Gold News

Gold's Own Country

Picture a gold jewelry shop over 20 acres with parking for 3,000 cars...

YOU MAY FIND the largest shopping malls in the world in the United States. But when it comes to jewelry, Kerala in India would easily beat them.

   Sitting in the first floor of his 12,500 sq-ft jewelry complex on M.G.Road in Ernakulam, Antony Alapatt of Alapatt Heritage says, "America's largest jewelry showroom would be just half the size of ours."

Buying ornaments and Investing in Gold has been part of the culture of Keralites for generations. In the olden times the royal families of the state used to be fond of gold ornaments. "My grandfather used to get invitations from the Tripunithara Royal Palace in Kochi," says Ramesh S.Pai of A.Geeripai Jewelry. "He used to go along to the palace together with his goldsmith and find out their design requirements.

   "Our goldsmith would then stay there and make gold ornaments for them."

A.Geeripai could easily stake its claim to be the oldest jewelry shop in the state. It was started 106 years ago in Broadway, Ernakulam, much before the famed Bhima Jewelry set up shop in Alapuzha in 1925. "We have cash bill books that are more than 76 years old," Ramesh says.

Now the Alukkas, Alapatt, Chemmanur, Josco, Malabar Gold and the grand old Bhima are all on an expansion spree in India and abroad. Paul Alukka of Alukkas Jewelry says that after setting shops in Salem, Coimbatore, Erode, Trichy, Tirunelveli, Delhi, Madurai and Hyderabad, he is now eyeing Maharashtra and Gujarat.

"The main reason for not expanding in Kerala is the 4% value-added tax [VAT] on gold," he says. "Many other states have only 1% tax. Moreover, the jewelry market has become overcrowded in the state."

Arrens Gold Souk International Ltd, a real estate developer, is setting up a shopping mall in Kochi in 2.5 acres of land in prime location where one of the focus areas will be gold ornament showrooms.

The mall will have reputed jewelers from both India and abroad. Leading Indian jewelers such as Joy Alukkas and Alapatt have already signed up for the Gold Souk. "The I.T. boom in Kochi and other centers will create higher demand for gold," Mohan Varma, director of AGS, told Commodity Market.

"Our upcoming facilities in Thiruvananthapuram and other cities would be much bigger projects to be housed in 10-20 acres of land with parking facilities for 1500-3000 cars."

What accounts for the rapid increase in jewelry shop space in Kochi and all over Kerala? God's Own Country is estimated to account for one-third of the 800-odd tonne annual consumption of gold in India – already the world's hungriest market for Gold Bullion Investment, most often in small bar and jewelry form.

   "Gold consumption in the last quarter was more than 300 tonnes in India," says Antony Alapatt. "Definitely gold consumption is increasing, but showroom space everywhere seems to be increasing at a much faster pace."

   How far could this competition and growth be sustainable? Paul Alukka feels that small jewelers will gradually be driven out of business just as factory-made jewelry has eaten into the livelihood of traditional goldsmiths.

   People now look for quality and purity in their gold ornaments. They look for 916 purity and BIS hall marking. Here in Kerala, the large shops have an edge in their wide variety. Large jewelry houses are now invading smaller towns and villages, bringing jobs with them. For a 2,000-sq-ft showroom more than 25 salesmen would be required.

   Pre-launch advertisement costs for major showrooms are anywhere in the range of Rupees 500,000 to Rs 10 million according to market sources [$126,000 to $250,000]. However, Antony Alapatt feels that road congestion, lack of parking space, and longer hours required to travel to the city would all be unfavourable for the business growth of large shops.

   "Why travel one hour to buy one sovereign of gold? You can easily get it from a nearby smaller shop."

Indian Gold Jewelry: Brand Building

   Competition has also led to several promotional and gift schemes for Keralites. Joy Alukkas Group, which set up a wedding center at Kochi at a cost of Rs 500,000 [$126,000], gave away 32 Maruti cars in a lucky draw in 2006. The company, which has spread its wings to Delhi, Hyderabad, Madurai, Tiruchirapally, Salem, Bangalore and Dubai, believes "it is easy to start a new showroom but very difficult to run it efficiently".

   Joy Alukkas' strength lies in his personal attention to get the best location, attractive promotional offers and a creative eye on ads. ot surprisingly, the group has set its eyes beyond the moon by aiming for a turnover of Rs 50 billion by 2010 [some $1.25bn].

   M.P.Ahamed of Malabar Gold, which started its first showroom in 1993, now has more than 11 showrooms within Kerala and the nearby region. He personally studies each location in terms of business potential, social and political conditions before deciding to set up shop. Malabar Gold also went for an expensive brand building exercise involving cine stars Mohanlal and Hema Malini, as well as tennis sensation Sania Mirza.

   The Malabar Gold group has also branched off into manufacture of gold jewellery, its own branded gold, precious watches, readymades, retail and real estate.

Indian Gold Jewelry: Changing Styles

   With the disposable income of the average Keralite going up, thanks to newer opportunities in I.T., tourism, banking and allied services, the preferences for jewelry is also undergoing a major change.

   "Now we sell 80% gold and 20% diamond jewelry," says Paul Alukka. "Platinum is also in demand. In diamonds, the trader margins are higher.

   "Some of the major jewelers have also sent their siblings or partners abroad for advanced training in gemology. The teenagers, young women and professionals prefer light weight ornaments instead of the large and bulky traditional ornaments."

   In tune with the changing tastes of the younger generation, jewelers are also innovating with newer lightweight designs. White gold is a favorite of the upper income consumers, but traditional jewelry is still in demand for weddings.

   In Kochi, customers seem to prefer chic western designs in 'yellow' gold (gold mixed with copper), 'white' gold (with nickel) and 'pink' gold (with a rhodium polish). In Thiruvananthapuram, however, conventional jewelry with a contemporary twist reigns supreme.

Indian Gold Jewelry: Slow to Change

   The Gold Market for unconventional jewelry is yet to be tapped, but Paul Alukka says North Indian designs are now available in most of the shops in the southern city of Kerala. One can see elements of the north Indian style – such as the intricate kundan work of Rajasthan or the filigree work characteristic of Kolkata – making their way into new versions of traditional ornaments such as Maangamala (with mango motifs) and Kaasumala (with coin motifs).

   Business everywhere is seasonal and it increases during the wedding season (Nov. to Feb.). It sometimes reaches a peak during the Akshaya Trithiya day (of late April) which is supposed to be the most auspicious day for Buying Gold ornaments.

   Families make Gold Investment mainly for wedding purposes. But it also comes in handy when in need of a loan. Banks are now eager to provide gold loans which are less risky than other types of retail loans. The booming yellow metal market also gave a golden opportunity for several banks to cash in on. Even private banks such as ICICI and Federal Bank could sell of their entire consignments of gold coins within a short period of time.

   Kochi is slowly emerging as the gold capital of Kerala. Bhima, Alapatt, Josco, A.Geeripai, Keertilal, Tanishq and Kalyan have already covered the city with the yellow metal. The construction of the Gold Souk is in full swing. Major jewelers from outside Kerala are also expected to invade this growing Gold Market.

   Kozhikode and Kannur are also attractive destinations for gold traders, according to Ramesh Pai. Geeripai has new plans for showrooms at the I.T. gateway of Kochi at Kakkanad, apart from Kozhikode and Kannur. Earlier, the success of a jewelry shop was dependent on service, adequate stock and advertisements, but now quality is also very important, as are workmanship and design, says Paul Alukka.

   Another sector which is booming in Kerala now is imitation jewelry. Fear of theft, gold snatching and burglary have led to a parallel market for imitation jewelry and ornaments. Branded shops in this segment have invaded all nooks and corners of Kerala.

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