Manappuram’s retail jewellery venture

Eyebrows were raised when, in March 2010, the Manappuram group launched its first jewellery showroom at Valapad, in Kerala. The question many had in mind was, “Why this foray into retail jewellery?” And then there were others who thought that gold jewellery and gold loans were related businesses and therefore assumed it made perfect sense to move from one to the other. In reality, barring the fact that both businesses deal in gold, there is little in common between gold loans and gold jewellery. So, why did we get into retail jewellery?

For an answer, begin with a look into the Manappuram history and you will find that we have been involved in the gold loans business for over sixty years. Today, we are a national leader in the segment. And thanks to this extensive experience in gold loans, we could count on a thorough working knowledge about gold and gold jewellery. Moreover, we could justifiably lay claim to an extra insight into customer tastes and preferences in the markets where we are present. In this sense, our entry into gold jewellery should be considered a natural extension of our core business. In truth, the clinching factor lay somewhere else.

As a group that sets store by values, we have always found it troubling that the gold jewellery business in India is dominated by small time players who are untroubled by values, and who don’t mind short changing their customers. How this has come about, is a story by itself.

India has more gold than any other country; we are also the largest market for gold in the world. Surprisingly, for a “precious” metal, the Indian demand for gold jewellery cuts through the urban-rural divide and it cuts through the socio-economic classes. In fact, rural areas and the lower economic classes buy as much gold as the urban and wealthier classes. Why this should be so is not hard to understand. Since gold is a good store of value, people buy jewellery as an investment because their wealth is unaffected by inflation. Moreover, the poor lack access to banks, particularly in the rural areas, and this compels them to park their savings in gold. In the farming communities, for instance, the surplus earned in the harvest season is invested mostly in gold.

This gold is usually bought from the local goldsmith who also doubles as a jeweller and pawnbroker. Their integrity is suspect and there is no transparency in their dealings. They exploit their unwary customers in two ways. Firstly, the gold they sell will not have the claimed purity. And then, they also sell jewellery on credit or part-payment basis. Here, customers get a raw deal because in return for the convenience of paying later, they are given gold of low purity. And that is why our longstanding experience in gold loans is that customers come to us believing that what they have is 22K gold only to go back with the shocking discovery that it is only 18kt. or 19kt.

At our jewellery venture, our intention is to replicate our experience in gold loans. It’s worth recalling that gold loans were for long dominated by the unorganized sector with small pawnshops and moneylenders lending money at exorbitant rates of interest. It was a segment the large commercial banks were not interested in because the potential for profits was limited—loans are given for small amounts and get repaid in two to three months. Manappuram’s biggest achievement in gold loans was to bring integrity, transparency and professionalism to a segment where it was missing all along. Our beneficiaries are the ordinary people who were given access to a credible source of instant credit.

In the same way, our jewellery venture aims to tap into the middle-class market for gold jewellery with a chain of stores offering premium quality on par with the reputed names, at more affordable prices. In the one-and-a-half years since we began, we have already expanded into a chain of nineteen showrooms across the four South Indian states, with a major presence in Bangalore where we have nine showrooms up and running. Very recently, we also went in for a rebranding exercise which saw us giving up the Manappuram tag for the jewellery. Having taken off in a big way, our jewellery business needed an identity distinct from the parent brand, and that was how it became “Riti Jewelry”.

Looking ahead, if all goes well, Riti Jewelry will change the retail jewellery trade much in the way that Manappuram Finance revolutionised gold loans in India.

V.P Nandakumar
Chairman
Manappuram Group of Companies