Coronavirus Impact: Jewellers focus on online sales ahead of Akshaya Tritiya; high price, delivery concerns make customers wary
Akshay Tritiya is one of the biggest gold buying days due to the auspiciousness attached to it
With Akshaya Tritiya being celebrated tomorrow (26 April), jewellers are trying to lure customers through various innovative offers to keep the business tide through difficult times amid the coronavirus lockdown.
There is a sentimental value in booking precious metal on this auspicious day.
“Usually ahead of Akshaya Tritiya, jewellers make purchases, but this year no one’s buying,” said Harshad Ajmera, proprietor of JJ Gold House, a wholesaler in Kolkata to Reuters.
Akshay Tritiya is one of the biggest days in the calendar for customers to shop for gold owing to the auspiciousness attached to it. However, due to the lockdown, the industry has missed out on Gudi Padwa celebrations (in March) and wedding sales, too, said Aditya Pethe, Director, Waman Hari Pethe Jewellers.
“However, as the auspicious day approaches, we are surprised by the number of enquiries we have received for pre-bookings. We have started taking Akshaya Tritiya bookings online from 21 April on our e-commerce platforms. The same will be delivered to the customers post-lockdown. We can't do sales speculation due to the exceptional circumstances, but we look forward to an online Akshaya Tritiya this year,” he said to PTI.
Many jewellers have announced plans to sell gold online on the festival and deliver it after the lockdown is lifted, “but retail buyers are not interested in online purchases due to the higher price and uncertainty about delivery”, said a Mumbai-based dealer with a private bullion importing bank.
Ahammed MP, Chairman, Malabar Group, said Malabar Gold and Diamonds is offering discounts on online gold purchases which is being promoted via SMS, WhatsApp, emailer, Facebook, Instagram, Google search and Google network. "We are offering 30 percent discount on making charges of gold jewellery, up to 20 percent discount on diamond value and 5 percent cashback on transactions above Rs 15,000 on SBI credit cards. The offer will be valid till 26 April. The online gold purchase facility comes with the rate protection advantage, i.e. customers can avail the jewellery at the booked rate or prevailing rate-whichever is lower," Ahammed said.
Shekhar Bhandari, Senior Executive Vice President & Business Head – Global Transaction Banking & Precious Metals Kotak Mahindra Bank felt Akshay Tritya 2020 would be subdued due to the continued lockdown on the back of the coronavirus crisis. "The inventory on hand for jewellers as well as the gold jewellery held by households in India have seen significant appreciation in value. Prices in April last year were around Rs 3,200/3,300 a gram and currently it is around Rs 4,600-levels which has resulted in an increase in wealth by 43 percent year-on-year for those who have invested, purchased or diversified in gold.
"Domestic jewellery demand has seen a significant drop given the rise in prices throughout the last financial year. The biggest impact to hit demand (including exports) has been the COVID-19 crisis," he said.
The price outlook on gold continues to remain positive with gold prices expected to rise significantly to meet the investor demand as a safe haven asset and due to depreciation of the rupee. "We can expect gold prices to continue the rally, to settle above Rs 5,000 a gram by the end of this financial year, primarily driven by the COVID-19 crisis and its significant impact on the global economy,” Bhandari said.
Weak consumer sentiment
In April, the loss in revenue will be 15 percent of the total annual turnover due to Akshaya Tritiya falling in the month when the country is under lockdown to prevent the spread of COVID-19 ,” said Anantha Padmanaban, Chairman, All India Gems and Jewellery Domestic Council to PTI.
The first six months of this calendar year has witnessed a very weak consumer sentiment due to high gold price and the COVID-19 pandemic; however, the demand is expected to begin taking off from July onwards and peak during Diwali, he added.
"Due to the COVID-19 pandemic, stores across the country are closed; however, on an individual level, jewellers are reaching out to their customers through innovative online offers, including booking now and payment and delivery later, among others. How far the consumers are going to react to these innovative marketing by the jewellers is yet to be seen,” he opined.
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Some like Titan are offering options like its 18K gold watch offering for Akshay Tritiya. Kalpana Rangamani, CMO-Watches and Wearables, Titan Company said, the company is offering online muhurat booking so that customers who are unable to visit stores have a seamless digital experience. "Consumers can now book their gold watches on titan.co.in at an auspicious time of their choosing. To address the delay in delivery that is likely to happen due to the lockdown, Nebula by Titan has announced a ‘Nebula Certificate of Ownership’ that can be immediately sent to the customer. Additionally, online customers can also avail Easy Returns on Nebula," Rangamani said.
Buying gold digitally, especially ornaments, will be a new arc for those who prefer jewellery than buying gold coins or bars for investment.
Digital buying will grow as an alternative going forward, but the touch, feel and trying out factor at retail stores will remain as strong as before, said Padmanaban of All India Gems and Jewellery Domestic Council.
There are multiple reasons for a rise in digital buying of gold this Akshaya Tritiya, said Somasundaram PR, MD (India), World Gold Council. "Gold prices are high and volatile, local market prices have sharp discounts, logistics have limited physical availability of gold, artisans are perhaps dislocated and jewellery stores shut," he said.
“In this scenario, Akshaya Tritiya will be a subdued occasion for gold... We could see jump in digital transactions not just through platforms such as SafeGold and MMTC-PAMP, but also on-line BTC (Business -to-Consumer) sales with some jewellers," Somasundaram added.
Deliveries are bound to be post-lockdown, but advance booking, buying simple, standard gold or jewellery, and a more robust digital engagement may be promoted in the market, he said.
“After a strong rally in prices for the past few weeks, prices are correcting... as risk-appetite returns slowly. The major reason behind the recent rally is global growth concerns emanating from the ongoing pandemic. This apart, central governments have been providing stimulus packages and these two factors make a solid case for a bullish rally in gold prices going forward,” said Gnanasekar Thiagarajan, Director, Commtrendz Research.
Kalyan Jewellers Chairman and Managing Director T S Kalyanaraman said traditionally, the majority of the company's sales on the occasion of Akshaya Tritiya is driven through its showrooms.
“This time, though our showrooms are closed due to the lockdown, we got many queries from regular customers who wanted to keep the tradition of buying gold during Akshaya Tritiya going. That's how we came up with the concept of the Gold Ownership Certificate, which can be bought on our website. What makes this unique is that upon order confirmation, customers will receive this certificate via email or Whatsapp on the day of Akshaya Tritiya,” he added.
The company is hopeful that this will bring some good results, and that its regular customers will be able to make their purchases, Kalyanaraman added.
Echoing a similar view, Senco Gold and Diamonds Executive Director Suvankar Sen said the jewellery industry might get a traction of 10-20 percent of normal sales this Akshay Tritya since offline stores are shut and the economy is in a standstill.
“To make sure customers can do a token buying this season we are using an online platform to sell or get bookings for future sales,” he added.
Industry to be credit-negative: ICRA
The coronavirus outbreak and the lockdown ahead of Akshaya Tritiya is a credit negative for the gold jewellery retail industry in the short-term, according to ICRA.
Over the last two years, the domestic gold jewellery retail industry has been affected by factors like weak consumer demand amid slowing economic growth, rapid rise in gold prices and faltering rural output, regulatory policy interventions and cautious lending environment, ICRA said in a report.
“Given this background, the widened outbreak of COVID-19 and subsequent lockdown, ahead of the critical Akshaya Tritiya season is a credit negative for the gold jewellery retail industry in the short-term,” it added.
Gold prices up
Indian gold futures held near a record high of Rs 47,327 ($620.5).
Gold prices on Friday rose by Rs 315 to Rs 46,742 per 10 gram in futures trade as speculators created fresh positions on firm spot demand.
On the Multi Commodity Exchange, gold contracts for June traded higher by Rs 315, or 0.68 percent, at Rs 46,742 per 10 gram in a business turnover of 16,400 lots.
The yellow metal for August delivery edged up by Rs 269, or 0.58 percent, to Rs 46,696 per 10 gram in a business turnover of 16,383 lots.
Fresh positions built up by participants mainly led to the rise in gold prices, analysts said.
Globally, gold prices traded higher by 0.06 per cent to $1,746.40 per ounce in New York.
Retail demand down
The retail demand for physical gold suffered this week in top Asian hubs as jewellery shops remained shut due to coronavirus restrictions, but some regions saw steady buying from investors hunting for a safe haven.
Dealers in the world’s biggest gold consumer China continued to sell bullion at hefty $50 an ounce discounts versus benchmark spot prices this week. This compares with last week’s $50-$70 discounts, the biggest on record according to data going back to 2014, Reuters said.
“Some shops have opened, but people are in no mood to buy gold on the retail side, it’s still a high-end purchase,” Ronald Leung, chief dealer, Lee Cheong Gold Dealers in Hong Kong.
Global spot prices are now well above $1,700 an ounce, the report said. Investment demand was steady in Hong Kong and Singapore but retail buying was poor.
“Dealers like us are taking pre-orders to be fulfilled on a later date, and clients are settling for higher premiums and for whatever inventories that are available,” said Joshua Rotbart, managing partner, J Rotbart & Co in Hong Kong to Reuters.
Premiums of $0.40-$2.00 an ounce were charged on average in Hong Kong, versus last week’s $0.50-$1.00, although some dealers quoted premiums as high as $4.00.
In Singapore, gold was sold at average premiums of about $1.50 to $5 an ounce for gold bars.
“No jewellery shops/businesses are open until 1 June,” said Spencer Campbell, director, Precious Metals Consultants SE Asia Consulting, adding premiums on retail gold were still high with new stock “based on promises right now”.
“Exemptions are not being granted for this industry as they do not see refining and minting as essential businesses,” Campbell said.
Japan saw premiums of $0.50-$1 an ounce amid muted activity with top gold retailer Tanaka Kikinzoku shutting all its stores.
Gold is a hedge against uncertainty and a good investment vehicle, especially in the current scenario, said Pankaj Bobade, Head - Fundamental research, Axis Securities.
"With the COVID-19 pandemic bringing the world economy to a standstill and a possible contraction ahead, gold seems an attractive option. Moreover, as the central banks of developed nations have been on easing spree to fight the economic contraction, the fiat currencies are expected to face pressure in the near future. In such a scenario, gold is likely to emerge as a safe-haven asset. One should have a part of the portfolio invested in Gold ETF as an insurance against the possible volatilities expected in the global financial market. So, if this Akshay Tritiya you are looking to buy gold, Gold ETF would be a good option from a long-term perspective," Bobade said.
The options are many. But through the digital route.
--With inputs from agencies
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