Q&A: David Lamb, MD (Jewellery), WGC

'Social currency will be more important than value per gram of gold'

The World Gold Council (WGC) wants to handle the three ‘i’s in gold jewellery — intelligence, innovation and image — at a time when gold prices are scaling new heights. The Rs 80,000 crore Indian gold jewellery market, the largest in the world, however, refuses to slow down despite the price rise. For WGC managing director (jewellery) David Lamb, the challenge lies in hooking a new set of consumers to the yellow metal. Young women, who depend on their mothers to introduce them to gold at their weddings, are the ones who can help drive innovation and the image of gold as well as demand for higher margin jewellery. On their part, jewellers should not wait for their wedding to reach out to them, Lamb tells Sayantani Kar.

Gold prices have scaled up rapidly. How will the growth of the gold jewellery market be affected by the rising prices?
The overall health of the Indian industry is intact. There has been no loss of purchase intent in the market. The Indian market grew by 39.5 per cent last year. Consumers are excited by gold because they believe in its intrinsic value. They know what they are buying outstrips almost any other thing they can spend their money on. This confidence in gold’s value will prevent the Indian consumer from thinking any less of gold jewellery, price hike or not. This strength is what makes India one of the most strategic markets for us.

Contrast that with the US, where the recent price increases have led retailers and consumers in the mass market really to question what gold jewellery is for them.

However, the Indian gold jewellery market also operates on low margins compared to other countries. How do you drive growth of brands in a market that is built on small-scale local players?
The thinness of the margins creates difficulties in the Indian (gold) industry. But as India explores new categories, new forms of competition, new standards of retail, the expectations of service and design will become more dear to consumers. Consumers are always looking to upgrade but in India there is a strong traditional way of buying gold that is at odds. The challenge for the trade here is to find ways of making consumers upgrade.

The sheer value of the metal will continue to be spectacular but there will also be new designs and forms of services to make buying more exciting for consumers. We will never move India to the kind of retail margin structures seen elsewhere in the world. But should these parameters improve, then we can increase the margins to a realistic level.

Do your plans then exclude the small-scale gold jewellery industry?
One of the fascinating traits of the jewellery industry is it is based on relationships. This is true all over the world. With India’s double digit growth, there is room for everybody. There are local retailers who are the biggest retail brands in their regions, irrespective of category. In India, gold jewellery will always be less about international luxury and more culturally sensitive and locally relevant.

What are the new business models that the trade should look at?
One of the projects that we are looking at now is the world of gold for the younger consumer — 20-27 years of age. A lot of the jewellery trade has its first interaction with the consumer around her wedding — a dynastic introduction when the mother takes you to the family jeweller.

But given the demographics of India, there is a huge opportunity to look where gold fits in with the life of a young woman. She does not have her mother’s extreme value consciousness. The social currency of the brand — how it makes you feel, the reactions you get from your peer group — are more important to her than rupees per gram. Addressing this set will lead to a different value proposition from what we have seen so far.

What will be WGC’s role in this?
I want the WGC to get into the lives and minds of women in their 20s. The jewellery industry here understands what to sell to a bride. But a younger audience will be tougher. The ticket size and the competitive set will be different. They have a predisposition to gold but haven’t got the right product yet. This is an area where the diamond industry has been more successful. Their aspirations for design will also lead to better margins.

We are actively looking for people who match our ideas to look at commercial partnerships such as brands of our own for big concepts that will lead. We have always had strong relationships with significant B2C (business to consumers) players. In the next five years, we will see those strengthen through commercial partnerships. As manufacturers, we will also help put supply chains in place for new concepts of retail etc.

At the same time, we have to enter gold in new forms of conversations such as those on Facebook. The industry needs to appreciate that its next generation of consumers is having conversations about products at a speed and in a format that is far different from the response to a formal piece of advertising.

You spoke of big concepts. What will they be like for your youth-centric approach?
When young women go for indulgent shopping, they don’t go shopping for fabric, leather or gold. They go shopping for a fantastic saree for an occasion or a handbag to make a statement. Gold as less of an abstract commodity and more of a specific piece for a mood or a part of the body could be a big idea to sell. Stores too have to be designed in a way to talk to a 20-something.

Is that the target audience around the world?
Around the world, business is anchored in what we call the core belief — gold is the metal of love. Central to every market, then, is the role of gold in bridal shopping. Almost 78 per cent of American women wear a gold band while 50 per cent of the second largest gold jewellery market, China, is bridal jewellery. So, the focus will remain on forging marriages in gold. But we are looking at more spontaneous engagements with gold much earlier in the consumer’s life because luxury purchases are becoming a form of self-identification and aspirational.

But won’t the prices be prohibitive for such dabbling?
They won’t be in India. In China too, the attitude and pricing are very similar to that in India. The price movement is in fact proof of gold’s value for the Chinese. But for the third largest market, the US, there is a need to make gold more ‘luxury’. It has become less accessible to the mass market and hence, will have meaning for the top-end of the consumer market as there are no cultural imperatives of heirlooms being passed on. There women are looking for big statement pieces to justify them as luxury purchases rather than buying an apology of a smaller piece.

Do you find Indian jewellers learning from international trends?
There is a resistance to international trends. But that is the difference between jewellery and other luxury segments in India. The modern Indian woman still wants jewellery that is culturally relevant. Hence, retailers are interpreting traditional motifs such as the lotus or the peacock in modern design.

For exports, Indian players have an advantage. With gold becoming more a premium buy, consumers are looking for a heritage story and exquisite craftsmanship in their jewellery. Indian jewellers have had a level of mastery that lends well to such a demand. Our earlier blinkered approach to gold jewellery has also given way to imagining gold with other materials such as semi-precious stones, again an area where Indian jewellers have always been strong.

Will it be possible to recreate the sense of gold’s intrinsic value in other markets?
It will take another generation for the rest of the world to behave like India and China. America is rediscovering the value of gold by selling it, as a response to economic hardships. Cash for gold is reminding them that of all the things they had inherited or bought, this has value. They will now have to return and invest in gold as a result of this realisation.

But it is still a period of re-evaluation of what we can or cannot trust. New arguments about gold investments and gold’s place in the financial architecture of America are being made. In 2010, central banks became net buyers of gold after 20 years for their reserve assets. Interest in ETFs (exchange-traded funds) and physical gold-holding is growing. The current recession has taught them to be a little more like Indians and Chinese.