The demand for gold in India has been falling at a rapid pace.
Some of the most common reasons attributed to this unusual trend are higher local gold prices and the fact that younger people no longer find gold to be as lucrative as their older counterparts.
In order to boost demand, sellers are now luring the Indian market by offering competitive prices. Indians can now buy gold for one rupee (or one cent) from online retailers who offer small portions of the precious metal. For many Indians, it’s a less risky way of obtaining the product because it doesn’t require significant capital investment.
Buyers will qualify for physical delivery of gold once they have collected at least one gram in their accounts, which is currently valued at Rs. 3200 or $45.48. The transactions are fast and can be done through a mobile app, which means that a large number of Indians will want to own gold due to lower barriers to entry.
Gaurav Mathur, the Managing Director of one such digital platform SafeGold, says that online transactions can be done in as little as 40 seconds, which is probably the biggest reason why Indians are buying the product in droves.
Contrary to the local market, where consumers have to physically go to stores at a certain time during certain days, online purchases can be made at any time, including public holidays. Online apps also allow consumers to check gold prices in real-time to help them make informed decisions about purchase and sale. If, for any reason, consumers regret their decision to buy gold, they can sell it for the same price.
That being said, the same regulations and tax laws are applicable on every purchase irrespective of the platform. It should also be noted that every transaction will undergo charges made by the bank account facility and e-wallet platform.
The “One Rupee Gold” market strategy can be seen as a desperate attempt by jewelers to lure more consumers in the face of dwindling demand, which fell by more than 23 percent since 2010.
The marketing campaign has gone viral, and about 3 million people have already finished transactions with the company. SafeGold also boasts of having World Gold Council as one of its investors, and it hopes to reach out to more than 15 million consumers by next year. While the market is still relatively small compared to the country’s overall demand of gold, which is estimated at 524 tons this year, current statistics promise a larger market share in the future.
Many investors in India are known to use gold for tax evasion and money laundering, which prompted the government to take set up regulations to discourage such practices. But these policies also discouraged regular consumers who are put off by the now sky-high prices.
An untapped market of over 500 million users in India is waiting to be explored by opportunistic entrepreneurs with the right skill-set and resources.