Indian Diamond Consumers Need Differentiated Strategy: DeBeers
Indian Diamond retailers will be required to adopt differentiated approaches to realize the significant growth opportunity in India, the world’s third-biggest consumer market for diamonds in which demand has more than trebled over the last decade, according to De Beers.
Rising incomes and aspirations could afford the industry an even bigger prize over the next 10 years, the company said in a note based on a 2014 survey of 40,000 Indian women, probably the largest consumer study of its kind ever conducted in the Asian nation. To realize this potential, the stakeholders will need to be proactive in opening up opportunities, according to the Diamond Insight Report 2015.
India’s domestic diamond consumer market has achieved almost uninterrupted growth over the last two decades, with demand expanding in 19 of the last 20 years in rupee terms. About 2.5 million pieces of diamond jewelry were bought in 2013, roughly six times the number acquired in 2002. With an 8 percent share of global demand (measured in polished wholesale value in USD) in 2014, the nation was placed behind only the U.S. and China.
“The most successful retailers of the future will need to employ a variety of approaches, including effective consumer messaging and positioning of diamonds for different occasions to different audiences,” the report said. Other strategies comprised “strengthening of retail and diamond jewellery brands, a compelling marketing framework, and developing modern retail formats with an online presence,” it pointed out.
The three distinct diamond jewelry consumer segments in India are socio-economic segments A/B (excluding all Elites), Elites and Super Elites. The latter two have a considerable share in value terms, despite representing only a small proportion of consumers, and display behaviors in relation to diamonds more in line with affluent Western consumers, De Beers said in the note.
Brand is the most important factor in diamond jewelry selection, with 78 percent of women viewing this as ‘very important’, ahead of other factors including price (73 percent), quality (65 percent) and design (64 percent). The strong growth of national jewelry chains such as Tanishq and Malabar Gold and Diamonds is testament to this increasing loyalty toward prominent retailer brands, according to De Beers.
A key trend in the Indian diamond jewelry retail scene is the increasing importance of large chains. In 2011, these comprised only 2 percent of diamond jewelry outlets, but were responsible for 17 percent of the sales. The increase in the significance of chains is part of the rise of modern formats in the broader retail market, favored by young, urban consumers. The growth in share of larger retail formats is expected to be accompanied by a surge in share of total retail sales made up by the ‘organized’ sector from 8 percent today to 24 percent in 2023.
More women will be able to access diamonds as affluence in the country continues to grow, the report pointed out. Women tend to start purchasing diamonds when their annual household income reaches $5,000-6,000, and 75 million new Indian households are expected to exceed this ‘inflection point’ over the next decade, the report said and noted the highest proportion of purchasers being located in Tier 1 cities (nearly 60 percent) and in the north of India (almost 50 per cent).
De Beers said in the report diamond jewelry is an ‘aspirational’ product and is more desired than the other luxury categories. The level of ownership and desirability is particularly high among the Elites and Super Elites, while diamonds remain an aspirational product for the much larger non-Elite segment.
Online is likely to become more important in India, both as a sales channel and a research tool, as internet penetration and sales of smartphones accelerate. The young generation is driving growth of online, and the incidence of online diamond jewelry purchasing among women aged 18-25 was 3 percent in 2013, three times higher than the overall online diamond jewelry buying rate.
While “diamonds have always had an intrinsic appeal to Indian women, with jewellery’s role embedded deep within Indian culture,” this growth story is “far from over, ” De Beers said in the report, which was based on a survey it conducted last year.