Gold jewellers offer instalment relief

Firms attract buyers by offering to pay up to two instalments in various gold savings schemes

High gold prices have been a deterrent for many buyers for some time. Consequently, imports have dipped sharply in the past couple of quarters.

No wonder, Rajni Kumar, a resident of Mumbai’s western suburbs, was relieved to read advertisements by jewellers to join a gold savings scheme and get instalment payments waived.

For instance, Delhi-based P C Jewellers (PCJ) is offering two instalments free to the customer (the maximum), in its ‘Jewel for Less’ scheme. Similarly, Tribhovandas Bhimji Zaveri (TBZ) and industry leader Tanishq pay one instalment to customers in their respective schemes.

There are other differences in these schemes. Tanishq’s ‘Gold Harvest Scheme’ allows a minimum monthly deposit of Rs 500 in its ‘Grammage Scheme’.In PCJ’s, one has to deposit a minimum of Rs 1,000 monthly.

 

THE OFFER

• PCJ is offering to pay two instalments for its gold saving/accumulation scheme, unlike Tanishq and TBZ which pay one instalment
• For PCJ offer, one needs to pay a monthly payment of Rs 1,000, compared to Tanishq’s Rs 500
• Immediate purchase of gold in the month of maturity, compared to one month gap offered by other jewellers 

THE ANALYSIS

• Compare making charges of jewellery in PCJ vis-a-vis other players
• Number of branches limited for participation
• Look at other options like e-gold to save for longer terms like four to five years

A PCJ customer can buy gold or diamond jewellery in the same month of maturity. For example: Suppose Kumar enrolls in January 2012. She can buy gold and diamond jewellery from PCJ for an amount equivalent to 14 instalments in January 2013, immediately after paying the 12th instalment. Other jewellers make one wait for at least a month from the date of maturity before a member can buy. “This scheme is an initiative towards increasing our customer base and relation building,” said R K Sharma, executive director of PCJ.

Market players say the company is going through this brand-building exercise as it has filed a draft prospectus to raise Rs 570 crore through an Initial Public Offer. But such schemes have, on the whole, been successful. Sandeep Kulhalli, vice-president (retail & marketing), Tanishq, says their scheme has been popular among price-conscious consumers.

Some question the viability of PCJ’s offer. Says a financial planner, “The company will have to generate returns in excess of 20 per cent to provide this service or charge the customer higher when they make the jewellery.” In addition, there has to be enough volume for the companies to be able to continue these. The latter say these are also a relationship building exercise, something to help their customer base.

On usage of funds, PCJ plans to invest the deposited money as working capital. Tanishq says it does not utilise customers’ money for any purpose. “The company deposits the amount in a trust, which does not fetch any interest income for us,” says Kulhalli.

Another drawback for customers wishing to participate is the absence of PCJ outlets, only 20 in North India. The company plans to add 20 retail showrooms in major tier-I and tier-II cities. In comparison, TBZ and Tanishq are established players in the market, there for several decades.

While the offer is attractive, customers wishing to participate need to do some research. Since these are long-term plans, they can afford to. For one, they need to go to different jewellers and compare the making charges. This should give them an idea of the cost-benefit they get.

There are options such as e-gold from the National Spot Exchange that allow persons to buy very small quantities and save over the years for jewellery purchase. Compare costs before taking a call.