Picture this. A farmer from a Bundelkhand village drives his family on - what else? - a tractor into Tikamgarh, a tiny town 120 km from Khajuraho in Madhya Pradesh.

The group steps into a local jeweller's and buys various gold ornaments for Rs 40,000. Rich pickings, but what excites Abhishek Potdar, the 22-year-old proprietor, is a small diamond ring that found its way into the family's purchases.

Not just any ring, though. This was a D'damas product and its sale was a, shall we say, ringing  endorsement of Potdar's decision to offer branded jewellery in his two-and-a-half year old store. "Ours is the only branded diamond jewellery outlet in this town. The town has a population of 350,000 and consumer interest in all branded stuff is noticeable," he says.

Back in Mumbai, D'damas Chief Operating Officer Arun Bhatnagar is happy to narrate the Tikamgarh story to anyone who cares to listen. "Branded jewellery is going into India's small towns," he declares. If you thought only residents of metros have access to, and interest in, jewellery labels, think again.

The potential of tier II and tier III towns is proving an irresistible lure for both, big, established players like Tanishq and Gitanjali Jewels and relative newcomers like Agni and Kisna. Declares Ramesh Shoor, director of Agni Jewels, which markets the Agni brand of gold and zircon jewellery, "There is a huge market waiting in small-town India."

The glittering prospect ahead hasn't blinded the jewellery companies, though. Unorganised players - and there are nearly 1 million neighbourhood jewellers - run India's Rs 120,000 crore (Rs 1200 billion) jewellery (gold, silver, diamond and other precious metals) trade.

And while the organised trade is chugging along twice as fast, branded jewellery manufacturers have a daunting task ahead: not only do they face intense competition from local jewellers, they also have to convince consumers of the attractive brand proposition they offer.

Says Jagdeep Kapoor, whose Samsika Marketing Consultants is advising several jewellery brands on their small-town strategy, "The challenge is to convert a commodity into a brand and promote jewellery as a consumer product rather than as an investment option."

'Sell jewellery the same way you sell jam' sounds rather off the wall but, truth be told, it's not too far from what some jewellery brands are actually doing. Take a look.

Seeing is selling

"Our brand mantra is jo dikhta hai, woh bikta hai," says Vedanta  Jatia, managing director, Asmi Diamond, which manages the Asmi brand licensed to the Gitanjali group by DTC. Like consumer goods companies, branded jewellery manufacturers are also realising the wisdom of having a large footprint and making sure their products are available and visible to all potential customers.

Tanishq is the No.1 jewellery brand in the country, but it is present in just 95 exclusive stores. So, a year ago, Tanishq launched its Gold Plus chain of jewellery stores in smaller towns - it has opened 16 stores across South India and plans 15 more over the next 12 months to cover the North as well.

The Tata company isn't the only one with ambitious plans for a pan-India presence. After covering 700 outlets across Mumbai in four years, Agni moved north to Gujarat. It is already present in towns such as Anand, Navsari, Porbandar and Bhuj and is now training its sights further north, at Uttar Pradesh, Chattisgarh, Uttaranchal and Haryana.

Kisna will soon be available in places like Latur, Osmanbad, Akola, Amravati, Nashik, Jalgaon and Ahmednagar. Launched in Mumbai in 2003, D'damas wants to cover the North East extensively; after Shillong and Guwahati, it is now eyeing a presence in Tezpur. "The goal is to be everywhere where consumer electronics are sold," says Bhatnagar.

Significantly, most of the jewellery brands launched in the past five or so years have been by wholesalers and exporters who were entering the retail brand space for the first time. Unlike Gold Plus, which has opted for an entirely franchise-driven business model, a retail presence through franchises or owned showrooms isn't on the cards for these players.

Initially, some of them attempted to latch on to the existing jewellery retail network in small towns by dumping stock with local jewellers in the hope that it would be sold. It wasn't. "The retailer had no real stake in the business," says Bhatnagar, in hindsight.

D'damas and a couple of other jewellery brands realised they needed a distribution network, along the lines of an FMCG company. But people from the trade - traditional wholesalers and jewellers - found the concept of turning distributors bizarre.

One, they had never promoted branded jewellery and two, they had little faith in the future of these brands.

So, rather than just adopting FMCG techniques, jewellery companies adopted FMCG personnel as well. Ever heard of a Haldiram packaged foods dealer dabbling in diamond jewellery or Tata Salt wholesaler pushing upmarket Asmi jewels? That is exactly what started happening.

In the past three years, jewellery brands have roped in distributors who were dealing in pharmaceuticals, salt, steel and even petrol. "Perhaps they figured that they would need to sell, say, hundreds of biscuit packets to earn Rs 4,000 margin, which they could make from a single piece of jewellery," considers Jatia.

Four Gitanjali group brands have opted for this route, but through separate distributors: while Asmi has appointed 52 distributors who will cover 800 districts, D'damas has 56 distributors who will help increase the brand's coverage from 132 towns at present, to 300. Agni, too, has roped in 58 distributors, while Kisna has 30 across Maharashtra.

How does it work? Hardcore FMCG dealers were chosen for their inherent strengths: of being disciplined, used to extensive travel and used to holding substantial inventories. Typically, the distributors pay in advance for the stocks they pick up from the jewellery manufacturers.

The argument: the locked-in money is an added incentive to drive sales. They also work on margins of 5 to 10 per cent - similar to those in the consumer goods space.  However, jewellery brands grant them an extra almost two per cent for advance payments.

The next step is to convince the neighbourhood jeweller, who can supply a readymade customer base. It is the distributor's work to convince the jeweller of the longevity of the manufacturer, assure him of a regular supply of goods and promise him a decent margin - between 15 and 25 per cent.

The distributor's salesmen also visits retailers on their beat every 15 days or so, offering new designs and checking on his progress.

Of course, not everybody is convinced an FMCG-like channel distribution model will work with jewellery. At least, not just yet. "At Tanishq, whatever we sell, it is to the customer. In the case of product brands, you may be selling to the pipeline. There's a need to measure how much stuff actually gets sold," says V Govindaraj, Tanishq's retail and marketing vice president.

Both he and Vijay Jain, CEO of InterGold Gems' Orra, believe the market still needs to evolve before such a distribution channel will be truly effective. "Consumers need to buy into the trust of the store as well," points out Jain.

The wow factor

The consumer goods model extends to the product and positioning as well. Jewellery brands realise that they need to keep the excitement alive around their product, much as it is with any FMCG offering. That means offering greater variety and designs  - typically, a brand offers between 200 and 1,500 designs - as well as subtle product differentiators.

The Rs 1,000-crore (Rs 10 billion) Harekrishna's Kisna diamond jewellery, for instance, plays up the fact that all its ornaments are made with superior quality, VVS (very, very small inclusion) diamonds - and come with a certificate to that effect.

"Each one of our pieces carries a certificate from the International Gemological Institute. If consumers wish to return or exchange jewellery, retailers accept it back with a 20 per cent and 10 per cent deduction respectively," says Ghanshyambhai Dholakia, promoter, Harekrishna Diamonds.

And as in consumer goods, brand ambassadors are equally popular here. Kisna roped in Rimmi Sen and Riya Sen; D'damas signed on Amitabh Bachchan and Sheetal Mallar (for Gold Expressions); Asmi brought on board Mandira Bedi and Kajol; Kiah has Sushmita Sen, Nakshatra has Aishwarya Rai�. Industry experts say that the local jewellers and national brands put together spend nearly Rs 450 crore (Rs 4.5 billion) a year on advertising and promotions.

It's money well spent. Television advertising, believe marketing consultants, is particularly effective for jewellery brands - it reaches a wide audience and creates an aspirational image for the brand. Local print advertising, too, has its uses, especially if it gives details of nearby retail outlets that stock the brand.

Kisna, though, went a step further: in Maharashtra, it advertised on bus panels. "Conventionally, diamonds are not associated with bus panels. But brand visibility is critical," explains Dholakia.

Surprisingly, price - which doomsayers had predicted would be the stumbling block for small-town launches - hasn't been an issue in tier II and III towns. "MRP cuts out the possibility of haggling and the constant fear that you're be being taken for a ride," says Kapoor. Observes Orra's Jain, "The difference in opportunity between small and big towns is in terms of value alone."

Kapoor says he does not believe in the "small town" classification. "Where are the small towns? I say there are 35 metros. It is just that the companies have not reached there."

Back in Tikamgarh, Potdar is convinced the upcoming festival and wedding season will bring in more customers for branded diamonds. "Brands is the way to go in the jewellery business," he states.