TN’s gold retailers suffer 80 pc biz loss

It is estimated that the daily consumption of gold (by volume) by major retailers is around 200 kg. Following the sudden demonetisation, these retailers have seen their sales dip substantially, with some big brands coming under the scanner for resorting to malpractices. 

These include charging premium of Rs 1,000 per gram when the gold rates were hovering around Rs 2,920 and keeping the shops “clandestinely” open till the wee hours on Wednesday, following the Prime Minister’s announcement on Tuesday that caught everyone off guard. Some of them even shut down their shops for three consecutive days as per the instructions received from the respective corporate offices. 

Jayantilal J Challani, President, The Madras Jewellers & Diamond Merchants Association tells us, “Apart from the goldsmiths being affected due to a shortage of orders, the industry has faced close to 80 per cent of business loss, following the demonetisation announcement. Many shops in the southern districts like Tirunelveli, Thoothukudi and parts of Madurai and Coimbatore have gone on to rework their business operation hours due to reduced footfalls. Quite a few of them now operate between 2 pm and 8 pm, as shops with more than 100 employees are attempting to cut corners on items  as lunch expenses. Of our total business, only 25 per cent of the sales happen during 10 am to 4 pm, whereas 75 per cent of the sales takes place between 4 pm to 9 pm.” 

In the long run, organised players will sustain though fringe players and smaller retailers will find it extremely tough to operate in a market, as the demonetisation impact has dealt a death blow to them, says an industry veteran, who shared his views on condition of anonymity.

Take for instance, silk-town Kanchipuram, the hub for wedding and festive shopping, where 100-odd jewellers thrive on their trade for day-to-day living. The demonetisation drive has hit these small traders where it hurts most, considering how the region has already attracted the attention of big jewellery brands. 

The veteran anticipates that the interest rates could go up next month with the US Fed intervention, leading gold prices to dip to  an extent of $40 to $50 from the current levels of $1,226 or $1,230 per ounce. That will be a double whammy for the exporters, who are facing ‘absolute slowdown’ in the wake of demonetisation.” 

He goes on to add, “We are not even at 20% sales! First, we had to face the excise duty battle. Then, the disclosure phase  happened. Last December, we incurred huge loss arising out of flood in the city. Now, this tops all other challenges with the next gen perhaps looking at other lucrative professions,” says a 4th generation exporter, on condition of anonymity. 

Challani says the sales volume has come down considerably, and customers are choosing to pay using options such as NEFT, RTGS or debit/credit cards. The problem is many customers use credit cards for utility payments and are unable to spend much on gold as these purchases tend to be of higher value.

Meanwhile, the industry veteran says, smaller ticket items dispensed in outlets will be the trend as large grammage jewellery will fade out. “Those who are keen to wear it and not lock it up will prefer the smaller items,” he says, adding that the silver lining is the marriage season in January and February, when the markets are expected to bounce back. Digital payment gateways will substantially increase and genuine buyers will  bring the shine back, he believes. 

However, Christmas season is in the offing, and some exporters are disappointed as orders have not come through. “Purchases and stocking of items that typically happens this month given the propensity to spend by the Europe and US markets is lost. Also, the latest US presidential results have sent signals for divesting from gold,” the exporter said.