Jewellery retailers will have to start generating more sales outside to compensate for the decline in growth rates in the UAE, according to trade sources. This realisation has already seen the bigger retailers push for more locations in Saudi Arabia, Qatar and Kuwait, while some have even ventured into the Far East and even into the UK and London.
“If there are fewer tourist buyers, the Dubai/UAE jewellery trade is wholly reliant on domestic shoppers for sustenance and growth,” said Joy Alukkas, chairman of the group that bears his name. “It means that the overall retail level sales of gold and jewellery is not rising as fast as it used to between 2010 and 2014.
“Also, the bigger retailers are all adding to their store counts — each new location is eating into a market that is not growing any longer. Unless there are more tourists willing to spend on 22k gold coming in, it means the UAE retail jewellery trade will remain at current levels.”
Based on official data, there are more than 1,800 “active” trade licences in Dubai’s jewellery sector. Of these as many as 1,000 are retailers and the rest made up of wholesalers, bullion distributors and manufacturers. But in the retail space, the trend has been towards “branded” retailers, which is what typically happens in any category that reaches a certain level of maturity growth-wise.
“Unlike any other Gulf market, [the] Dubai/UAE jewellery sector has made the transition towards branded,” said Ramesh Kalyanaraman, executive director at Kalyan Jewellers. “Because of the strict gold purity standards and pricing [on a per gram basis], there’s nothing to choose between what one store sells vis-a-vis another.
“The difference comes in the range of collections on offer and that’s where bands matter. Even during the first-half of 2016 — when jewellery sales across the whole sector might have had some drop — the branded retailers still managed growth.” Saudi Arabia is building up to be the next battleground for jewellers, with the likes of Damas already well into an ambitious expansion roll-out there. Kalyan, meanwhile, is working towards getting licensing approval for a presence there, a market which it deems as instrumental in building up scale for the future.
“Our move into Saudi should happen soon — it’s a market where the type of organised jewellery retail we see in the UAE is still a couple of years away from happening,” said Kalyanaraman. “Similar situation exists in some of the other Gulf markets and that’s where we will be expanding.”
Jewellers are not just having to cope with expansion needs. There are other ways the business of jewellery retail has to adapt to fit in with changing consumer preferences.
Jewellery sales in the Gulf/Middle East region has gone down in the last two years, making it one of the key retail categories affected by weak consumer sentiments. But there could be other — more intangible — reasons too.
“The young consumer is not showing the same preference for 22k gold jewellery her parents did,” said Alukkas. “Retailers here have been forced to accept this reality and make changes to their collections — otherwise we risk a major disconnect with future consumers.
“This is a consumer who would much rather spend on smartphones and fashion — jewellers have to find a way to win the over with more contemporary designs, choices in 18k and more collections set with diamonds.
“The future of Dubai’s jewellery retail is being shaped right now. And it will look a whole lot different.”
What will keep UAE’s jewellery retail in shine mode?
* UAE will be the jewellery manufacturing hub for the Gulf markets. Retailers like Malabar Gold and Kalyan operate multiple facilities in the UAE. This will be particularly useful when it comes to shipping out to stores in the other Gulf states. Plus, it keeps customs duties in check and will also have a role when the Gulf states introduce the VAT regime.
* There might be new fads that will show up in the business of jewellery retail, but one thing will remain unchanged. “The UAE market will still be driven by 22k demand, and that is so because expat buyers from India are not going to shift to 18k in a big way,” said Ramesh Kalyanaraman of Kalyan Jewellers. “Even with the great majority of Arab buyers, 18k will only be a niche.”
* The big retailers will need to come up with new design collections every six months. “That should be the ideal shelf life — anything longer will mean it hasn’t connected that well with the target buyer,” said Kalyanaraman.
* The global jewellery industry is valued at approximately $150 billion (Dh551 billion) of which the Gulf markets represent around 10 per cent.