Transcript Project Proposal for SETTING up an Authenticity Centre

Project Proposal
Setting up an
Authenticity Centre
for Gold & Mounted Jewelry
By Tehmasp Printer
OBJECTIVES
Tap the entrepreneurial spirit of the Parsi Youth.
Establish a resource for the community to enter a sunrise
service industry.
Help develop a Parsi business enterprise in one of the fastest
growing segments in India namely - Jewelry industry.
Participate in initiatives aimed at promoting transparency –
promoting hallmarking and encouraging consumer activism in
matters related to quality, purity, certification etc.
STRENGTHS
Cash in on the trust placed on the Parsi community for its
integrity, honesty, dedication & commitment.
Professional expertise available in the Authenticity services
PRESENTATION FLOW
Part I
Market Potential
 Huge opportunity in providing an Authenticity service to the
jewelry industry.
Part II
Proposed Authenticity service to be provided:
 Assaying & Hallmarking of precious metals
 Identification & Certification of Gem Stones & Mounted
Jewelry mainly diamonds
MARKET UNDERSTANDING
Global Gems & Jewelry industry on the threshold of a largescale transformation.
Last 5-6yrs the industry has seen more changes than ever
before.
Next 10yrs likely to bring in more deeper and far reaching
changes across the value chain.
Fascinating industry – traditional on one hand glamorous on
the other.
KEY INDUSTRY SEGMENTS
Diamonds Diamond studded jewelry is the largest
segment estimated @ USD 69billion
Gold Primary use is in jewelry fabrication which
accounted for 67% of total gold demand (volume
terms) in 2005.
Platinum often the metal of choice for high-end
precious jewelry across the world. Its showing an
increasing trend in India too.
Colored gemstones
GLOBAL : GROWTH IN JEWELRY RETAIL SALES
CAGR
(2000-2005)
200
USD Billion
160
113
118
111
124
136
146
5.2%
6.4%
120
4.4%
80
5.5%
40
5.0%
0
2000
2001
2002
2003
2004
2005
Others
5.4
5.3
5.6
5.9
6.5
7.3
Plain Platinum Jewelry
7.3
7.1
8.0
9.1
9.5
9.0
Plain Gold Jewelry
46.4
41.5
44.4
46.3
54.0
60.7
Diamond Jewelry
54
56.7
59.5
62.5
65.7
68.9
World jewelry sales grew at a steady pace
CAGR : Compounded Annual Growth Rate
Source : KPMG Analysis
INDIA :GROWTH IN RETAIL SALES OF JEWELRY
CAGR
(2000 – 2005)
14
10.20%
12
USD Billion
10
8
6
4
2
0
2000
2001
2002
2003
2004
2005
7.49
7.16
6.4
7.4
9.9
12.2
India is one of the fastest growing market for Jewelry,
growing at a rate of 10.20% per annum over the last 5years.
CAGR : Compounded Annual Growth Rate
Source : KPMG Analysis
GLOBAL & INDIAN BREAKUP OF INDUSTRY - 2005
% Market Share of various jewelry segments
Plain
Platinum
jewelry
6%
Plain
Platinum Others
jewelry
5%
0%
Others
5%
Diamond
jewelry
12%
Diamond
jewelry
47%
Plain gold
jewelry
42%
Plain gold
jewelry
83%
Global
India
Source : KPMG Analysis
CHANGES IN RETAIL JEWELRY SALES IN KEY MARKETS
(USD billion)
2005
2010
43
2015
5
5
7
2005
2010
2015
7
4
2005
2010
27
12
13
2015
2005
Turkey
U.K.
2010
2015
China
77
58
Japan
45
2005
2010
2015
12
U.S.
7
7
6
2005
2005
66
2010
2010
Italy
49
37
13
2010
RoW
2015
2015
35
2005
8
9
2015
2005
18
2010
24
2015
Middle East
12
2005
21
2010
2015
India
Source : KPMG Analysis
INDIAN JEWELRY MARKET – A SNAPSHOT
Indian consumer’s increasing penchant for diamond jewelry
and the rekindling of her affair with gold jewelry meant that its
share in the world market went up to 8% from a low of 5.5% in
2002
Fastest growing diamond jewelry market growing at the rate of
19% in 2005
Largest player in the polished diamond industry 57% of world
produce
Large producer and exporter of various forms of jewelry.
 output in 2005 USD 12.17billion
India is also the emerging jewelry fabrication centre riding on a
number of advantages such as
 cheap skilled labor,
 large domestic demand for jewelry &
 an added advantage of being the largest producer of
polished diamonds.
INDIA: WORLD JEWELRY FABRICATION SHARE
India
14%
RoW
86%
India’s share of world jewelry production output
in value terms (2005)
Source : KPMG Analysis
GEMS & JEWELRY VALUE CHAIN - INDIA’S PRESENCE
Mining
Diamond
Processing
√
Gold
Platinum
Others
√
Fabrication
√
√
√
√
Consumption
√
√
√
√
√ Established Presence √ Emerging Centre / Markets
INDIAN RETAIL LANDSCAPE
Traditionally dominated by small scale local players is rapidly
moving towards greater organization as retail channels
mature and obtain greater penetration across the country.
Retail organization will enhance the sales of jeweler in India.
World jewelry sales will be positively impacted because of this
change.
The increasing levels of consumer sophistication, both in terms of
design & product demand as well as a general orientation towards
 gemstone certification
 jewellery hallmarking
INDIAN RETAIL LANDSCAPE
Experimentation with new retail formats.
Increased emphasis on branding and marketing
Value addition in jewellery will increase due to penetration
of brands
Growth of e-retail in India. Most online jewellery purchases
fall in the 18-35year age group.
CHANGING TRENDS IN THE INDIAN RETAIL MARKET
TRADITIONAL PRACTICE
EMERGING TREND
Jewelry considered an investment, particularly gold jewelry
Wearable’ jewelry as a fashion accessory and gifting.
Marriage and festival season are peak seasons.
Wearability and gifting dimensions are distributing demand
throughout the year.
22 karat jewelry
Acceptance of jewelry of lower karatage, particularly in studded
jewelry.
Dependence on the family jeweler in the locality.
Growing interest in brands which personify quality and trust.
Traditional and ethnic designs.
Demand for fashionable, lightweight and innovative designs.
Predominantly ‘gold-based’ jewelry (particularly yellow gold)
Growing interest in white gold and newer precious metals such
as platinum, diamond studded jewelry is also generating
significant interest across the country.
Reliance on local jeweler’s reputation / trust in local jeweler’s
stated karatage.
Introduction of objective means of quality measurements
through certification and guarantees.
Jewelry largely sold on the basis of prevailing gold price per
gram with additional mark-ups for making charges and profit
margins.
Jewelry is being sold at a fixed price basis (maximum retail
price) by branded players.
BRANDING – THE NEW MANTRA
Indian consumers are becoming ‘ brand conscious’ and are
willing to pay significant premiums for purchasing branded
products.
Large-scale marketing and branding campaigns by large
diamond marketing companies and industry associations
have created brands that in many ways kick started the
branding trend in the country.
 Nakshatra
 Gold Expression
 Sangini
A representation of rising income levels in India
90
80
14.9
USD Billion
70
12.3
60
50
5.5
40
30
30.4
22.1
20
10
33.9
23
28.7
31
2002
2005
0
1996
Low Income
Mass Affluents
High Income Groups
Increasing disposable incomes and the rising number of
affluent/high net worth individuals (HNIs) in the country have
opened up the market for high-end premium brands.
Source : KPMG Analysis
BRANDING AS AN EMERGING TREND
Industry has seen two distinct ‘branding’ waves
Company level
 in an effort to maximize margins and tap target markets
Industry level
 pushed by large upstream players for market expansion and
demand generation
BENEFITS OF BRANDING
Increasing awareness and interest in the minds of consumers towards
‘jewelry’ as a whole
Preventing commoditization
 branding guards against the erosion of the cardinal value
proposition of jewelry – its linkages with traditional values and
emotional expression
Impact on consumer confidence
 branding fulfills the necessary function of demystifying the
process of purchasing jewellery including quality parameters to
watch out for
Impact on retail margins
 given that the added value of brands in other luxury goods
categories (such as watches and perfumes) ranges between a
whopping 70-90% the jewellery industry has a lot to catch up
INCREASING TRANSPARENCY
Vicious circle of low transparency – low growth.
Lack of transparency has constrained the industry from growing fast.
An aversion to transparency has meant that companies have missed
out on access to relatively cheaper capital by not accessing equity
markets.
BUILDING ENTERPRISE CAPABILITIES
Strategic & Business Planning
Capabilities
Strategic sourcing capabilities
Managing mergers acquisitions
& alliances
Marketing capabilities
Technology & Product
innovation.
Rising capital
Managing financial & operational
Risks
Managing operational costs
Grow the
Jewelry
Market Defining robust organization
modules
Managing Supply Chain
Sourcing & Managing Talent
Adopting best practices
Managing Processes
Growing the Jewelry market involves undertaking initiatives
at a Consumer & Industry level
1
4
Promote jewelry as
a Category
Enhance image of
the Industry
5
Enhance talent
supply
2
Identify new products
& Consumer segments
Consumer
end
Grow the
Jewelry
Market
Industry
end
6
Reduce financing
Cost
3
Manage a portfolio
of markets
7
Professionalize and transform
family owned businesses
CURRENT SCENARIO
Jewelry
Authentication
Assaying & Hallmarking
Gold
Platinum
Silver
Own
Coinage
Gemstones & Diamond Verification /
Certification
Loose
Stones
Mounted
Jewelry
Education
to Trade
&
Consumers
Mobile Laboratory
Portable equipment for Hallmarking /
Assaying / Diamond Grading
in mounted form at Jeweler’s end
DEFINING THE SERVICES
Assaying – Purity of the precious metal is ascertained.
Hallmarking – Marking of the tested metal.
OUR PROPOSAL
Merger of the two services that will meet the Authentication
needs of mounted jewelry
 Hallmarking of precious metals and
 Analysis of gem stones in jewelry mountings
Mobile Laboratory
 Grading & Hallmarking will be done at the jewelers end
whereby eliminating the logistics of to and fro transportation /
security concerns
INDUSTRY STANDARDS, CERTIFICATION
& HALLMARKING
By & large jewellery industry indifferent to the adoption &
establishment of formal or informal industry standards
However, a growing industry with more & more global business
transactions, a need has arisen for establishing standards.
India which is one of the largest markets for precious jewelry,
quality standards are conspicuous by their absence.
The Indian government has made hallmarking mandatory
by 2008
Industry will see an increasing level of adoption of hallmarking
in gold and certification in gemstones
CURRENT STATUS
Diamonds
 Customers do not usually demand certification of small diamonds,
as it is not cost-efficient.
 Larger stones are increasingly being sold along with certificates of
authenticity.
 Consumers in US & Europe rely on certified diamonds and diamond
studded jewelry.
Jewelry
 Customers do not demand hallmarking for low end jewelry
 Customers in Europe & US are more ‘insistent’ on hallmarking of
jewelry than customers in India
WHY HALLMARKING AND ASSAYING SERVICE?
Precious metals used in jewelry and giftware are always used as an alloy
mainly gold
The most experienced jeweler or chemist cannot tell how much precious
metal is there in an alloy
High price of precious metals offers a huge opportunity for fraud
To protect the public & honest suppliers from those who are tempted to
cheat them
Hallmarking is mandatory in various countries across the world like UK
India being the largest consumer of gold jewelry, the government of India
has declared the hallmarking of precious metals to be mandatory from
2008 onwards
Hallmarking & Authenticity services can mint their own coins for public
consumption.
CURRENT PLAYERS / COMPETITION
Place
No. of Centers
Mumbai
5
New Delhi
5
Kolkata
3
Trichur
3
Chennai
4
Coimbatore
3
Surat
1
Rajkot
1
Vizag
1
Calilut
2
Cochin
5
Pune
1
Baroda
1
Ahmedabad
2
Hyderabad
1
Bangalore
1
Kanpur
1
As per BIS figures
number there are
40 Hallmarking Centers
across the country
INFRASTRUCTURE
Manpower & Training
Assaying and Lab training as well as manpower will be
provided by the consultant
Place
Space required is ideally around 1000 sq.ft.
WORKINGS OF AN ASSAYING &
HALLMARKING CENTRE
List & Cost of Equipments
Particulars
Rate (INR)
Nos.
Amount (INR)
XRF Analyzer
1,900,000
2
3,800,000
Laser Maker-5markings per piece
1,900,000
1
1,900,000
Analytical Balance
3,00,000
3
9,00,000
Cupellation (Assaying) Furnace
1,00,000
2
2,00,000
Melting Furnace
1,00,000
1
1,00,000
Annealing Furnace
1,00,000
1
1,00,000
Scrubber for Flu Gases
1,00,000
1
1,00,000
Miscellaneous Consumables
3,00,000
1
3,00,000
25,000
4
1,00,000
Computers
2
50,000
CCTV
4
50,000
Air Conditioners
Biometric System/Metal Detector
50,000
One time BIS License Fees
1,00,000
Consultant/Turn Key Operator
2,50,000
Furnishing & Interiors
5,00,000
Total
85,00,000
BUSINESS PROJECTIONS
Business Model
Revenue
(INR)
Investment
(INR)
Expenses
(INR)
Gross
Profit
(INR)
Output
per day
pcs.
Case I (Conservative Output)
Operating in
1Shift
21,600,000
7,000,000
12,060,000
2,540,000
800
Operating in
2 Shifts
43,200,000
7,000,000
20,340,000
15,860,000
1,600
Case II (Realistic Output)
Operating in
1Shift
32,400,000
7,000,000
12,060,000
13,340,000
1,200
Operating in
2 Shifts
64,800,000
7,000,000
20,340,000
37,460,000
2,400
Projected Income after 5 years
WHY CERTIFICATION & INFORMATION
OF GEM STONES?
Prices of gem stones are quality sensitive.
 1carat diamond can cost anywhere from INR 0.1million –
0.6 million.
 while the size of the diamond is the same the quality is what
makes the difference.
The most experienced jeweler or manufacturer does not
have the expertise to differentiate the quality of the gem stones.
Hence, the importance of an independent gemological
laboratory for certifying and educating the various public in the
value chain of the international standards of gem stones
WORKINGS OF A GEM STONE LABORATORY
AND A TRAINING CENTRE
Gem stone Laboratory entails
 Grading and analysis of loose gem
stones & diamonds
 Grading and analysis of mounted
jewelry
 Training courses in gem stones and
jewelry
CERTIFICATION UNIT
Certification Unit involves certification of :
 loose stones (Gemstones & Diamonds)
 mounted Jewelry - Melle sizes
 identification of treatments to enhance gem stones &
diamonds
To start with we shall offer only services for grading mounted
jewelry
Costing of the services of the mounted Jewelry - Melle sizes
 This part of the service is not machinery intensive more
important is the human resource and expertise rendered by
them
COSTING OF CERTIFICATION UNIT
The main equipment for the identification process
is the microscope
Each microscope costs USD 2,500 (INR 1,15,000)
10 Gemologists would require 10 microscopes costing
USD 25, 000 (INR 11,50,000)
5sets of mounted color master sets each
costing USD 2,000 (INR 90,000) i.e.. USD 10,000 (INR 4,50,000)
Other Equipment USD 15,000 (INR 6,75,000)
Let’s help create
A Unique One- Stop-Shop for all the
Authentication needs of the
Gems & Jewelry Industry