The Grey Zone Archetypes: Distributors, Bullion-Linked Models, and Hybrid Businesses

Jewellery Business Models - Episode 4

If Episodes 1–3 dealt with gold, cash, and clear archetypes, Episode 4 deals with what most banks actually struggle with:

Businesses that look like retailers, sound like manufacturers, handle inventory like owners, but behave like intermediaries.

This is the grey zone of jewellery lending — where risk does not disappear, it merely relocates.

Most stress in jewellery portfolios does not originate from:

• pure retailers,

• clear manufacturers,

• or transparent job-workers.

  
  

It originates from models that sit between trade and finance, where:

• ownership is delayed,

• pricing is unfixed,

• inventory is reversible,

• and cash moves last.

  
  

These models are legitimate. They are also frequently misfunded.

ARCHETYPE 4: DISTRIBUTORS / WHOLESALERS / VENDOR-LINKED PLAYERS

Core economic reality

• Jewellery is present physically

• Ownership is partial, delayed, or conditional

• Payment is linked to downstream sale

Inventory exists — but balance-sheet ownership is ambiguous.

4A. Price-Unfixed Vendor Model

(Common in large chains and metros)

How it works

• Jewellery received from manufacturer/vendor

• Price fixed only when final customer buys

• Payment made at prevailing gold rate

What this achieves

• Retailer avoids price risk

• Inventory risk shifts upstream

• Capital requirement appears lower

What banks often misread

• Treat stock as owned inventory

• Extend GML against it

Hidden risk

• Inventory can be recalled

• Sale proceeds are first owed to vendor

• Bank sits behind an invisible creditor

4B. Consignment-Based Distributor

How it works

• Stock placed on display

• Unsold stock returnable

• Margin earned only on sale

Economic truth

• Retailer sells without owning

• Balance sheet shows movement, not ownership

Banking risk

• Funding non-owned inventory

• Inflated turnover without asset backing

4C. Bullion-Swap Distributor

How it works

• Jewellery supplied against bullion exchange

• Cash settlement deferred

• Adjusted periodically

Why it exists

• Reduces cash movement

• Aligns metal flows

Risk zone

• MTM exposure hidden

• Liquidity stress if bullion prices swing

4D. Non-Moving Stock Exchange Model

How it works

• Slow designs returned

• Fresh designs substituted

Why it appeals

• Retailer avoids obsolescence

Why banks must pause

• Inventory value appears stable

• But monetisation is uncertain

4E. Semi-Owned Inventory Model

How it works

• Partial payment made

• Balance settled post-sale

Danger

• Looks like ownership

• Behaves like consignment

Classic misclassification

• Treated as fully owned stock for WC/GML

  
  

ARCHETYPE 5: OLD-GOLD / SCRAP AGGREGATORS

These players do not sell jewellery — they move gold back into the system.

Core economic reality

• Scrap collection precedes refining

• Time and purity risk dominate

• Margins are thin, volumes large

5A. Exchange-Dominant Retailer

• Old gold inflow > fresh gold purchase

• Dual cycle strain: scrap + finished goods

Banking blind spot

• Exchange appears “cash neutral”

• Actually locks capital twice

5B. Pure Scrap Aggregator

• Collects, refines, supplies bullion

• High price sensitivity

Funding caution

• Gold exists briefly

• Liquidity only after refining

5C. Mobile / Doorstep Exchange Players

• Informal sourcing

• High purity and valuation risk

Not a gold-loan candidate

5D. Refinery-Linked Aggregator

• Faster turnaround

• Lower margin, lower inventory days

Better structured, still volatile

ARCHETYPE 6: HYBRID / MIXED MODELS

(Where most NPAs are born)

These businesses operate multiple archetypes simultaneously — often without internal separation.

6A. Retail + Vendor-Financed + Exchange

• Sales look strong

• Cashflows fragile

Risk

• Bank funds inventory that is neither owned nor liquid

6B. Manufacturer + Distributor

• Produces some stock

• Distributes others’ designs

Funding mismatch

• WC sized for manufacturing

• Actually supporting trade credit

6C. Job-Work + Retail (No Separation)

• Entrusted gold shown as inventory

• Severe audit and collateral risk

6D. Retail + Bullion Trading

• MTM gains mask operating stress

• Price movement mistaken for business strength

The Banker’s Reality Check (This Is the Line)

In jewellery lending, risk does not vanish in hybrid models — it hides.

The more “innovative” the structure sounds, the more important it is to ask:

• Who owns the gold today?

• Who gets paid first when it sells?

• Who absorbs loss if it doesn’t?

Why Banks Struggle Most Here

Because account statements:

• show turnover, not ownership,

• show inventory value, not recallability,

• show credits, not prior claims.

And so:

• GMLs get stretched,

• rollovers become habits,

• stress appears suddenly.

The Banker’s Reality Check

In jewellery lending, risk does not vanish in hybrid models — it hides.

The more “innovative” a structure sounds, the more important it is to pause and ask three uncomfortable questions:

• Who owns the gold today — legally, not operationally?

• Who gets paid first when a piece is sold?

• Who absorbs the loss if it doesn’t sell, is recalled, or is repriced?

  
  

If these answers are unclear, the bank is not funding inventory —it is funding a gap in ownership, timing, and accountability.

That is why stress in jewellery portfolios rarely comes from:

• pure retailers,

• clean manufacturers, or

• transparent job-workers.

  
  

It comes from grey-zone archetypes —where inventory moves, cash delays, and ownership floats.

And that is the banker’s line.

Not where gold exists. But where risk crystallises.

What Comes Next (Episode 5 Trailer)

In the next episode, we step away from lending and into investing and schemes —gold savings plans, exchange-heavy models, accumulation structures, and “safe” promises.

We’ll ask a simpler question:

When gold doesn’t sit on your balance sheet — whose risk are you actually holding?

Episode 5: The Schemes Around Gold — and the Risks They Don’t Advertise.

Disclaimer

This article is intended for educational and discussion purposes only.

The business models, structures, and archetypes described here are illustrative and drawn from observed industry practices. They do not refer to any specific entity, transaction, or borrower.

This is not investment advice, credit advice, or a solicitation of any kind. Readers should not rely on this content as a substitute for professional judgment, independent assessment, or institution-specific credit policies.

Any views expressed are personal and do not represent the views of any bank, regulator, employer, or institution, past or present.