India Woos the U.S.

It was overwhelming: the spicy food, the poverty, the crowded cities, the splendor of the Taj Mahal. It was also exhausting, enlightening, and, for many, the trip of a lifetime.

But for the team of retailers that was flown (business class, all expenses paid) to the U.S.-Indo Business Development Conference in Mumbai, India, the real reason they were there was the jewelry. (JCK also received an all-expenses-paid trip.) And the unanimous verdict was: impressive.

Indian manufacturers want to expand their customer base, and the conference was an attempt to show U.S. retailers that Indian jewelry doesn’t mean only low quality and small stones. But they also wanted to explore whether “going direct” would be worth it—for both sides.

Of course, many American retailers already buy direct from India, but those are primarily big mass marketers. This conference represented a branching out. Of the 14 or so attendees, most represented smaller chains, which tend to buy from the U.S. representatives of Indian companies. The conference sought to “take our relationship further,” in the words of Sanjay Kothari, head of Mumbai’s Gem and Jewellery Promotion Council.

On paper, there is every reason to do so. For retailers, buying direct means lower prices and greater selection. For manufacturers, although much of their product ends up in America anyway, dealing with retailers could lead to some indirect long-term benefits, including greater communication, more knowledge about what customers want, greater market share, and possibly scaling back their high-rent American offices.

Much of the conference was dedicated to what organizer/emcee (and JCK columnist) Rick Bannerot called “speed dating”—20-minute meetings between retailers and local manufacturers to discuss lines and the possibility of working together. These were widely considered the most useful part of the conference, though some (on both sides) thought 20 minutes was too short when there was a match and too long when there wasn’t. Organizers are mulling some kind of prescreening before the next edition.

Even so, the “dates” may lead to a relationship or two. One buyer from a chain noticed products he was already buying from a U.S. wholesaler, costing him margin. And some were impressed with the growing improvement in Indian jewelry, although there were gaps, particularly in the bridal category. For their part, the Indian manufacturers were sometimes reluctant suitors, with some commenting it wasn’t worth it to service chains that receive product exclusively on memo.

On the final day, attendees toured local factories. Although Mumbai is not what anyone would consider spotless, the factories were among the cleanest the visitors had ever seen, even if they did have the occasional idiosyncrasy that looked unusual to Western eyes—like barefoot workers. “SEEPZ [the special export zone] surprised me,” said one visitor, Beverly Harris, president of 20-store Harris Originals. “I didn’t know the extent of it. I was expecting something more like 47th Street.” Some were impressed by the sophisticated technology, which has become a hallmark of the new India.

The big message of the trip was that India can, and does, make high-quality product, and there was much talk about how the country could raise its image in the jewelry industry. Industry analyst Ken Gassman noted that “made in Japan” has gone from a signifier of something cheap to a symbol of quality, although it was later noted that this was attributable to specific Japanese brands, not to the image of the country as a whole.

The conference also addressed ways to improve Indo-U.S. business relations. Gassman devoted his talk to the culture shock between India and America. “We both speak English but do not communicate,” he said. “If you in India understand how we in America think, we can get business done.” He noted that India’s organizational structure is different from America’s. In India, sometimes more than one person can be considered a chief executive, but in America the chain of command is clearer, and “CEOs prefer to talk to other CEOs. Let the American CEO know there is one person in charge.” Gassman urged the Indian attendees to “underpromise and overdeliver,” implying that some companies tend to do the reverse. “Don’t say yes unless you mean yes,” he said.

That’s a real issue, noted one participant, Mary Moses Kinney, merchandising director for International Jewelers Organization. Kinney was impressed by India, but noted that her members have some misgivings. “Diamond grading and unacceptable quality standards are the biggest concerns, combined with the reputation the Indians have to overpromise,” she said. “That this conference was being held told me the Indians were serious about making the needed changes. It would be unrealistic to expect that the changes will come about overnight, but the independents will want solid evidence that changes have been implemented.”

The other element of culture shock came from India itself. Most of the conference took place in the air-conditioned confines of one of Mumbai’s new luxury hotels, but the glimpses at the real world often were disconcerting. Despite India’s considerable progress, including its burgeoning middle and upper classes, its poverty can be shocking to Western visitors, and even the growing affluence can be disturbing in what is still very much a third world country. Teresa Painter, head buyer for 16-store Lemon’s Jewelers, who had never been out of the United States before, called the experience an eye-opener. “One of the salespeople said, ‘This will humble you,’ and that is very true,” Painter said. “Things that I’ve seen as problems I probably won’t see as problems.”

One of the conference’s guests of honor, Jairam Ramesh, India’s minister of state for commerce, pleaded with visitors to be understanding, admitting the country’s infrastructure is “pathetic.” “The demographics in India are difficult,” he said. “We are three Americas, and we add an Australia every year.”

Yet India is booming, with the economy growing at about 9 percent a year. But this has brought its own problems. The soaring rupee and sinking dollar have made Indian jewelry more expensive and cut into Indian suppliers’ profits. The country also has been the victim of international politics. Last year, because of some differences with the United States on trade issues, India’s GSP (Generalized System of Preferences) status was lifted, meaning all jewelry imported into America must carry a 5.5 percent duty, equal to archrival China. In addition, rents in Mumbai are rising, and some think the city’s factories, which so impressed the visitors, eventually will have to relocate to less expensive areas, following the unforgiving logic of outsourcing that brought India to prominence in the first place.

Despite all this, most observers predict a bright future for India. “Even with these issues—the GSP, the rupee, slowing U.S. economy—most manufacturers are growing dramatically,” Kothari said, noting that most of the manufacturer attendees had grown as much as 50 percent to 100 percent over the last few years.

In any case, organizers of the conference don’t intend to give up. They plan future conferences, and they invited all attendees to the upcoming high-end India International Jewelry Show in February, which will be held in the resort town of Goa. Certainly, the inaugural version does seem to have changed a mind or two. “When I dealt with India 20 years ago, my order had to be enormous,” noted Harris. “Now they are much more flexible. After seeing their factories and their attitude, I am willing to do more business with them.”

Added Painter: “This was a remarkable experience, both personally and professionally. We would never have bought direct before, but it does have benefits for the bottom line.”

“This was a positive start,” said Siddhart Kedia, vice president of marketing for Suashish. “The retailers came with an open mind. Now the next step begins.”