and other such scams in recent years. Nevertheless, the lenders’ stance seems to be improving for the gold jewellery retail segment.

Meanwhile, the domestic gold jewellery retail industry has been facing several headwinds, including weak consumer demand amidst steady rising gold prices, unfavourable rural demand, constrained funding from lenders, etc, over the last two years. While there was optimism around the jewellery demand, the pandemic further made a dent, affecting the jewellery businesses as the outlets were closed for months this fiscal year.