UAE jewellers are thinking beyond the most sparkling or priciest of diamonds to attract shoppers. These days, they are focusing just as much on low value, less on sparkle jewellery.
The shift comes as more retailers are convinced they cannot get by relying on gold alone. Local consumption of gold jewellery has dropped in the last three years, a process that accelerated when VAT (value added tax) was introduced last year.
This is where diamond pieces with more affordable price tags can help ... and catering to a different sort of buyer. That means less carats to a diamond, with the more popular jewellery pieces featuring “only 10-25 cents” and prices in the range of Dh3,000. (A carat is made up 100 cents.) “Retailers are introducing collections aimed at a younger and trend-conscious buyer,” said Abdul Salam K.P., Director at Malabar Gold and Diamonds. “These days, this is the only way to attract shoppers more frequently to the stores.
“Traditional gold-buying is happening only when bullion prices drop suddenly or during key promotions/festivals. For the longer term survival of the jewellery business, that just will not do.
“Both retailers and shoppers need to stop thinking of jewellery meant only for investment purposes. The sector needs to bring in a new generation of shoppers.”
Ironically, the VAT factor will help with such a transition. Under VAT norms, loose diamonds are exempt from the 5 per cent charge.
Currently, there are two segments - one looking at fashionoriented, more affordable jewellery, and the other looking for investment-grade diamonds.
What jewellers have been doing over the last year is make more of the diamond-studded jewellery here rather than rely on imports alone, which also carry an additional 5 per cent customs duty. These price benefits then pass on to the shopper.
At leading retailers, locally made jewellery make up 25-30 per cent of their in-store collections, and that’s a number only likely to go up as they chase cost-conscious buyers.
According to Chirag Vora, Director at Bafleh Jewellers, the shift in buyer profiles is already apparent. “Currently, there are two segments- one looking at a fashion-oriented, more affordable jewellery, and the other looking for investment-grade diamonds. These tend to be in the 1-5 carat range, which holds its value for a longer period of time.”
Retailers will have torefresh their diamond jewellery much more frequently.
According to market sources, diamond pieces now make up around 20 per cent of the overall business generated by the gold and jewellery sector, as against the 5-10 per cent from four years ago. Retailers are hopeful this could touch the 30 per cent mark by 2022-23, with a little bit of help from targeted promotions.
Jewellers are also running separate campaigns for gold and diamond collections, realising they are catering to two different buyer profiles. But there are costs and other factors retailers have to focus on.
“Unlike with gold, retailers will have to refresh their diamond jewellery much more frequently, particularly the affordable collections,” said Cyriac Varghese, General Manager at Sky Jewellery. “This category needs to rely on the same principles applied in the “fast fashion” business — anything that stays unsold for a few months needs to be replaced with new designs/collections immediately.
“There is a definite sell-by date for more affordable diamond pieces — retailers cannot lose sight of that.”