India: International Distribution Problems

Published on: February 19th, 2009

The Internet has bought the world a click away. Shoppers are now offered a huge number of diamond and jewelry options from different parts of the world. A lot more information and the specifications are available today and price and quality comparisons can be made thanks to our consumer advocate website Pricescope.com’s listings and and price comparison tools. Consumers can buy diamonds through the internet, delivered to their door step and return the goods if they are dissatisfied. Participating vendors know they must be honest and transparent or they will be publically ‘outed’ on the forum.

Strangely however Indian diamantaires and consumers, where the vast majority of the worlds diamonds are cut and polished, have missed out on this Internet phenomenon until now.

Import and exporting diamonds and jewelry for consumers is still a big challenge in India. Some web companies are developing good domestic Indian deliveries and web purchases across many sectors are growing strongly. But government customs duties, taxes and shipping delays make international deliveries either to or from India a headache. But once the diamond or jewelry crosses international borders, ‘return sales’ are a nightmare for both vendors and consumers.

Deliveries inside India of diamonds and jewellery are easy for business to business (B2B) transactions, and improving slowly for business to consumer (B2C). There are only a few courier companies who deliver valuable goods (diamonds and jewellery) in India and those who provide the service are limited to specific cities. Fortunately for diamond jewelry vendors and their customers those cities that receive good services have substantial consumer bases and are where Internet user rates and web shopping is more prevalent.

Additionally many of the large diamond manufacturers have sales staff who travel around India and also do the delivery of valuable goods to their retail brick and mortar stores (B&M). A key difference between B&M retailers in the West and in India is that many Indian retailers have very low margins. We believe that this will result in e-tail distribution networks from the big cutting and polishing houses and wholesalers via their retail clients. The model may operate like this:

‘Big Diamond Cut Company’ (who has never sold direct to the public) open a B2C website under their own Brand name. BDCC has state of the art technology from their manufacturing plant and can provide a lot of cut related information to assure the consumer’s confidence. When a consumer buys the diamond delivery is via ‘Big Companys’ retail distribution network – this may be company owned outlets, arms length retailers or a hybrid of the two. This takes advantage of existing B2B distribution networks and so adds security while reducing costs. The happy customer is given better service and may then choose a setting and receive custom services that are more difficult to provide on-line.

Deliveries from India to overseas consumers In sending valuable cargo overseas, there are a very few providers. Fedex and UPS are the popular ones. They have their local clearing agent in the respected country and their charges depend on the weight and value of the shipment. Exporting from India is not an issue for manufacturers (B2B) sending regularly, those who are comfortable in handling invoices. Usually all the international transfers are done through Bank wire and not Credit Cards. But there are issues of duties and taxes (if applicable) of the receiving country. The duties and taxes are born by the customer as an additional cost. The expense of sending a shipment to any country is around $100 or even more for valuable shipments. This is one of many reasons why Indian B2B’s and B2C’s operate from USA and other countries.

International diamond and jewellery companies also hesitate to do B2C sales from India because of the real pain when there is a ‘sales return’. Importing diamonds and jewellery in India is strictly controlled and can even be prohibited. Once the parcel goes in to customs, it is a big hassle to get it cleared. Manufacturers need to pay fines, taxes, duties and many other associated formalities. Manufacturers may even need to have a costly clearing broker who can deal with getting the goods cleared. Manufacturers have to work very hard to get through one sale. If manufacturers do not take the responsibility of clearing the consumer will loose confidence and post about it on the Pricescope forum and that can kill many future sales.

Deliveries from overseas vendors to Indian consumers are also very difficult. FedEx for example will generally refuse to ship a diamond or ring into India because of the bureaucratic hassles, even though importation (with duties and taxes) is not illegal. On Pricescope we have read about less scrupulous vendors sending jewelry or diamonds in between magazines or cigarette packs sent via various postal methods. This is both illegal and very risky for both vendors and consumers and when ever such stories have been posted on Pricescope, by tearful consumers chasing refunds, the Administrator has wisely removed the posts.

From time to time there have been enquiries on Pricescope about diamond buying in India, and we hope this article has helped clarify some of the issues.

by Garry Holloway
HCA and Ideal-scope developer

www.ideal-scope.com – www.hollowaydiamonds.com.au