Thursday, Nov 26, 2015
Dubai: There will be no “unilateral” increase in the gross profit margins included within the Dubai gold rate and it will remain in the 3-5 per cent range, according to senior sources within the Dubai Gold & Jewellery Group.
The issue has come to light after recent suggestions made in certain quarters of the jewellery retail sector that the margins should be set higher. The Dubai gold rate (on a per gram basis for 22k, 24k and 18k) is formulated on a daily basis and take into account the international price of bullion, shipment/customs charges and other factors that are more localised in nature. Within this, the margins are retained at 3-5 per cent “Dubai’s gold and jewellery trade’s reputation is built on the fact that it offers one of the lowest prices of gold on per gram basis but at the highest quality,” said a Dubai Gold & Jewellery Group spokesperson. “That reputation also comes from the transparency that is built into how the Dubai Gold Rate is set, and inclusive of the margins. This is what shoppers who have bought gold through the years in Dubai have accepted as a fact.
“Raising the margins now — and without a clear rationale — could give the wrong signals to the shoppers and prove detrimental.”
De facto standard
All members of the Gold & Jewellery Group have to, as per the terms of the association, put up boards at their outlets clearly indicating the Dubai Gold Rate. The revenues for retailers are dictated by the level of design intricacy they bring into the jewellery pieces and through factors such as the clarity of diamonds and other prices stones.
While theoretically the Dubai gold rate is applicable only within the emirate, it has become the de facto standard for the UAE as a whole. Some of the other Gulf states also take their cue from the Dubai pricing. In Saudi Arabia, however, margins are set on a per gram basis, which is what is there in markets like India as well.
It is a fine line that Dubai’s jewellery retailing trade has to walk through — while the current debate about raising margins, there is no reason why a retailer could not conceivably drop his margins to try and pick up sales in the future. When that happens, it sets off a chain reaction where discount selling becomes the norm. That would have detrimental effect on the trade in the longer run. Influence
“Dubai’s authorities have consistently maintained that full transparency should always be there in formulating the base price of gold,” said Abdul Salam K.P., Executive Director at Malabar Gold & Diamonds. “Because Dubai is the ‘City of Gold’ and given the decisive influence that the gold trade has in the campaigns such as Dubai Shopping Festival and Dubai Summer Surprises, the transparency has to be maintained at all costs.”
According to Cyriac Varghese, General Manager at Sky Jewellery, “Since the downturn in gold prices is more in favour of retailers, the current “thin” margins on gold in Dubai (as suggested by the official industry grouping) takes care of the interests of both retailers and shoppers. These interests should be safeguarded at all times.
“Each time the bullion market has moved either way, the official industry grouping has intervened and done the best for the trade by taking into confidence the majority of retailers.”
By Manoj Nair Associate Editor
Gulf News 2015. All rights reserved.
