A few years ago some innovative jewellers started the concept of savings account for gold jewellery. Not the savings account at a local bank but at a local jeweller who will offer gold jewellery at the current rate for the amounts saved at the end of a year or two depending on the period you have chosen to save.

In a country where affinity for gold is extraordinary this was a sure shot method to bring back the customers time and again. As this gained popularity, jewellers startedintroducing small changes. But this concept really caught on in the last two years when prices turned volatile, keeping consumers away.

In India gold consumption is influenced more by volatility in prices and less by prices themselves. During 2010 and 2011, gold prices witnessed huge volatility prompting consumers to defer purchases.

“Today gold faces serious competition from two other sectors – white goods and holidays. Serious amounts of money are spent on these,” said Mr Rajiv L. Popley, Director, Popley Group. Therefore, keeping the connection with the consumer alive through a savings scheme for gold jewellery was the best option available to the jeweller.

Today, many jewellers across the country have been offering this option to the consumer with moderately good success. Planned purchase is a growing phenomenon in India where bridal demand for gold jewellery continues to be a major share of the total gold consumption. Bridal demand is followed by gifting and religious purchases of jewellery.

“The advantage of this scheme to the jeweller is that the consumer will visit the store once a month to make the payments. This will keep their interest in gold jewellery designs alive,” said Mr Dinesh Jain, Managing Director, P.M. Shah & Co Jewellers.

From the consumer point of view, this saving plan also kept the buyer updated with changing prices of gold, said Mr Popley.

Many southern jewellers have been offering this option to consumers for several years now.

The Popley group started this option for consumers two years ago.

“We are also offering bullion, platinum jewellery and watches for the saved amount,” he said.

Most jewellers offer a bonus to the savings plan primarily to bring in the consumer. But most offer only the option of redeeming the savings with gold jewellery and not bullion or cash.The reason why this scheme is largely restricted to jewellery is to primarily ensure that manufacturing capacity is being used, jewellers said.

While the jeweller has been able to bring back the consumer back to the store, he does incur an additional cost in servicing consumers through this method, jewellers say. Jewellers make losses in this scheme but they hope and rely on consumers buying more than what they saved for. “Most consumers usually end up buying more that the amount they have saved for,” Mr Jain said.“It is an expensive strategy of inviting the customer to the store,” said Mr Popley.

For the jeweller, the normal cost of funds is around 12 per cent but in this saving plan the cost of funds rises to around 18-20 per cent, he said.Nevertheless, jewellers across the country have found economic sense in continuing this concept.

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