Post COVID-19, the world will be divided between brands that think and react fast and those that wait to react, says Mithun Sacheti, CEO of CaratLane Jewellery. He noted that only two or three Indian diamond manufacturers who were in the top 10 list before 2008, remain leaders today. “The way businesses handle the current situation will determine their position in the market in the future. For jewellery businesses to stay relevant, they need to plan well and grab every sales opportunity once the lockdown is lifted,” added Sacheti.
These were just some of the takeaways from his thought-provoking webinar hosted by the GJEPC on ‘Has this lockdown limited our growth or has it shown us the road map to build an Exponential Organisation?’. The webinar moderated by Milan Chokshi of GJEPC, had 500 participants.
Below are the excerpts:
How have you and Caratlane used this lockdown and dealt with the challenges it imposes?
Mithun Sacheti: We have engaged with our customers on Instagram. We have had concerts, Zumba classes, make-up sessions… things that have nothing to do with jewellery. (We are just creating content) to engage with customers and really make them happy and cheerful.
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How many people are affected by COVID-19 in terms of the actual disease itself? There is a 100 crore population in this country and not all of it is affected. These people are sitting at home. Out of that, 25-30 crore people are getting their salaries every month. They are having the time of their lives, spending it with family, talking to their friends, and being on the internet –all of this is a quotient of happiness. And what is jewellery? Jewellery is a happy state of mind with money in the wallet. And if both these things are happening then at least a person who is hopeful in life, like me, feels that we will come out stronger. Will problems like cash flow, exist? For sure.
For the longest time, we fought travel. Travel takes away such large amounts of money in the month of May and December, that jewellery business goes through a massive slump in those two months. This is the one time when we are not going to be hit by that. I don’t know anybody who is in a hurry to go to America or Europe right now. There is going to be disposable income sitting over there and we have got to get ready to capitalise on those things. We started off early and I am sure it is leaving an impact.
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When the lockdown is lifted, what will be your business plan?
There are a few things that we need to be careful of. One, we have got to take care of hygiene and safety. Second, we got to be careful that there is no demand for destruction, which means we must put our best foot forward and ensure that when the customers are ready (to purchase again), we must stand out as strong as any other category. We have always stood behind. We have waited for demand to come to us. In a starting line scenario, we must go out there and grab demand because if we do not do that, we will be the losers. Not because a customer went somewhere else. It is only because we did not work towards demand at all.
How would you describe a typically modern jeweller post COVID-19?
To talk about a modern jeweller, it is important to talk about my definition of a traditional jeweller. My father is a traditional jeweller and my grand uncle is an even more traditional jeweller. They have always waited for the customer to walk into their doors. They take pride in the word of mouth business and wait for that. A bulk of their business was built at a time when there was allocated money for jewellery purchase. It was not as discretionary as it has become today. And the way they went about it, it worked. When it (money for jewellery) is allocated, there is no problem. It is going to come to you. It is only a question of one jewellery versus another. The modern jeweller cannot wait for allocated money. The market is much larger now and you have to go after the discretionary money. Discretionary money can come to your jewellery shop, can go to another jewellery shop, can go to travel, maybe a mobile phone… depending on what is aspirational for that customer at that point.
The customer doesn’t need to think that this is my time to buy jewellery. When he is ready to spend money, jewellery as an option must be presented to him. To me, that is the single largest difference.
Do you think that organised players have an advantage over family jewellers in this situation?
If you look at the financial model of a large jeweller, take the top three players. The number one player will not have any financial difficulty in the system because they have enough money and will manage with that. The number two and three players, you can see from the way payments are coming in, will have difficulty in the system. So, they do not have an advantage in the financial side of things. It gets worse as you go down from the fourth to the tenth largest player. The family jeweller somehow manages his finances and has built a system which works (for him).
The next piece is demand generation. The organised players by nature of quarterly reporting of their numbers will focus on demand generation and go for it. Anybody who waits and then reacts to it will be at a disadvantaged position. By design, the family jeweller is the one who can react faster. An entrepreneur can make decisions, but for an organised player, it only comes through processes. By the time you create a process rule book, the entrepreneur has already started (implementing it). The question is how many of us are going to go after demand generation (once the lockdown is lifted)?
We have always marketed jewellery as an investment. Is there a new collective message that would help jewellers rise in this pyramid of desires?
The gold business, whether we like it or not, has stayed true to the investment thesis. Today, anybody who has gold jewellery in their house is laughing to the bank. Somebody bought a piece of gold jewellery in the year 2000 at Rs309/ gram. Today it costs Rs4,500/ gram. On the diamond side of the business as well, the numbers have risen, but I feel this is not the only way to sell something. It drives selling a product from the thought process of scarcity. It will work for a smaller population.
What I have gathered from my analysis is that the number of people who buy diamond jewellery for more than Rs2 lakh is only 6 lakh. The number of people who buy automobiles in this country in a year is 1 crore. Jewellery has residual value; automobiles do not.
Our ability to communicate and figure out the value proposition of our business has always been challenged. Let’s take diamonds for example, we are obsessed with turning every customer into a jeweller. We insist that they learn the four Cs. The customer will never learn the four Cs because he may buy a solitaire once in three years or four years. There is no way he will remember it the next time he comes to buy. Just like he doesn’t know what a carburettor is.
Until we are obsessed about selling the specifications of a product, we will always struggle to have new demand coming in (from the new generation), plus, at the same time you dumb it down so much that it takes away all the margin out of the business as well.
McKinsey in its ‘State of Fashion 2020 report’ has identified innovation, building digital capabilities and social commerce as important themes of the future. Which one is the most relevant for jewellery retail?
I think innovation is going to be the number one for us right now. We have a serious challenge coming up. Gold is nearing Rs50,000. The look of the product is dramatically going to change. And if we don’t innovate in building larger looking products at lower weights, we are going to really struggle. When people don’t get desirable products they move asset classes. Gold has a solid connection with India and it needs to be sustained.