It's a scheme: Jewellers strike gold, but do you?

Leading jewellery brands offer what is called a ‘gold saving scheme’. While it is a viable option for many, it may always not be a win-win for customers and jewellers.

The scheme allows customers to make a periodical deposit of cash and the amount may be either credited as cash, or collected as gold in the customer’s account with the jeweller. After the pre-determined period, the jeweller usually adds a bonus instalment to the accumulated amount, which the customer can use to buy jewellery.

“On one hand, many customers are moving to electronics and other products in place of gold and on the other hand, even if they decide to purchase gold, the intense competition within the jewellery market makes it difficult to attract and hold customers,” said Kushal Oswal, owner of Mahendra Jewellers. “The gold schemes are just a meant to fasten customers to one’s brand.”

“About 20% of our revenue are from these schemes,” shared Antony Chirayath, manager of Josco Jewellers. He said that according to their scheme, wastage charges will be eliminated and the bonus instalment will further add value to the customer.

On the flip side, when gold prices reduce during that period, the customer may lose out on the difference. In addition, these schemes cannot be converted to cash or revoked, but only be used to buy jewellery.

To Swarnalakshmi AR, a 25-year-old employee of a nationalised bank, it is a good choice only if the objective is to buy gold in future.

“The scheme does not specify the dates of payment. So I track gold prices everyday and pay when it reduces.” Having availed such schemes since the time she started working by depositing Rs 2,000 every month, she also agreed that if the future price of gold reduces, she will lose the advantage.

“Maybe, if I had deposited the same amount in a recurring deposit, I would have earned a better return which could have been used to buy gold in one shot,” she added.

The scheme
Pros
Eliminates wastage and making charges

Often offers a bonus instalment

Doesn’t pinch your pocket at one go

Suitable when the decision to buy is certain

Cons
Makes it mandatory to buy jewellery

Purchase can be made from the same jeweller

Rate of return not high as other options

Market risks are not completely covered