The news in itself is a little unusual because as we go to press Victorian-based Bevilles has not yet clarified what this “alliance” actually means, leaving many to believe the Indian company has acquired a stake in the 75-year-old retailer.
This is made all the more interesting because Tara is the second Indian jewellery supplier to gain a foothold in Australia following the acquisition of Zamel’s Jewellers just two years ago by the M Suresh Group.
The Zamel’s acquisition means overseas companies now own Australia’s three major jewellery groups but this is not what I mean when I speak of a possible industry change.
Instead, I wonder whether we are seeing the first stages of a major shift towards vertical integration, where the jewellery manufacturer also markets and sells their product to the jewellery consumer.
Of course, a “parent” company can’t exclusively supply all product – retailers of watches and branded jewellery lines are good examples of this. Michael Hill has sold its own watches for some years, after deciding not to stock third-party watches but I’d argue that this isn’t vertical integration, given that the company does not manufacture the product itself and simply “brands” it with the Michael Hill name.
Tara is a major supplier to the US retailer Zale Corporation, which has more than 1900 stores, and the Signet Group, which has 1300 UK retail locations. The new arrangement with Bevilles is interesting because Tara operates 30 retail stores in India. While that number is small by Asian standards, it could provide a peek into the future of the Australian jewellery industry when coupled with the Zamel’s takeover.
M Suresh was a supplier to Zamel’s before it acquired the retailer and Tara was a supplier to Bevilles prior to the announcement of an alliance, which leads some people to believe that both deals began as outstanding credit issues. This is not an unreasonable proposition, given that Tara gained a foothold in the US in July 2006 when it announced an alliance with M Fabrikant & Sons, a New York-based De Beers sightholder.
The two companies formed Fabrikant-Tara International LLC. Five months later, Fabrikant & Sons filed for bankruptcy under Chapter 11 of the US Bankruptcy Code.
Just as Tara was a long-term supplier to Fabrikant, Bevilles describes Tara Jewels as “a long-standing supplier to Bevilles”, and an email to existing suppliers states, “All suppliers will be required to ship orders directly to the Indian jeweller’s Hong Kong office for consolidation and transhipment to Bevilles.” Clearly, this “alliance” is not a traditional preferred-supplier arrangement; so what does it mean for the wider industry?
Many people will bemoan more “Australian” retailers being taken over by overseas companies, ignoring the fact that Kiwis already own the two largest jewellery groups.
While I think it preferable that Australian retailers are locally-owned, even in the face of increasing globalisation, I think a healthy and vibrant jewellery industry is more important. It was no secret that Zamel’s was in a sorry state under the former owner, private-equity firm Quadrant.
When Zamel’s was acquired by M Suresh in 2011, I hoped the Indian company would reinvigorate Zamel’s. After all, there would be no sense in acquiring more than 100 stores without a grand plan, and grand plans require capital investment.
While it has taken some time, industry pundits are now saying Zamel’s stores are looking better. On the other hand, Bevilles announced six stores would close, reducing the number to 23.
I think it’s preferable to have international investors reinvigorate the local jewellery industry if the alternative is not so palatable, but I do wonder how a vertically-integrated market might change the industry for independent jewellers.
Posted:1 March 2013