In India, the world’s second largest gold market, gold has always been seen more of a necessity than a luxury. While gold has traditionally been the indulgence of the wealthy worldwide, in India, gold is part of the lifestyle of the middle and even poorer classes. Gold is an intricate and necessary part of marriage ceremonies. In India’s impoverished regions, gold substitutes for bank accounts, thus avoiding the tax system. In India, even the poor invest in gold as a means of barter and trade.
Despite the traditional importance of gold to the Indian lifestyle, small jewelry shops have been collectively struggling against organized jewelry retailers. The larger retail establishments are better equipment to understand and deal with the new regulations and tax laws, which demand CCTV records of gold transactions. This new and unaccustomed invasion of privacy has many Indians avoiding the taxman’s scrutiny, which is as much a tradition for many as gold itself. The government’s attempt to regulate the gold industry has many consumers worried and stepping back. The recent tax on consumer goods has only increased their wariness.
Instead of buying new jewelry, many families are either selling gold to acquire wedding jewelry or exchanging old jewelry for new in an effort to keep under the tax officials’ ever-growing radar. In addition to trying to adapt to the new tax regulations, India’s gold market is trying to recover from the government’s decision to devaluate its own currency in the effort to cut down on corruption and unreported wealth. India’s huge cash-only economy is hurting jewelers, especially small, family-owned shops.
Zaveri Bazaar, Mumbai’s major gold hub with 5,000 individual gold shops, no longer has the hustle and bustle it used to. Until recently, these shops comprised up to 70 percent of India’s jewelry sales. In 2017, gold sales have fallen below 10 percent, reflecting the national trend of Indian’s avoiding gold purchases. As a rule, the traditional Indian marriage season brings out entire families in search of wedding jewelry. This year, the small shops aren’t seeing the usual deluge preparing for the happy event.
The Indian government’s efforts at greater transparency and discouraging the traditional cash-only trades is making consumers hesitate to invest in gold. In addition to its crackdown on money laundering, India has instituted new standards to ensure the purity of the gold sold, and well as setting new buying limits.
The larger, organized jewelry retailers are better able to cope with these changes. In addition, they are more sophisticated and able to meet modern India’s demand for au courant jewelry designs that are less traditional. They are also able to satisfy the new government demands for better and proper recordkeeping. In addition, they offer more payment options. All these innovations are making them a more attractive choice to jewelry buyers. Jewelers who can assure customers of quality and integrity are outperforming the small shops in places such as the Zaveri Bazaar and are expected to continue to do so.
Tradition is allowing for change. The new anti-corruption laws are many jewelry buyers more cautions. They are demanding proof of authenticity, quality,
and gold purity certificates, something the family-owned shops frequently lack. These shops are historically known for low quality and questionable sales tactics, such as fake warranties, tax evasion, and smuggled goods, the very problems the government is vowing to crack down on.
These larger jewelry retailers are adapting more easily to the new circumstances. They are becoming more attractive to a wider range of buyers as they include less expensive piece in their stock. There is no doubt that the larger retailers are wooing customers away from the family shops with a larger selection of merchandise, friendlier pricing policies and those all-important guarantees now demanded by the Indian government. They are also broadening the range of their services with return options and free repairs.
Traditional jewelry dealers are hanging in there. Old clients still buy their jewelry in familiar places. In India, after all, buying jewelry is a beloved tradition, and changes aren’t always welcome. As long as gold continues to be a strong investment and safe haven, people will continue to buy. But traditional sellers may need to institute new sales methods, such as providing certificates of authenticity and offering a more pleasant buying experience.
In changing times, gold is one of few constants, and it surely will remain so.