Indian Gold Book:Indian Gold Book - Gold Bars Worldwide

TRADITIONAL JEWELLERY RETAILERS
INVENTORIES
The inventories of most large and many smaller retailers have increased substantially, especially over the
past 5 years.
Large retailers observe generally that their inventories have increased by 20 - 50% over this period. Many smaller retailers
also report that they have been obliged to increase their inventories.
Reasons include the trend among customers to buy ready-made, rather than customised, jewellery. Many are now insisting
on a much wider variety of “fashionable” pieces to choose from. Retailers have responded to this trend, and fuelled it, to
attract new customers in a static market.
To increase their inventories, many retailers have reinvested their profits, while both large and small retailers appear to be
supported increasingly by wholesalers who offer partial credit terms or consignment stocks at higher prices.
Inventories vary greatly in size. A large retailer may have 30 kg of gold jewellery on display, some 100 kg and more. Many
small retailers have less than 5 kg, some only a few hundred grammes, and even less when they rely on their customers to
provide the gold for fabrication purposes.
Although inventory turnover rates vary considerably, large retailers indicate that a typical average is now likely to be around
3 times annual sales, although in the mid-1990s it was higher at around 4 - 6 times. Among medium size and smaller
retailers, who operate with small inventories and sell more customised jewellery, the inventory turnover rate would be
higher.
Anecdotal evidence suggests that the total amount of gold jewellery held in inventories by retailers nationwide is unlikely to
exceed 400 tonnes of fine gold (equivalent to around 500 tonnes of carat gold).
Inventories tend to be stable. Retailers observe generally that they do not increase their inventories when
the gold price falls, or reduce them when the gold price rises.
To replace the net amount of gold jewellery sold (taking into account the amount of old jewellery exchanged or bought back
for cash), and to preserve the size of their inventory, they usually buy gold on a daily or weekly basis regardless of the
prevailing gold price. They do not speculate on the gold price.
When buying gold bars from bullion dealers, they advise that they rarely keep them in bar form for long. They are normally
converted into jewellery as soon as possible.
Inventories act generally as depositories of family wealth.
In India, most traditional retailers view their inventories differently from retailers in Western countries. Apart from being the
vehicle to retail gold jewellery, inventories also serve as a long-term family investment in gold.
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Most jewellery retailers are small. Many sell on average less than 50 g of gold jewellery daily.
AN INTRODUCTION TO THE INDIAN GOLD MARKET