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City of gold to get its shine back

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Dubai: Dubai’s gold and jewellery trade could do with some timely help from the government to tide over an extremely difficult retail environment that has set in since February, market sources say. Such measures could include — but not be limited to — a freeze on rental increases for the sector.

“If such a freeze could be effected across the board it would be of immense help for the trade,” said Chandra Siroya, Vice-Chairman of the board of directors at Dubai Gold and Jewellery Group and Managing Director of Siroya Jewellers. “Rental increases have been the one constant that the jewellery trade has been subject to every year, with increases of up to 20 per cent.”

The industry grouping also reckons that the branding associating Dubai as the ‘City of Gold’ should be reinvigorated, particularly in exposures outside of the UAE. “If, for instance, Dubai’s Department of Tourism and Commerce Marketing could have the ‘City of Gold’ imprint on all their external communications, it would be such a help to the trade when it comes to promotion and much needed exposure. The Gold and Jewellery Group on its own doesn’t have the kind of budget to effect such a high-visibility campaign ... but key Dubai Government departments can.

“The Government and all the stakeholders in the industry have worked so hard to create the ‘City of Gold’ branding. This is as good a time as any to strengthen the message.”

Indeed, the present is proving tiresome for the jewellery business. Russian buyers are yet to make a return despite the rouble having recently erased some of the steep drops it had suffered against the dollar, and which had erased the high spending Russian tourists from Dubai’s retail market since late last year.

There have been other worrying signs — “The expected volume of business from Indian tourists visiting the UAE during April-May did not materialise,” said Abdul Salam K.P., Treasurer of the Gold and Jewellery Group and Executive Director at Malabar Gold & Diamonds. “Tourist transactions in recent years had averaged well over Dh10,000, but in recent months has dropped appreciably.

“In broad terms, 80 per cent of transactions are now done by domestic shoppers as against the 60:40 split that was there earlier.”

As the overall transaction levels chalk out a lower year-on-year growth, the number of players trying to carve up the market among themselves keep rising. Two new retailers from India — GRT and Bhima Jewellers — made an entry in the first-half, expecting their name recognition in the home market to bolster their prospects here. GRT’s opened a 6,500 square foot facility in Dubai and will also be heading to Abu Dhabi.

“We haven’t experienced too many problems after the launch of our store,” said G.R. Ananthapadmanabhan, Managing Director at GRT. “With only 30 stores in India, we managed a turnover rate compared to other brands who own double the amount of stores. When it comes to gold, our target customer is strongly affected by the trust factor rather than the market scenario.”

Unfortunately for the jewellers, gold prices haven’t seen the bouts of volatility that would push it down to levels that can release any pent-up buying interest from local consumers. By and large, prices have been rangebound in the year-to-date, with the occasional spikes happening when global investors get suitably concerned by the Greek crisis. That’s when gold goes back to being a safe haven asset, albeit for short spells. Then some last minute back room manoeuvre would take place on the Greek talks and the metal would lower itself back to previous pricing levels.

“Gold prices should go up in the longer term on a need-to basis as opposed to just being speculation-driven,” said Cyriac Varghese, General Manager at Sky Jewellery. “The current price levels -at Dh135 a gram — are very reasonable, and there’s a bit of the holiday buying happening now. But those shoppers who do not have a compelling reason, there’s not enough happening by way of an occasion, a generous promotion, or an extremely favourable price levels to make him buy. That explains the current lean period.”

None of which leaves the local jewellery retail sector with any sense of assurance that things are on the mend. This is where some sort of governmental support — direct or otherwise — can put some shine back on the business.

Sharon Shetty

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