27 Aug 2006
Dubai: A dangerous blend of high prices and rising mall rental rates is forcing Dubai's gold retailers to rethink their retail strategies.
Last week's report from the World Gold Council revealed that UAE gold consumption dropped from 32.9 tonnes in the second quarter of 2005 to 25.9 tonnes in the same period this year a 21 per cent drop.
The dip was linked to high gold prices, which hit more than $720 per ounce in May.
Slacking demand coupled with rental rates as high as Dh800 per square foot in Dubai shopping malls are narrowing margins among gold retailers and forcing them to widen their sales portfolio into diamonds, pearls and branded jewellery in an effort to boost customer numbers.
"The feedback we are getting from members is that operating costs are on the up so gold retailers have to be extremely mindful of returns and attempt to increase footfall counts," said KP Baiju, general manager at the Dubai Gold and Jewellery Group.
"They are doing this by creating a wider mix of products to appeal to the many different nationalities of people who visit Dubai and live here every nationality has a different taste and Dubai must cater to all of them.
"Other strategies are to boost their line of branded jewellery from companies including Mikura Pearls and Graf Jewellery, which provide better returns."
According to Baiju, Dubai's attractiveness as a centre for gold purchases is based on a wide product range and an expectation of value for money a factor which could ebb away if retailers are forced to raise prices in response to high overheads. Many leading jewellery retailers feel they have no choice but to follow consumers to Dubai's malls and away from traditional trading areas such as the Gold Souq in Deira, despite the prospect of higher rental rates.
"The market demographic is shifting towards the malls so customer footfall there will be higher. It's a move we will seriously consider at the end of the year," said Amit Amani, managing director of diamond retailers Damani Jewellers.
"Turnover is the first priority among jewellery retailers, so the fact that sales values are up is an encouraging trend. But a healthy sales volume is also important," said Baiju.
Moaz Barakat, the World Gold Council's managing director for the Middle East, Turkey and Pakistan, added: "It's extremely encouraging that people are willing to buy gold, despite high prices. It shows that gold jewellery is still popular as a fashion item and as an investment."
By Robert DitchamGulf News 2006. All rights reserved.
