Dubai: After enduring its worst third-quarter performance in living memory, Dubai's multi-billion dirham gold and jewellery trade hopes some light will shine through shortly. If their luck is in, the turn-around could take place as early as this week, given the traditional pickup in sales during the key Indian festive season of Diwali.
It would be all too appropriate for the celebratory period otherwise known as the ‘festival of lights', when Indian residents here go for sizeable jewellery purchases. "The peak season has just started and we have already seen sales pick up dramatically," said Raj Sahai, director of retail at Damas Jewellery.
"In fact, with the prices of gold falling over the last few weeks, this is an additional incentive for the price-sensitive segment of the market. Consumer confidence in gold has clearly not been lost over the past quarter."
While the third quarter has traditionally been a slow period for the trade here, given that most residents are on their holidays and the summer heat would put off many of the tourists, this year's was particularly torturous.
According to market estimates, the drop in sales could have been anywhere between 35 to 70 per cent. For the smaller jewellery retailers, the going was particularly tough.
This year, wider industry-specific sentiments were at play over and above the usual reasons.
"We experienced a sales decline of 35 per cent which we never experienced in the last few years," said Shamlal Ahmad, managing director for international operations at Malabar Gold, which during this period opened four new outlets in the GCC in a bid to maintain volumes.
"The reason is that gold prices went through a period of high volatility and reached an all-time high of $1,923.70 (Dh7,064) an ounce. Another reason was the Indian rupee weakened against the dirham and this increased remittances to India making less funds available for gold purchases."
But has the volatility factor dissipated enough to make the gold shopper return?
In recent days, gold prices have been going through a bit of a seesaw, albeit within a very narrow range.
Spot prices for the metal did fall to a "low" of $1,535 an ounce on September 26, but have also been mounting recoveries since then. All of which makes it difficult for shoppers to base their decisions.
One option open to them would be to commit their investments to bars and coins. It is a retail strategy that the trade will focus on during Diwali.
Gold coin promotion
"We have seen a small increase over the past few months from customers enquiring about — and purchasing — these products," said Sahai. "Based on this demand, we have integrated gold coins into our Diwali promotion and are offering them with select purchases."
Even with the recent drops, the local trade is still sticking to belief that the metal will touch $2,500 an ounce at some point in the near term. "The current situation can be of interest to investors as they can utilise the low price to start investing or adding more gold to their portfolio," said Ahmad.
If shoppers too can be convinced that gold prices will tread higher, and at the same time find there is little going around by way of investment options in stocks and property, they may well see the light and treat gold as a safe haven.
The trade is hoping that this week's Diwali celebrations will provide a sales spark, and would extend to the upcoming Eid and the end-of-the-year festivities. The more optimistic are hopeful of a good run that would extend well into next year's Dubai Shopping Festival.
And what better way for the start to be made than during Diwali, the festival of lights?
Economies of scale
The big-name retailers in the local jewellery trade are looking to broaden their sourcing arrangements with makers. The preference would be for those makers who can provide design variety at optimum costs.
"Actually, we are already looking at this option; we currently purchase from well-known manufacturers from various countries including Italy and India, and in addition also create jewellery at our in-house manufacturing facilities," said Raj Sahai of Damas Jewellery.
"Damas is a big group, so our buying power is high and we can benefit from the economies of scale."
Damas has unveiled 29 new collections for Diwali. It also gave away a one-kilogramme gold bar last Wednesday to the first winner of a raffle prize, drawn weekly for a period of three weeks.
Pure Gold Jewellers has launched a Diwali collection inspired by floral designs. Pure Gold is also running a special promotion till October 29 during which customers purchasing diamond jewellery worth Dh3,499 will receive a quarter carat certified diamond solitaire pendant free.
Joyalukkas has reworked the designs of its branded collections available in diamond, gold, pearl, precious stones and platinum. It is also offering a free gold coin till Wednesday on purchases worth Dh5,000 and above. There is also a 50 per cent discount on all diamond and Polki jewellery with a 5 per cent cashback voucher.
Liali Jewellery has launched the ‘Bangle Mela'. There is also the Heritage collection of necklace sets in uncut diamond jewels set and in 22-carat gold. It also has in-store promotions that range from a pair of gold earrings, gold pendants, pearl necklaces to free tickets for At the Top.
Aaron Shum Jewellery has introduced the Coronet Solitaire collection for Diwali. Each piece is made from seven diamonds set with no prongs holding the centre diamond. The Diwali set includes a ring, earrings and necklace.