For Indian businesses, going digital was one of the biggest takeaways from the pandemic; but not for Kalyan Jewellers. In fact, it has reinforced India’s second biggest jewellery brand's belief in the importance of physical stores. With a primary focus on raising capital to open new stores outside its south Indian base, the company went in for an IPO on March 16, and is set to get listed on the bourses next week. THE WEEK caught up with executive director Ramesh Kalyanaraman. Excerpts from an interview:
Stock markets have been on a volatile spiral these days. And the pandemic has been tough on most companies. Why do you feel this is the right time to go for an IPO?
When does a company go for an IPO? When it needs capital. And when you feel that your company and the industry are performing well. Look at Kalyan Jewellers; we have completed our expansion into all the important markets in the country [and are] present in 21 states. We have done all the work in terms of [building] the brand, in terms of creating the purchasing ecosystem and the customers and now the time has come to leverage what all we have done till today.
Secondly, the post-Covid comeback has been actually positive for our sector. If you see our Q3 (October to December 2020) figures, they are better than the pre-Covid figures. And for the industry, the momentum (has been) pretty (strong), even in the months of January, February and March, till today.
The business has recovered pretty well. Is that what you are saying.
Not just that. While [other sectors] are talking about nearing pre-Covid levels, jewellery has been one of those rare industries talking about growth [that is more than] pre-Covid sales.
Why do you think this has happened?
Because of the revenue coming from the unorganised segment. The momentum of the shift from the unorganised segment has been accelerated post-Covid.
Because people do not want to go to crowded streets or malls. They want to come to standalone stores because of hygiene and safety. That is why our industry has been doing very positive post-Covid.
Marriages and marriage-related revenue contribute 60 per cent to our industry, normally. But now the ticket size (of marriage purchases) has increased by 10 to 15 per cent is what the industry reports are saying. This is because marriage-related expenses like F&B and halls have come down drastically because fewer people are invited due to restrictions. So that saving is going to jewellery.
When you have the opportunity to grow, when your industry is behaving positively, when you are performing best post-Covid, why should you wait? You have to take your company ahead when you have the scope for growth.
You have been categorical that more stores and getting hyperlocal is the strategy and not going more digital. Can you explain this strategy and why you are clear, at least in jewellery, not going online is not the way forward.
Let me correct you, I have only clearly said online in our industry cannot replace offline. Online as a business has got organic growth. But it can never replace offline, because shopping for jewellery is not (like shopping for) fashion. It is for the major functions like marriages or festivals like Diwali, Akshaya Tritiya, Danteras. It is families coming together and spending time at the jewellery store and purchasing. Online is predominantly used for gifting purposes.
Even during Covid times when people were using all kinds of digital platforms, (we saw) youngsters coming in to the shop and connecting via video call to elders at home or waiting in the car outside.
Regarding your question about the brand focussing on a hyperlocal strategy, I’ll give you an example. When we opened our first showroom in Thrissur (Kerala) our brand was built on the core values of trust and transparency. We pioneered a lot of fair practices like BiS hallmark and rate tag that show making charges. We kept repeat inventory available in our store at a time when it was more of a made-to-order business. It was accepted well.
We opened our second showroom after seven years, in Palakkad (Kerala). We took our learning from Thrissur and opened there. Though just 70km away from Thrissur, there was a marked difference in the type of products the customers preferred, the service levels they expected, the campaign, the grasping and understanding. There we realised that tastes and preferences were quite different in that town. So we revamped the total store, brought in local inventory, changed the brand campaign and even the customer-facing staff. From that time, it has been one of our best-performing stores.
So you have to customise yourself to local preferences.
There were a lot of villages in and around Palakkad and we wanted to get through to them, so we started My Kalyan (a grass-root customer outreach network). That was the way we expanded in Kerala, and the same strategy was followed for the Tamil Nadu entry, and then Karnataka and Andhra Pradesh. We did the same when we expanded out of south India. It is a hyperlocal brand, be it in Punjab or Gujarat.
If a popular Kerala jewellery brand or a Chennai restaurant chain opens in Mumbai, the brand name itself reveals its identity. Their products also cater to people from their home region, they are not hyperlocal in nature. So the locals don’t go to these outlets. I am not saying it is wrong, it’s one way of doing business.
Kalyan has taken a different approach.
Totally different! We behave like a Gujarati in Gujarat and a Punjabi in Punjab. That is how we go. And our brand ambassadors are also there in all these regions.
Any interesting customer differentiation you have seen across different regions?
Every customer is different. A product that moves in Gujarat does not move in Maharashtra, or say, Bhubaneswar. Everywhere, products are different.
We have 13 procurement centres in jewellery hubs of the country. We deal with the contract manufacturers and keep the products. Something worn at a Gujarati shaadi will not even be looked at by a Kerala customer, forget about buying. Having local staff, the brand name should have a local feel, everything is different.
You said the purpose of IPO is to open more showrooms. You are present in the Gulf countries. Would the next level of expansion include these markets?
No. Now we want to leverage what we have done till today. We will be expanding only in the states we are in.
What else going forward?
First of all, our run rate of opening showrooms have been 10 to 12 every year for the past many years. That was the time when we were entering new states. When you enter a new state or region, you need more time and energy and branding effort. Now since we don’t have to enter a new state, the expansion is much easier. The run rate will be faster than before.
Any particular focus on branded items or sub brands you might plan to bring in.
The margins are different in north India and south India—15 per cent in south and 25 per cent in north. That is close to the market leader. In south India, we are already present in tier 1, 2 and 3 cities, while in the north, we are present in tier 1 and metros. A huge vacuum that exists to grow. So an organic growth is going to happen on my margins.
Have you ever strategised at making the likes of diamonds, silver, platinum more popular?
As of today, 24 per cent of our revenue was studded jewellery, that is higher margin than gold. So we are already doing it. And, of course, there is platinum and silver too that we sell. But the main appetite is for gold, diamonds and studded.
Would you say that silver and platinum are growing, maybe with the younger audience?
We have an organic growth.
But nothing out of the ordinary.
How much of an influence has the use of celebrities had on Kalyan’s growth?
These brand ambassadors have been the first reason for us to be identified as hyperlocal. From [actors] Prabhu to Nagarjuna, these brand ambassadors have been with us right from the time we entered that particular market till today. Mr [Amitabh] Bachchan has been with us for the past eight years. The brand has an hyperlocal feel because of these celebrities being there as a face of the brand. Even the creatives we do with them we have tried to do with a hyperlocal feel. Their contributions have been very high.
What is the future forward for your online presence?
There is an organic growth that is coming and revenue has been growing. A lot of research happens online, and revenue happens offline. So (that way), the online vertical helps.
Indians go for traditional jewellery, for marriages and special occasions. Do you think the markets can evolve into a western style of buying, where you buy for personal reasons, where you aspire for a brand like Cartier or Tiffany?
In India, jewellery is not seen as a fashion accessory. For Indians, jewellery is a part of their culture. You need gold jewellery at all the important occasions in your life. People see it as an investment. As a traditional product. In India, jewellery is not considered a luxury product, like the brands you mentioned. Even if the price is high, it does not come in that category because here, even a middle-class or lower-middle-class person buys jewellery.