Heated hallmarking debate: the need for trust

I have just come back from a short trip to India, presenting at the Gems and Jewellery Export Promotion Council’s third India Gold and Jewellery Summit in Delhi, as well as sneaking in some field research and presenting the investment case for gold to some wealth managers in Mumbai with my colleague, Mukesh.

While in Mumbai, we visited the Zaveri Bazaar, a bustling hive of entrepreneurial activity and the home to India’s largest informal gold trading market.

The four-day trip was jammed-packed with interesting insights, but three themes stood out to me.

Trust

At the Summit, I presented some of the key findings from our recent consumer research report which you can find at www.retailinsights.gold, placing a special emphasis on the importance of building trust to protect and grow retail demand for gold. This seemed to be the theme for most of the discussions on the first day of the conference, with the Minister for Commerce, the honourable Piyush Goyal, highlighting that it was the industry’s responsibility to work together to build trust and drive bad practices out of the industry. Senior industry leaders agreed.

But there is a fierce debate in the broader industry about a central aspect of building trust – the issue of hallmarking. It is currently voluntary and many in the trade, especially industry leaders, recognise it is necessary to ensure India’s gold industry is trusted by all stakeholders – the government, banks, and most importantly, customers. But going by the volatile Q&As and strength of emotion in the audience, it appears some in the industry seem resistant to moving ahead.

It seems likely hallmarking will be made mandatory at some point. When, we don’t know, but while it may cause some disruption, it is undoubtedly a positive step forward for the industry.

Branding and marketing

Day two of the conference had a wonderful session focused on creating successful brands. Dr Ruppal Sharma, Marketing and Head of Delhi Centre, S P Jain Institute of Management and Research and Mr Sachin Jain, MD Forevermark, shared thought-provoking views about the creation of successful brands. And the industry is clearly interested – Indian jewellery is beautifully hand-crafted, and many family jewellers have traditions going back several generations. The Swiss luxury watch industry has leveraged these two features to create global brands, and there is an enthusiasm for India’s jewellery industry to do the same.

And it can. The jewellery and the stories jewellers can tell are beautiful, emotive and compelling. But the industry needs to do two things before a it can aspire to the status of Switzerland’s luxury watch industry. It must build trust; the industry must be reputable. And it must focus on the value it creates for customers and move away from discounting making charges and tactical campaigns as a way to boost short-term sales. Only then can India’s leading jewellery aspire to the rival Switzerland’s watchmakers.

Consumer demand

Demand has been soft for several months. The rapid uptick in the gold price – to a record high of Rs 39,011/gm in September– combined with a weakening economy has dented demand. But contacts in the trade reported things were picking up a little. The pullback and stabilisation of the gold price has helped, as well as the start of wedding season which runs from 8th November to 12th December. And we can see this in the local premia: the slight improvement in demand coupled with the decline in imports over recent months has pushed the local gold price from US$55/oz below the LBMA spot price in September to a modest premium of US$1/oz ahead of the start of the wedding season in November.

So, a great trip with a lot of interest in the consumer research, especially the next phase when we will focus in greater detail on India’s gold market. And it was great to spend time with Som, the MD for the World Gold Council India, and the wider team and catch up on the great work they are doing to support the healthy development of India’s gold market, such as supporting the development of a gold spot exchange and establishing formal assay training centres to support the hall-marking initiatives.

If I have one regret, it’s turning up with just ten business cards… I was sure I’d packed more…