Spiralling price hits gold business

In the face of spiralling prices of gold and consequent slump in the jewellery business, prominent jewellers in Kerala are leaving no stone unturned to keep afloat. With the price of yellow metal reaching an all-time high, jewellers are offering various prize and discount schemes to attract customers. Last week, the price raced to Rs 902 a gram in the state sending sale of jewellery into a tailspin.

A prominent jeweller here told Business Standard that owing to the rising price, the sales dropped by 30 more than those of last year. Despite the wedding season in the state, sales have not improved as even for this once in a life-time purpose, people are not opening their purse strings.

"A customer who comes to the shop intending to buy 10 soveriegns will end up buying only five soveriegns as the high price of yellow metal is sure to upset his budget. We have lost 50 percent of the business as compared to the last season," a jeweller rued.

With prices spinning out of the reach of the middle class, jewellery is in demand only among the rich. Exchange of old ornaments for new ones constitutes about 50 percent of the total annual sale of around 20-tonne gold in the state. Even the exchange business has suffered serious setback due to the price spiral.

T R Krishnan, president of Kochi unit of the All Kerala Gold and Silver Merchants Association, said that most of the jewellers were facing serious threat as business dropped by 30 percent. "Due to stiff competition, profit margin in the business is as low as 5-10 percent. But, overheads are too high and only a few with other sources of income can survive." Kochi alone has 85 gold shops of which 15 are of international standard and some more are in the offing.

Fighting with their back to the wall in the face of rising prices, jewellery shops have now lined up prize schemes and discounts but to no avail. A major jewellery group, which has two dozen showrooms in the Gulf region, is offering 32 Maruti 800 cars, one each daily as bumper prize. Not lagging behind, another prominent jeweller has lined up Maruti Altos while others have unveiled price discounts and gift schemes. While big showrooms have unleashed their might adding more glitter to their swanky shops to attract customers, the condition of small and middle players is undescribable.

During good times, the small jewellers too have their share of business, but with slump settling in, they are hit very hard.

"Unless prices come down to a reasonable level, we will be forced to close down the shutters", lamented a jeweller from Kochi suburb. With sales hitting the rockbottom and average maintenance expenditure remaining as high as Rs 50,000, jewellers are prying for prices to come down to Rs 600 a gram. "Otherwise, it will not be possible to run the business," Joby Joseph, a local jeweller said.