In October last year, the entire senior management team of Mercedes Benz India visited Aurangabad, the town which is 210 km from Pune and famous for the historical paintings in the Ajanta-Ellora caves nearby. But it was not sightseeing that took them there; rather business was high on their agenda. They were there to complete the largest single transaction in the company’s history – handover of more than 100 cars at an estimated value of Rs 65 crore.%% Mercedes also organised a concert of singer KK and a dinner party for the buyers and their families to celebrate the occasion. "The deal is representative of the face of the new India, where smaller cities are driving the economic prosperity," Wilfried Aulbur, managing director and CEO of Mercedes Benz India, had said at the function.%% The mega order, itself the result of the coming together of 115 prominent citizens, including industrialists, businessmen and professionals from different walks of life, also spawned a brand new 10,000 square feet Mercedes service centre in the city. %% The deal once and for all changed the image of Aurangabad, which was perceived to be a backward town despite the rapid industrialisation and modernisation that had taken place over the previous two decades. %% While the mass purchase of Mercedes cars may seem like a well planned publicity gimmick, the story of the new Aurangabad that it reflects is being retold and rewritten across hundreds of smaller towns and cities in various parts of India. Some of the names such as Chandigarh, Ludhiana, Jaipur or Jalandhar are better known and have been on the radar for some time, but there are other newer ones like Indore, Siliguri, Hubli, Bellary, Madurai, Lucknow, Kanpur, Vadodra, Dhanbad, Bahraich, Vishakapatnam, Meerut, Guwahati, Kakinada, Belgaum and Kottakal that have come sharply into focus more recently.%%

Beyond the Metros%% In earlier years these cities had been given less attention by branded manufacturers and retailers in the organised sector, but more recently things have begun to change. DLF Emporio, the luxury mall in Delhi consciously advertised a recent shopping festival in some of the prominent North Indian cities with the result that 18 per cent of footfalls registered during the promotion originated from such locations.%% Clearly the market for luxury has gone well beyond the metros. In most of the smaller cities mentioned above, there is a rush of job and wealth creation. Budding entrepreneurs, established small businessmen, and even some highly paid professionals are all fuelling the charge for higher end goods.%% In fact, the Tier II and III cities are booming on all fronts. A recent Assocham study entitled “Tier II and Tier III cities Emerging as the New Job Creation Basket in 2011-2012” notes that these cities recorded a share of 61.8 per cent in total job creation out of the total sample size during this period. %% The study found that in 2010-11 about 2,53,702 jobs were created in Tier II cities, which recorded a growth of 38.8 per cent over the corresponding period of the previous fiscal, with as many as 1,89,756 of these being generated in Pune, Bhubaneshwar, Chandigarh, Lucknow and Surat.%% Similarly, during 2010-2011, Tier III cities showed a growth of 23 per cent on account of 1,50,391 job creations. Allahabad, Udaipur, Agra, Ajmer, Kota and Meerut are the major cities among the Tier III cities which showed a high growth in job placements. The surge in disposable incomes has caught the attention of high end manufacturers. Sanjay Kapoor, managing director of Genesis Luxury, which represents luxury brands such as Canali, Jimmy Choo and Bottega Veneta in India, has been quoted as saying, "Now there is a potential market that exists in these cities for luxury brands to expand." In fact, he reported that small city buyers make up for about 15 per cent of sales of these brands.%% Another high end brand, watchmaker Tag Heuer reported that 30 per cent of its sales come from non-metro cities where it sells through multi-brand outlets. According to a statement by Manishi Sanwal, general manager, LVHM Watch & Jewellery India, which sells the brand, "Smaller towns are growing at 30-40 per cent." %%

Clearly changes in lifestyles in Tier II & III cities has impacted shopping trends as conventional trader-run standalone shops have given way to more organised and large retail-mall formats. Vikas Gupta, director of Earth Infrastructure Ltd, a developer, has noted that “the future of retailing in Tier II and III cities lies in New Age shopping malls, which provide variety, value and convenience in a more comfortable environment.” %% He points out that prominent retail chains like McDonald’s, Reliance Trends, Pizza Hut, Bharti EasyDay, Metro have already established their presence there, and that “Bharti EasyDay in Patiala has recorded the highest earnings per square feet amongst all its outlets in the country.”%% Just how dramatic the shift has been is also reflected in the recent order placed by SpiceJet for Q400 NextGen Bombardier turboprop aircraft. The 78-seater craft will be used specifically to connect Tier II and Tier III cities in the country, with the first flights from Vizag to Tirupati and Bangalore having already been launched. A study by research agency IMRB on the buying patterns of fast-moving consumer goods (FMCGs) revealed that in the semi-urban and rural areas, high ticket consumption is driven by aspirational factors.%% Potential for Branded Jewellery%% The jewellery sector has always had a presence in these locations, but things are set to change, with more and more branded jewellers moving beyond the metros. A recent study by credit ratings agency CRISIL covering 63 gold jewellery retailers rated by it, which collectively account for 20 per cent by revenue of the gold jewellery retailed in India in 2010-11, came to the conclusion that “Tier II and III towns will drive growth for the branded gold jewellery retailers over the medium term. Around two-thirds of the new outlets that these retailers set up over the medium term will be in such small towns. The demand for gold jewellery in these centres is strong and growing, buoyed by increasing affluence and preference for branded jewellery. The gold jewellery retailers are therefore, expected to derive over half their revenues from such small towns by the end of FY 2012-13, as against around 40 per cent in FY 2009-10.” The jewellers rated by Crisil include some big players like Tribhovandas Bhimji Zaveri, Tanishq, Thangamayil Jewellery, Malabar Gold and Josco Jewellers, among a host of others.%% Gurpreet Chhatwal, Director, CRISIL Ratings, says, “The intensifying competition in the large cities has led to stagnation in growth for players. The branded jewellers are, therefore, now increasingly pursuing opportunities that expansion into Tier II and III centres can offer.”%% The rising disposable income in households, favourable demographic trends in customer profile (including the increasing proportion of young consumers), and growing consumer preference for branded jewellery, are among factors that will buttress the retailers’ expansion plans. Adds Chhatwal, “The wide variety of designs, aggressive marketing and promotional strategies, including hallmarking, and innovative offers such as gold deposit and buy-back schemes, will also bolster the growth of branded players’ in the Tier II and III towns.”%% GJF Chairman Bachhraj Bamalwa recently said, “The expanding reach of the service sector, especially in Tier II and III cities, is set to drive the demand for branded jewellery where disposable income remains high.” %%

He believes that since those in the service sector frequently change work places, and find it difficult to identify trusted traditional jewellers, “they move to organised retail to buy branded jewellery, where they get trust and guarantee of purity, along with a renowned brand.” %%

Perspectives and Plans%% Many jewellers have already moved towards these new hubs of prosperity in a big way while others are developing plans to move in this direction.%% Mehul Choksi, CMD, Gitanjali Group, says, “While shop-in-shops are growing in Tier I cities, over 70 per cent of our new stand alone franchise stores are coming up in Tier II and Tier III towns. He says the company has identified 600 towns in India where branded jewellery (both gold and diamond) could be sold, adding, “So far we have reached 300 of them and soon we will spread across all cities.” %% The franchise route in smaller towns offers added advantages such as better supply chain management, push of sales by the franchise as owner and better economics for both the company and franchise partners, he noted.%% Gitanjali has made course adjustments as part of this shift. “Stores in these towns demand a greater mix of gold jewellery, both as a complement to our diamond jewellery and as a connect between traditional and modern retail,” says Choksi. %% Crisil notes that the benefits of such expansions are obvious – “greater geographical reach and improved cost efficiencies”, though it also points out the flip side – a “greater requirement of working capital loans” mainly meant to support inventory which currently formed 86 percent of current assets of the players over the last couple of years.%% Perhaps realising this, more and more retail jewellers are approaching the capital markets Joyalukkas India Ltd, Tribhovandas Bhimji Zaveri Ltd (TBZ) and Ratanchand Jewellers Ltd have already filed their draft herring prospectus with SEBI, and all of them have stated retail expansion as one of the important uses to which the funds raised will be put.%% For example, of the 14 stores to be opened by Joyalukkas over the next two years, 13 will be coming up in Tier II and III cities. According to Nandakumar T, CFO of Joyalukkas, these smaller towns contribute 55 per cent of the revenue for the firm, which could go up to 65 per cent in two years. Similarly, majority of the new stores of Malabar Gold are coming up in small, hitherto unheard of towns.%% It is perhaps a little ironic that Tanishq, one of the largest jewellers in the country, which launched a sub-brand, GoldPlus, for semi-urban and rural areas, some years ago, is perhaps the only big name that is currently focusing on setting up large format stores in the big cities where it has had a relatively limited presence. But that is perhaps a product of its unique history, and possibly the exception that proves the rule.%%

Shree Ganesh Jewellery has formed an alliance with Bharti Retail's 'Easy Day' market format to promote its Gaja Lites range of jewelleries. The company plans to launch 250 outlets in Tier II and Tier III cities under its flagship brand ‘Gaja’. RAA diamond jewellery from K T Lifestyle has targeted various towns of UP in its first phase.%% According to Ghanshyam Dholakia, director of HK Jewels, which markets the brand Kisna, there are plans to open 300 semi-urban and rural outlets in the current fiscal in talukas of Rajasthan, Gujarat, Bihar, Jharkhand and Madhya Pradesh, among others. Clearly though they may be classified as Tier II and Tier III, these smaller towns and cities are today top-of-the-rung destinations for the trade. %%

In October last year, the entire senior management team of Mercedes Benz India visited Aurangabad, the town which is 210 km from Pune and famous for the historical paintings in the Ajanta-Ellora caves nearby. But it was not sightseeing that took them there; rather business was high on their agenda. They were there to complete the largest single transaction in the company’s history – handover of more than 100 cars at an estimated value of Rs 65 crore.%% Mercedes also organised a concert of singer KK and a dinner party for the buyers and their families to celebrate the occasion. "The deal is representative of the face of the new India, where smaller cities are driving the economic prosperity," Wilfried Aulbur, managing director and CEO of Mercedes Benz India, had said at the function.%% The mega order, itself the result of the coming together of 115 prominent citizens, including industrialists, businessmen and professionals from different walks of life, also spawned a brand new 10,000 square feet Mercedes service centre in the city. %% The deal once and for all changed the image of Aurangabad, which was perceived to be a backward town despite the rapid industrialisation and modernisation that had taken place over the previous two decades. %% While the mass purchase of Mercedes cars may seem like a well planned publicity gimmick, the story of the new Aurangabad that it reflects is being retold and rewritten across hundreds of smaller towns and cities in various parts of India. Some of the names such as Chandigarh, Ludhiana, Jaipur or Jalandhar are better known and have been on the radar for some time, but there are other newer ones like Indore, Siliguri, Hubli, Bellary, Madurai, Lucknow, Kanpur, Vadodra, Dhanbad, Bahraich, Vishakapatnam, Meerut, Guwahati, Kakinada, Belgaum and Kottakal that have come sharply into focus more recently.%%

Beyond the Metros%% In earlier years these cities had been given less attention by branded manufacturers and retailers in the organised sector, but more recently things have begun to change. DLF Emporio, the luxury mall in Delhi consciously advertised a recent shopping festival in some of the prominent North Indian cities with the result that 18 per cent of footfalls registered during the promotion originated from such locations.%% Clearly the market for luxury has gone well beyond the metros. In most of the smaller cities mentioned above, there is a rush of job and wealth creation. Budding entrepreneurs, established small businessmen, and even some highly paid professionals are all fuelling the charge for higher end goods.%% In fact, the Tier II and III cities are booming on all fronts. A recent Assocham study entitled “Tier II and Tier III cities Emerging as the New Job Creation Basket in 2011-2012” notes that these cities recorded a share of 61.8 per cent in total job creation out of the total sample size during this period. %% The study found that in 2010-11 about 2,53,702 jobs were created in Tier II cities, which recorded a growth of 38.8 per cent over the corresponding period of the previous fiscal, with as many as 1,89,756 of these being generated in Pune, Bhubaneshwar, Chandigarh, Lucknow and Surat.%% Similarly, during 2010-2011, Tier III cities showed a growth of 23 per cent on account of 1,50,391 job creations. Allahabad, Udaipur, Agra, Ajmer, Kota and Meerut are the major cities among the Tier III cities which showed a high growth in job placements. The surge in disposable incomes has caught the attention of high end manufacturers. Sanjay Kapoor, managing director of Genesis Luxury, which represents luxury brands such as Canali, Jimmy Choo and Bottega Veneta in India, has been quoted as saying, "Now there is a potential market that exists in these cities for luxury brands to expand." In fact, he reported that small city buyers make up for about 15 per cent of sales of these brands.%% Another high end brand, watchmaker Tag Heuer reported that 30 per cent of its sales come from non-metro cities where it sells through multi-brand outlets. According to a statement by Manishi Sanwal, general manager, LVHM Watch & Jewellery India, which sells the brand, "Smaller towns are growing at 30-40 per cent." %%

Clearly changes in lifestyles in Tier II & III cities has impacted shopping trends as conventional trader-run standalone shops have given way to more organised and large retail-mall formats. Vikas Gupta, director of Earth Infrastructure Ltd, a developer, has noted that “the future of retailing in Tier II and III cities lies in New Age shopping malls, which provide variety, value and convenience in a more comfortable environment.” %% He points out that prominent retail chains like McDonald’s, Reliance Trends, Pizza Hut, Bharti EasyDay, Metro have already established their presence there, and that “Bharti EasyDay in Patiala has recorded the highest earnings per square feet amongst all its outlets in the country.”%% Just how dramatic the shift has been is also reflected in the recent order placed by SpiceJet for Q400 NextGen Bombardier turboprop aircraft. The 78-seater craft will be used specifically to connect Tier II and Tier III cities in the country, with the first flights from Vizag to Tirupati and Bangalore having already been launched. A study by research agency IMRB on the buying patterns of fast-moving consumer goods (FMCGs) revealed that in the semi-urban and rural areas, high ticket consumption is driven by aspirational factors.%% Potential for Branded Jewellery%% The jewellery sector has always had a presence in these locations, but things are set to change, with more and more branded jewellers moving beyond the metros. A recent study by credit ratings agency CRISIL covering 63 gold jewellery retailers rated by it, which collectively account for 20 per cent by revenue of the gold jewellery retailed in India in 2010-11, came to the conclusion that “Tier II and III towns will drive growth for the branded gold jewellery retailers over the medium term. Around two-thirds of the new outlets that these retailers set up over the medium term will be in such small towns. The demand for gold jewellery in these centres is strong and growing, buoyed by increasing affluence and preference for branded jewellery. The gold jewellery retailers are therefore, expected to derive over half their revenues from such small towns by the end of FY 2012-13, as against around 40 per cent in FY 2009-10.” The jewellers rated by Crisil include some big players like Tribhovandas Bhimji Zaveri, Tanishq, Thangamayil Jewellery, Malabar Gold and Josco Jewellers, among a host of others.%% Gurpreet Chhatwal, Director, CRISIL Ratings, says, “The intensifying competition in the large cities has led to stagnation in growth for players. The branded jewellers are, therefore, now increasingly pursuing opportunities that expansion into Tier II and III centres can offer.”%% The rising disposable income in households, favourable demographic trends in customer profile (including the increasing proportion of young consumers), and growing consumer preference for branded jewellery, are among factors that will buttress the retailers’ expansion plans. Adds Chhatwal, “The wide variety of designs, aggressive marketing and promotional strategies, including hallmarking, and innovative offers such as gold deposit and buy-back schemes, will also bolster the growth of branded players’ in the Tier II and III towns.”%% GJF Chairman Bachhraj Bamalwa recently said, “The expanding reach of the service sector, especially in Tier II and III cities, is set to drive the demand for branded jewellery where disposable income remains high.” %%

He believes that since those in the service sector frequently change work places, and find it difficult to identify trusted traditional jewellers, “they move to organised retail to buy branded jewellery, where they get trust and guarantee of purity, along with a renowned brand.” %%

Perspectives and Plans%% Many jewellers have already moved towards these new hubs of prosperity in a big way while others are developing plans to move in this direction.%% Mehul Choksi, CMD, Gitanjali Group, says, “While shop-in-shops are growing in Tier I cities, over 70 per cent of our new stand alone franchise stores are coming up in Tier II and Tier III towns. He says the company has identified 600 towns in India where branded jewellery (both gold and diamond) could be sold, adding, “So far we have reached 300 of them and soon we will spread across all cities.” %% The franchise route in smaller towns offers added advantages such as better supply chain management, push of sales by the franchise as owner and better economics for both the company and franchise partners, he noted.%% Gitanjali has made course adjustments as part of this shift. “Stores in these towns demand a greater mix of gold jewellery, both as a complement to our diamond jewellery and as a connect between traditional and modern retail,” says Choksi. %% Crisil notes that the benefits of such expansions are obvious – “greater geographical reach and improved cost efficiencies”, though it also points out the flip side – a “greater requirement of working capital loans” mainly meant to support inventory which currently formed 86 percent of current assets of the players over the last couple of years.%% Perhaps realising this, more and more retail jewellers are approaching the capital markets Joyalukkas India Ltd, Tribhovandas Bhimji Zaveri Ltd (TBZ) and Ratanchand Jewellers Ltd have already filed their draft herring prospectus with SEBI, and all of them have stated retail expansion as one of the important uses to which the funds raised will be put.%% For example, of the 14 stores to be opened by Joyalukkas over the next two years, 13 will be coming up in Tier II and III cities. According to Nandakumar T, CFO of Joyalukkas, these smaller towns contribute 55 per cent of the revenue for the firm, which could go up to 65 per cent in two years. Similarly, majority of the new stores of Malabar Gold are coming up in small, hitherto unheard of towns.%% It is perhaps a little ironic that Tanishq, one of the largest jewellers in the country, which launched a sub-brand, GoldPlus, for semi-urban and rural areas, some years ago, is perhaps the only big name that is currently focusing on setting up large format stores in the big cities where it has had a relatively limited presence. But that is perhaps a product of its unique history, and possibly the exception that proves the rule.%%

Shree Ganesh Jewellery has formed an alliance with Bharti Retail's 'Easy Day' market format to promote its Gaja Lites range of jewelleries. The company plans to launch 250 outlets in Tier II and Tier III cities under its flagship brand ‘Gaja’. RAA diamond jewellery from K T Lifestyle has targeted various towns of UP in its first phase.%% According to Ghanshyam Dholakia, director of HK Jewels, which markets the brand Kisna, there are plans to open 300 semi-urban and rural outlets in the current fiscal in talukas of Rajasthan, Gujarat, Bihar, Jharkhand and Madhya Pradesh, among others. Clearly though they may be classified as Tier II and Tier III, these smaller towns and cities are today top-of-the-rung destinations for the trade. %%

In October last year, the entire senior management team of Mercedes Benz India visited Aurangabad, the town which is 210 km from Pune and famous for the historical paintings in the Ajanta-Ellora caves nearby. But it was not sightseeing that took them there; rather business was high on their agenda. They were there to complete the largest single transaction in the company’s history – handover of more than 100 cars at an estimated value of Rs 65 crore.%% Mercedes also organised a concert of singer KK and a dinner party for the buyers and their families to celebrate the occasion. "The deal is representative of the face of the new India, where smaller cities are driving the economic prosperity," Wilfried Aulbur, managing director and CEO of Mercedes Benz India, had said at the function.%% The mega order, itself the result of the coming together of 115 prominent citizens, including industrialists, businessmen and professionals from different walks of life, also spawned a brand new 10,000 square feet Mercedes service centre in the city. %% The deal once and for all changed the image of Aurangabad, which was perceived to be a backward town despite the rapid industrialisation and modernisation that had taken place over the previous two decades. %% While the mass purchase of Mercedes cars may seem like a well planned publicity gimmick, the story of the new Aurangabad that it reflects is being retold and rewritten across hundreds of smaller towns and cities in various parts of India. Some of the names such as Chandigarh, Ludhiana, Jaipur or Jalandhar are better known and have been on the radar for some time, but there are other newer ones like Indore, Siliguri, Hubli, Bellary, Madurai, Lucknow, Kanpur, Vadodra, Dhanbad, Bahraich, Vishakapatnam, Meerut, Guwahati, Kakinada, Belgaum and Kottakal that have come sharply into focus more recently.%%

Beyond the Metros%% In earlier years these cities had been given less attention by branded manufacturers and retailers in the organised sector, but more recently things have begun to change. DLF Emporio, the luxury mall in Delhi consciously advertised a recent shopping festival in some of the prominent North Indian cities with the result that 18 per cent of footfalls registered during the promotion originated from such locations.%% Clearly the market for luxury has gone well beyond the metros. In most of the smaller cities mentioned above, there is a rush of job and wealth creation. Budding entrepreneurs, established small businessmen, and even some highly paid professionals are all fuelling the charge for higher end goods.%% In fact, the Tier II and III cities are booming on all fronts. A recent Assocham study entitled “Tier II and Tier III cities Emerging as the New Job Creation Basket in 2011-2012” notes that these cities recorded a share of 61.8 per cent in total job creation out of the total sample size during this period. %% The study found that in 2010-11 about 2,53,702 jobs were created in Tier II cities, which recorded a growth of 38.8 per cent over the corresponding period of the previous fiscal, with as many as 1,89,756 of these being generated in Pune, Bhubaneshwar, Chandigarh, Lucknow and Surat.%% Similarly, during 2010-2011, Tier III cities showed a growth of 23 per cent on account of 1,50,391 job creations. Allahabad, Udaipur, Agra, Ajmer, Kota and Meerut are the major cities among the Tier III cities which showed a high growth in job placements. The surge in disposable incomes has caught the attention of high end manufacturers. Sanjay Kapoor, managing director of Genesis Luxury, which represents luxury brands such as Canali, Jimmy Choo and Bottega Veneta in India, has been quoted as saying, "Now there is a potential market that exists in these cities for luxury brands to expand." In fact, he reported that small city buyers make up for about 15 per cent of sales of these brands.%% Another high end brand, watchmaker Tag Heuer reported that 30 per cent of its sales come from non-metro cities where it sells through multi-brand outlets. According to a statement by Manishi Sanwal, general manager, LVHM Watch & Jewellery India, which sells the brand, "Smaller towns are growing at 30-40 per cent." %%

Clearly changes in lifestyles in Tier II & III cities has impacted shopping trends as conventional trader-run standalone shops have given way to more organised and large retail-mall formats. Vikas Gupta, director of Earth Infrastructure Ltd, a developer, has noted that “the future of retailing in Tier II and III cities lies in New Age shopping malls, which provide variety, value and convenience in a more comfortable environment.” %% He points out that prominent retail chains like McDonald’s, Reliance Trends, Pizza Hut, Bharti EasyDay, Metro have already established their presence there, and that “Bharti EasyDay in Patiala has recorded the highest earnings per square feet amongst all its outlets in the country.”%% Just how dramatic the shift has been is also reflected in the recent order placed by SpiceJet for Q400 NextGen Bombardier turboprop aircraft. The 78-seater craft will be used specifically to connect Tier II and Tier III cities in the country, with the first flights from Vizag to Tirupati and Bangalore having already been launched. A study by research agency IMRB on the buying patterns of fast-moving consumer goods (FMCGs) revealed that in the semi-urban and rural areas, high ticket consumption is driven by aspirational factors.%% Potential for Branded Jewellery%% The jewellery sector has always had a presence in these locations, but things are set to change, with more and more branded jewellers moving beyond the metros. A recent study by credit ratings agency CRISIL covering 63 gold jewellery retailers rated by it, which collectively account for 20 per cent by revenue of the gold jewellery retailed in India in 2010-11, came to the conclusion that “Tier II and III towns will drive growth for the branded gold jewellery retailers over the medium term. Around two-thirds of the new outlets that these retailers set up over the medium term will be in such small towns. The demand for gold jewellery in these centres is strong and growing, buoyed by increasing affluence and preference for branded jewellery. The gold jewellery retailers are therefore, expected to derive over half their revenues from such small towns by the end of FY 2012-13, as against around 40 per cent in FY 2009-10.” The jewellers rated by Crisil include some big players like Tribhovandas Bhimji Zaveri, Tanishq, Thangamayil Jewellery, Malabar Gold and Josco Jewellers, among a host of others.%% Gurpreet Chhatwal, Director, CRISIL Ratings, says, “The intensifying competition in the large cities has led to stagnation in growth for players. The branded jewellers are, therefore, now increasingly pursuing opportunities that expansion into Tier II and III centres can offer.”%% The rising disposable income in households, favourable demographic trends in customer profile (including the increasing proportion of young consumers), and growing consumer preference for branded jewellery, are among factors that will buttress the retailers’ expansion plans. Adds Chhatwal, “The wide variety of designs, aggressive marketing and promotional strategies, including hallmarking, and innovative offers such as gold deposit and buy-back schemes, will also bolster the growth of branded players’ in the Tier II and III towns.”%% GJF Chairman Bachhraj Bamalwa recently said, “The expanding reach of the service sector, especially in Tier II and III cities, is set to drive the demand for branded jewellery where disposable income remains high.” %%

He believes that since those in the service sector frequently change work places, and find it difficult to identify trusted traditional jewellers, “they move to organised retail to buy branded jewellery, where they get trust and guarantee of purity, along with a renowned brand.” %%

Perspectives and Plans%% Many jewellers have already moved towards these new hubs of prosperity in a big way while others are developing plans to move in this direction.%% Mehul Choksi, CMD, Gitanjali Group, says, “While shop-in-shops are growing in Tier I cities, over 70 per cent of our new stand alone franchise stores are coming up in Tier II and Tier III towns. He says the company has identified 600 towns in India where branded jewellery (both gold and diamond) could be sold, adding, “So far we have reached 300 of them and soon we will spread across all cities.” %% The franchise route in smaller towns offers added advantages such as better supply chain management, push of sales by the franchise as owner and better economics for both the company and franchise partners, he noted.%% Gitanjali has made course adjustments as part of this shift. “Stores in these towns demand a greater mix of gold jewellery, both as a complement to our diamond jewellery and as a connect between traditional and modern retail,” says Choksi. %% Crisil notes that the benefits of such expansions are obvious – “greater geographical reach and improved cost efficiencies”, though it also points out the flip side – a “greater requirement of working capital loans” mainly meant to support inventory which currently formed 86 percent of current assets of the players over the last couple of years.%% Perhaps realising this, more and more retail jewellers are approaching the capital markets Joyalukkas India Ltd, Tribhovandas Bhimji Zaveri Ltd (TBZ) and Ratanchand Jewellers Ltd have already filed their draft herring prospectus with SEBI, and all of them have stated retail expansion as one of the important uses to which the funds raised will be put.%% For example, of the 14 stores to be opened by Joyalukkas over the next two years, 13 will be coming up in Tier II and III cities. According to Nandakumar T, CFO of Joyalukkas, these smaller towns contribute 55 per cent of the revenue for the firm, which could go up to 65 per cent in two years. Similarly, majority of the new stores of Malabar Gold are coming up in small, hitherto unheard of towns.%% It is perhaps a little ironic that Tanishq, one of the largest jewellers in the country, which launched a sub-brand, GoldPlus, for semi-urban and rural areas, some years ago, is perhaps the only big name that is currently focusing on setting up large format stores in the big cities where it has had a relatively limited presence. But that is perhaps a product of its unique history, and possibly the exception that proves the rule.%%

Shree Ganesh Jewellery has formed an alliance with Bharti Retail's 'Easy Day' market format to promote its Gaja Lites range of jewelleries. The company plans to launch 250 outlets in Tier II and Tier III cities under its flagship brand ‘Gaja’. RAA diamond jewellery from K T Lifestyle has targeted various towns of UP in its first phase.%% According to Ghanshyam Dholakia, director of HK Jewels, which markets the brand Kisna, there are plans to open 300 semi-urban and rural outlets in the current fiscal in talukas of Rajasthan, Gujarat, Bihar, Jharkhand and Madhya Pradesh, among others. Clearly though they may be classified as Tier II and Tier III, these smaller towns and cities are today top-of-the-rung destinations for the trade. %%