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Tanishq Case Presentation PDF

The document discusses gold jewellery pricing in India. It notes that the gold market size is 2.7 lakh crore with 70% organized and 30% unorganized. Demand is embedded in cultural traditions, with 55-60% of sales from weddings. Organized players source gold through spot buying, nominated agencies and banks. Pricing varies by geography with discounts on making charges. Tanishq is a leading organized player with over 15,000 crore in revenue and aims to maintain margins in a commodity-driven market through schemes, inventory management and educating customers.

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sameera eeranki
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630 views

Tanishq Case Presentation PDF

The document discusses gold jewellery pricing in India. It notes that the gold market size is 2.7 lakh crore with 70% organized and 30% unorganized. Demand is embedded in cultural traditions, with 55-60% of sales from weddings. Organized players source gold through spot buying, nominated agencies and banks. Pricing varies by geography with discounts on making charges. Tanishq is a leading organized player with over 15,000 crore in revenue and aims to maintain margins in a commodity-driven market through schemes, inventory management and educating customers.

Uploaded by

sameera eeranki
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Gold Jewellery: Thoughts on

Pricing
Arvind Sahay, Ph.D.
Professor
MN Vora Chair of Marketing and Entrepreneurship
Chairperson, India Gold Policy Center
Indian Institute of Management
Ahmedabad – 380015
India
Partly based on a case study prepared for Tanishq
Jewellery Market in India
 Gold Market:-
o Size: 2.7 Lakh Crore
o Structure: 70% Organized, 30% Unorganized
o Sales: 80% Gold, 20% Diamond
o Growth (CAGR) over past five years: Industry 5-7%, Organized players 35%
o Consumption: 29% of global jewellery consumption

 Demand:-
o Indian gold demand is embedded in cultural & religious traditions (Stridhan)
o Buying Behaviour is different for different regions.
o 55-60% sales from wedding purchases, 40-45% from other occasions
o Festive season contributes 13-15% to annual sales numbers
Organized Vs. Unorganized
Jewellery Market (%)
Year Organized Unorganized
2016 23.2 76.8
2017 24.3 75.7
2018 29.2 70.8
2019E 30.9 69.1
2020E 33.0 67.0
2021E 35.6 64.4
2022E 38.5 61.5
Source: HDFC Securities Report
Sourcing & Pricing
 Sourcing of Gold:-
o Spot Buying
o Nominated Agencies Banks
o Exchange Programs
o Unorganized jewellers also have the fourth channel i.e. smuggling

 Pricing:-
o Gold price varies across geographies
o Discounts offered on making charges
o Price charged from customers: Price of Gold + Making Charges (Wastage) + GST
GOLD Sourcing in India
 Spot Buying Agencies
o National Spot Exchange Limited (NSEL)
o National Commodity & Derivatives Exchange (NCDEX)
o Reliance Spot Exchange

 Nominated Agencies
o Metals & Minerals Trading Corporation Ltd
o The Handicraft & Handloom Corporation of India
o Project & Equipment Corporation of India ltd.

 Banks
o IndusInd Bank
o SBI
o Standard Chartered Bank
o HDFC Bank limited
Variation Across Geographies
 Pricing
o Gold rates in South are low but making charges are high
o Customers in Chennai are more cost conscious whereas
in Ahmedabad they are more quality conscious

 Demand
o 40% South, 20% North, 25% West and 15% East
o Peak Days vary across regions: Dussehra, Pushya
Nakshatra, Dhanteras and Akshay Tritiya
o Gujarati customer visits 4 jewellers on an average before
buying gold whereas in other regions customers visit 2
jewellers.

 Designs
o In south customers don’t prefer stones in the jewellery
whereas in East and West stones are preferred
Tanishq- A Tata Product
Tanishq
 Revenue: Rs. 15656 Crore

 Presence: 275 Stores in 140 cities

 Inventory Turnover: 4 compared to 1.5-3 of local jewellers

 Brand Ambassador: Deepika Padukone

 Core Competencies: Retailing, Marketing and Merchandising

 Gold Sourcing: 41% on Lease, 40% Exchange Programmes, 19% Spot buying
Source: HDFC Securities Report
Schemes & Discounts
 Golden Harvest Scheme
o Success of festive season ascribed to GHS enrolments of last year
o Contributes 50% for top stores and 25-30% for other stores (Festive Sales)

 Same Scheme offered across the country


o Discounts offered in slabs

 Every festive season a collection is launched.


o Meeting aspirations of the customers
o Utsava in 2018
Challenges
 Customer Adoption
o Influence of local retailers

 To maintain margin in a commodity driven market


o Creating the perception that Tanishq is not expensive
o Proportion of Discounts

 Inventory Management
o Right mix of SKU’s
o Movement of inventory from regions of low demand to high demand
Margin Calculation
Tanishq

 Current Gold Rate = Rs. 34,360* per 10 g (1 tola)


of 24 carat gold
 Making charges= 10%

For a 10 g of gold jewellery (22K):


 Cost of Gold (A)= 1*31,496= 31,496
 Making charges @ 10% (B)= .1*31496= 3150
 Discount on making charges 10% (if any) (C)= 315
 Stone charges (D)= 10,000
 Cost (A+B+D-C) = 44,331
 GST @ 3% = 1330
 Total Cost= 45,661
*Gold Price as on 06 Feb’19= Rs. 34360
Sources of Margin

 For Unorganized Player:-


o Selling 22 K gold with the price of 24 K gold
o 6-10% on buying jewellery
o Weight of stones included in gold while selling and excluded while buying
o Making Charges double for customized designs
o Commission on Exchange of Old Jewellery

 For Organized Player:-


o Making Charges
o Fluctuations on Gold prices
o Stone Charges
Tanishq: Pricing Mechanism

Primary Competitor Wedding Competitor


80-90 Markets
Zaveri AB Jewels

Product Category Workmanshi Enhanceme Classificatio


125-130 Group p nt n
Complexi
Plain/Stone Bangles/ Machine / None/ E/L/M/H
ties Chains Hand Rhodium

Variant Code Costs Price Incl. Markup


1 Lakh
SKUs 5118812EOABAP3 X% A%
Brand Initiatives & Challenges
 Educating the Customer:-
o Karatage
o Gross Weight and Net weight
o Factory Visits

 Transparent Exchange Process:-


o Melting of gold in front of customer
o Same buying and selling rate for Tanishq Jewellery

o Changing Retail Behavior Patterns


o Buying Behavior of the Younger Generation
Thank You

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