How to run a jewellery business | Sarthak Ahuja

Let’s look at the economics of running a jewellery store…
👉🏼 Market Size: The gold market in India is almost touching USD 100 Bn p.a. - a tenth of which is probably captured by the top players in the country like Tanishq, Malabar, Kalyan and Senco
👉🏼 Revenues: Tanishq has ~380-400 stores around the country and does a revenue of ~Rs 100 crores per store p.a.
That means a Tanishq store does approx 8 Cr worth of sales per month. If you were to start one, maybe you’ll do about Rs 3 Crores a month if you’re a jeweller of repute in your city, but accounting for a smaller area compared to Tanishq and even lower brand pull.
👉🏼 Making Charges: Let’s assume that you don’t make money on the increase in price of gold and there’s no capital appreciation (there is, but let’s ignore it for the sake of simplicity) - so it’s the making charges which forms your core revenue.
Assume 80% of your sales are of items with making charges of an average of ~25%.
That means on a sale of Rs 2.4 crores, you get making charges of Rs 60 lakhs a month.
Tanishq charges ~30% as making charges on most items, but you’re a smaller player.
Also, diamond jewellery can get you much heftier margins. But let’s ignore that for simplicity.
👉🏼 Labour Charges: Reasonable to say that making charges cost you about 7.5% of the jewellery sales but you charge 25%, so it’s 70% of the making charges which is your profit.
That’s about Rs 40 lakhs of gross margin per month.
👉🏼 Fixed Costs: Now this is completely dependent on the area, the location, the city… but let’s assume you pay rent and utilities of Rs 10 lakh per month, and another Rs 5 lakhs in salaries.
👉🏼 That leaves you with a profit of Rs 25 lakhs per month, which is an 8.33% EBITDA margin
👉🏼 One makes Rs 3 crores profit per annum on a Rs 10 crore investment
And we’ve not taken into account the capital gains on increase in value of gold, the extra profit margins on diamond sales… but we’ve also not taken any other fixed running expenses into account.
We’ve also ignored schemes like Golden Harvest that give jewellers advances from customers to finance a part of the business.
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A Chartered Accountant with about 10 years of experience in areas of Tax Advisory, Startup Consulting, Fundraising, Audits, Deal Advisory, Business Modelling and contract CFO services.
Winner of the ISB Young Leader Award 2017 and the Best All Rounder, PGP Class of '17, Sarthak has also been published about in the leading financial newspapers such as The Financial Express as possibly the youngest Indian to have completed the courses of CA, CS and CMA along with a graduate degree in Financial & Investment Analysis from University of Delhi, all by the age of 23 years.