Online Jewellery Market
Top Down
From FY20–26: The online jewellery market is expected to grow from USD 850 Mn to USD 3.7 Bn at a CAGR of 28%. So, the TAM of the company by FY26 is USD 3.74 Bn.
This was attributed to the very low online penetration of the jewellery market in India (1.2% in FY19), as compared to the USA (10.3% in FY19) and China (9.0% in FY19).
The low online penetration in retail in India (4.3% in FY19) will grow to 8% in FY25, and India will become one of the fastest-growing e-commerce markets in the world.
SAM would be the segment the company will realistically target with its current offerings and capabilities. The company currently targets the mid-to-premium segment of the market with an AOV of INR 3,000 (USD 37.5). Assuming the segment has a 30% market share, this translates to 30% of USD 3.74 Bn, which is USD 1.12 Bn.
SOM of the company is the small portion of the mid-to-premium segment of the company, which would be 2–3% of the SAM, which is ~USD 22.4 Mn -USD 33.5 Mn.
Bottom Up
All assumptions for the calculation will be taken with respect to FY26 when the company will realistically set up:
Online Shoppers: From FY20 to FY28, The number of online shoppers will increase from 105 Mn to 425 Mn at a CAGR of 19.5%. [i]
The number of shoppers in FY26 will be ~300 Mn.[ii]
AOV: The AOV of the brand is INR 3,000 (USD 37.5), while for online jewellery industry standard is INR 8,000 (USD 100). So, we can consider a median of INR 6,000 (USD 75).
% Of People Buying Jewellery Online: 15%.[iii]
Repeat purchase of Jewellery: 1.5–2 times a year.
TAM Calculation:
Number of shoppers interested in buying jewellery online = 300 Mn * 15% = 45 Mn.
TAM = Number of online jewellery shoppers * Average spends on Jewellery per shopper = 45 Mn * USD 75 = 3.37 Bn.
SAM Calculation:
The number of shoppers in the mid-to-premium range is 30% of 45 Mn shoppers, which is 13.5 Mn shoppers.
SAM = Number of shoppers online in the mid-to-premium range * AOV * Repeat purchase rate = 13.5 Mn * 32.5 * 2 = USD 877.5 Mn.
SOM Calculation:
Assuming the company is able to capture 2–3% of the market share, the SOM will be USD 17.55 Mn — USD 26.33 Mn.
Key Growth Drivers
The growing number of fast fashion and fine jewellery brands in India: Earlier marketplaces in 2010 in this category, such as Voylla, failed as there were very limited brands.
Growing no of online shoppers and increasing per capita spending: Online shoppers are expected to grow from 125 Mn in 2020 to 500 Mn by 2030. The per capita digital spending is expected to increase from USD 750 to USD 2,000 per annum. In the Jewellery category, the per capita consumption in the top 10% of urban India was 8–10x that of the average of India. GenZ and millennials account for a 30–35% share of e-commerce transactions. Gen Z consumers are keen on experimenting, while millennials focus on sophisticated purchases.
Vertical-focused marketplaces built for new customer segments are winning: In 2010–2020, homogeneous customers were set on India’s internet marketplaces, such as Flipkart and Bigbasket. The 2nd half of the last decade saw the emergence of a new set of customers, women and younger consumers (<25 years old). New internet marketplaces and brands were built, such as Good Glamm Group and Nykaa, with offerings built to serve women, arguably the largest new consumer segment in India.
New categories of jewellery coming up: Lab-grown diamonds are an emerging category in the US.
Different category of jewels: Solitaire, White Gold, Zirconium, demand picking up
Niche, minimalist designs for daily wear: Young, fresh and modern designers are creating a minimalist aesthetic and enabling consumers to express their styles and personalities through jewellery. More women are open to buying this jewellery, which could compliment a business outfit or a sari.
Offline jewellers coming online: There is an opportunity to get offline jewellery shops online and boost their sales by giving them distribution online, reach and insights. Top local jewellery brand STAC in Mumbai can open up their catalogue.
E-commerce penetration rising in India: Indian customers are comfortable spending online and making big-ticket purchases online on Furniture, electronics, etc. (INR 50,000–1,00,000).
What are the problems existing in the space?
Over the last decade, online B2C marketplaces have scaled successfully. However, the jewellery sector remains untouched, with no marketplace that can host D2C brands to scale at the same level. Earlier attempts at establishing online marketplaces for jewellery had faltered due to limitations in both the supply and demand sides of the ecosystem.
Supply-side problems
Cost of Acquisition: D2C brands are only able to reach 2–4% of the market, which results in a low Return on Advertising Spend (ROAS). Turning potential customers into actual buyers takes time due to this low reach. This is a common issue faced by D2C brands in India.
Brand Discovery: There is no holistic experience for purchasing jewellery, and the founder believes that the discovery and shopping experience are not integrated.
Specialisation in one product type: Many D2C brands tend to specialise in only one category of product, such as floral, evil-eye jewellery, etc. This can be a problem as customers often prefer variety and are unlikely to buy two products of the same type.
Low customer retention: D2C brands typically start on Instagram, engage with customers through content, and then take them to a Shopify website to complete their purchase. However, since the shopping experience is not integrated, customer retention is often low. These brands have a market size ranging from INR 40–50 Cr to a maximum of INR 100 Cr.
Platform integration: D2C brands often do not want to be placed next to value-based items on platforms like Myntra. They are considered mass premium items and require a platform that resonates with their unique brand values. Jewellery is considered an emotional purchase, and brands want to connect with their customers on a deeper level rather than just being transactional.
Traditional online marketplaces such as Amazon, Flipkart, Myntra and Ajio do not sell quality products (INR 200–300 SKUs) that have a 2–3-time use.
Demand-Side Problems
Jewellery is no longer viewed as an investment but is considered to be more of a lifestyle product. The changing consumer preferences and evolving fashion trends are pushing for minimalistic jewellery. As a result, people are buying more 14-carat and 18-carat gold items instead of the traditional 22-carat.
Consumers now prefer to check products online (100% discovery) before going to offline stores. The company is targeting the FOMO aspect of its customers who want to know all products that are available before purchasing their regular shops.
Consumers sometimes prefer to shop from international brands that do not have a distribution setup existing in India. Brands such as Pandora’s Bracelet, Majuri, Kendra, and Scout are looking for potential entry points.
Key Challenges
Building a marketplace is more complex than building a brand, as it involves managing a warehouse, quality packaging, inventory and returns. This is a high-volume-growth business, and the high fixed costs can be offset only by a significant consumer base and sustained growth. B2C marketplaces typically take time to achieve positive unit economics. The competitive pricing and quality service can strain margins. Managing CAC (Customer acquisition costs) is a key challenge in this business. Building a large, competent team is very crucial across roles such as finance, data science/AI/ML, product management, operations and customer support.