Gulf Business - - CONTENTS - By Aarti Na­graj

In an ex­clu­sive in­ter­view, the chair­man of Pure Gold Group, Firoz Mer­chant, opens up about his re­mark­able rise to the top

Seated in his of­fice on the 40th floor of the Plat­inum Tower in Dubai's Jumeirah Lakes Tow­ers, Firoz Mer­chant has a clear view of the glit­ter­ing Dubai sky­line. But the In­dian busi­ness­man, whose life re­sem­bles a Bol­ly­wood-style rags to riches story, is not en­am­oured by the shim­mer­ing lights out­side. “I'm a sim­ple per­son – I want to re­main fo­cused on my work and fam­ily,” he tells me, a deep smile etched in his face. The founder and chair­man of UAE-based Pure Gold Group, Mer­chant started the com­pany in 1989 in the bustling Mur­shid Bazaar in Dubai's Deira area with two em­ploy­ees. Es­ti­mated to be worth $1bn, the jew­ellery brand now has 157 stores in nine coun­tries across the Mid­dle East and Asia, op­er­ated by 5,000 em­ploy­ees. It has man­u­fac­tur­ing fa­cil­i­ties in China and In­dia, and is look­ing to launch a sim­i­lar fa­cil­ity in the UAE in Oc­to­ber 2018.

Ear­lier this year, Pure Gold also launched seven new con­cept stores in the UAE, Kuwait and Oman with a to­tal in­vest­ment of $10m, de­signed to fea­ture a mod­ern and min­i­mal­ist bou­tique con­cept – com­pletely dif­fer­ent from a tra­di­tional jew­ellery store. Tar­get­ing ‘mil­len­ni­als', the stores have ex­pe­ri­en­tial ta­bles with aug­mented re­al­ity, hop­ing to en­tice a younger gen­er­a­tion of con­sumers.

“To­day's cus­tomers have be­come very ed­u­cated [about gold] be­cause of the growth in tech­nol­ogy as well as easy ac­cess to in­for­ma­tion,” says Mer­chant.

“In the past, con­sumers used to buy from a store be­cause of loy­alty, which con­tin­ued through gen­er­a­tions. So they knew that the gold owner would not cheat them.

“But to­day, the loy­alty has switched to tech­nol­ogy. Ev­ery con­sumer re­searches ex­ten­sively about a prod­uct be­fore buy­ing it and they find out where they can get the best price for it. They are able to look for var­i­ous op­tions,” he ex­plains.

Los­ing its shine?

A fac­tor that has had a big im­pact on oper­a­tions this year is the in­tro­duc­tion of value added tax ( VAT) in the UAE on Jan­uary 1.

The 5 per cent tax is be­lieved to be one of the main rea­sons that re­tail gold and di­a­mond jew­ellery sales in the coun­try dropped by a re­ported 30-40 per cent dur­ing the first quar­ter of the year. Anec­do­tally, it was es­ti­mated that the UAE's whole­sale gold mar­ket fell by up to 60 per cent in the first three months of the year as a re­sult of VAT.

In May, there was some re­lief when the tax was rolled back on the whole­sale trad­ing of gold and diamonds, al­though it con­tin­ues to be levied on the re­tail sec­tor.

“When­ever tax is in­tro­duced in a coun­try, it sig­nals that the coun­try has ma­tured. Ev­ery coun­try needs a sus­tain­able in­come re­source; it is not pos­si­ble to sus­tain a rapidly de­vel­op­ing econ­omy such as the UAE on a sin­gle re­source like oil - we all saw how the drop in oil prices hit the re­gion,” says Mer­chant.

“But while there is noth­ing wrong with tax, the tim­ing should be right. When the global eco­nomic sit­u­a­tion is good, then you can in­tro­duce the tax. In my opin­ion, the in­tro­duc­tion of VAT was not timed right,” he opines.

“The slump started in 2017, so glob­ally mar­ket con­di­tions were down. From a con­sumer and trader per­spec­tive, ev­ery­one is strug­gling. The life­style and liv­ing stan­dards have be­come ex­tremely ex­pen­sive here.

“So the 5 per cent VAT in the jew­ellery in­dus­try has come as a set­back. It has be­come tough and chal­leng­ing for op­er­a­tors. Our busi­ness has also been hit. Our agenda for this year is to man­age cash flow – we are not look­ing for prof­its,” he ex­plains.

Mer­chant says he has ad­vised his team to give con­sumers the “ab­so­lutely best deal” that is pos­si­ble.

“Con­sumers have been psy­cho­log­i­cally hit by VAT. There is a set­tling time that is needed – which can be six months, a year or even two years,” he adds.

But it is not just VAT – gold lost its shine in the UAE even prior to the tax. The World Gold Coun­cil said in its 2017 re­port that gold jew­ellery de­mand hit a 20-year low in the coun­try.

Pur­chases were down 2 per cent from 43.4 tonnes in 2016 to 42.8 tonnes last year, the fourth con­sec­u­tive an­nual de­cline, ac­cord­ing to the or­gan­i­sa­tion.

But a de­crease in prices – spot gold prices were trad­ing at around $1,206 per ounce at the time of go­ing to press,

while there is noth­ing wrong with tax, the tim­ing should be right. when the global eco­nomic sit­uat i o n i s g o o d , t h e n you can in­tro­duce the t a x . I n my o p i n i o n , the in­tro­duc­tion o f vat wa s not timed right

down nearly 12 per cent from a 2018 high of $1,365.23 in April – have ac­tu­ally helped boost sales. Ac­cord­ing to Pure Gold’s CEO and manag­ing direc­tor, Karim Mer­chant, the com­pany has seen 20 per cent growth in its re­tail busi­ness.

“We see an up­take in cus­tomer in­ter­est and in­crease in gold re­tail, es­pe­cially af­ter the price drop, as peo­ple per­ceive gold pur­chases as a sav­ing and long-term in­vest­ment op­tion. Over­all, there has been an im­prove­ment since we mon­i­tor our sales in grams,” he states.

But has the volatil­ity in bul­lion prices been hard to con­tend with from a busi­ness per­spec­tive?

“We have seen gold prices trad­ing at highs and lows. But you must have a busi­ness strat­egy in place and cre­ate poli­cies that ad­dress these fluc­tu­a­tions. You can­not run the busi­ness based on only one side,” ad­vises Firoz Mer­chant.

“To­day’s mar­ket con­di­tions are very tough. Noth­ing is easy. You have to be pre­pared for every­thing. And in my view, the com­ing pe­riod is go­ing to be even more tough,” he warns.

A tough jour­ney

Han­dling tough sit­u­a­tions is some­thing that Mer­chant has been in­her­ently pre­pared for. Noth­ing in life came easy for the Mum­bai-born busi­ness­man, who was born into a big fam­ily and ex­pe­ri­enced poverty as a child. He was even forced to drop out from school af­ter fifth grade.

“I used to look at other chil­dren go­ing to school with their bags, and I would also long to study,” he rem­i­nisces. “I even came first in fifth stan­dard and got an Ea­gle ther­mos flask for be­ing the best stu­dent. But the sit­u­a­tion was such that I couldn’t pur­sue my stud­ies.

“But I’m not sad about it”, he quickly adds.

Hav­ing learnt the art of “buy­ing and sell­ing” from his fa­ther, a real es­tate bro­ker, Mer­chant says he un­der­stood how to suc­cess­fully close a deal. His par­ents also laid down a “strong foun­da­tion” for his life, em­pha­sis­ing the im­por­tance of in­tegrity and hard work.

The fam­ily’s fi­nan­cial con­di­tion grad­u­ally im­proved, and dur­ing a visit to Dubai for his hon­ey­moon when he was 22, Mer­chant went to the Gold Souk, where he was cap­ti­vated by the trade and en­ticed to set up his own gold busi­ness.

De­spite ini­tial re­luc­tance from his fam­ily, he per­sisted and af­ter re­search­ing the gold busi­ness in Mum­bai, he re­turned to Dubai to make his mark. Start­ing from scratch, he be­gan by ap­ply­ing the trad­ing prin­ci­ple that he was fa­mil­iar with – he bought and sold gold bars for a small profit.

He opened a bank ac­count in the erst­while Bank of Oman (now Mashreq Bank) in half an hour – the process was sim­ple – and then started hand­ing out cheques as a guar­an­tee to grow his busi­ness.

“Peo­ple used to work on trust. To­day it’s not like that be­cause fraud has in­creased but in those days it was very dif­fer­ent,” Mer­chant wist­fully says.

His perseverance paid off and his com­pany soon grew into the be­he­moth it is to­day.

“At that time the gold in­dus­try in the UAE was good and grow­ing. But in my opin­ion, the mar­ket now has ma­tured but also be­come very sat­u­rated. Many new play­ers have en­tered the mar­ket and com­pe­ti­tion has in­creased,” he states.

While the sup­ply “seems to be” ex­ceed­ing de­mand, Mer­chant also re­mains op­ti­mistic that the mar­ket size will prob­a­bly grow fur­ther as the UAE seeks to at­tract more tourists and res­i­dents.

Com­pa­nies should fo­cus on “or­ganic growth” and un­der­take ex­pan­sion af­ter “due con­sid­er­a­tion and care­ful cal­cu­la­tion”.

“Busi­ness should never be done for ego and com­pe­ti­tion should al­ways be ac­cepted,” he adds.

Not all that glit­ters is gold

Pure Gold – a name that just “popped” into Mer­chant’s mind when ap­ply­ing for a com­pany li­cence – is no longer fo­cussing purely on gold and has heav­ily di­ver­si­fied into pearls and diamonds. Be­tween 70 and 80 per cent of the com­pany’s busi­ness comes from diamonds, ac­cord­ing to Mer­chant.

“In the past, peo­ple used to buy gold as an in­vest­ment, with or­na­ments like ban­gles weigh­ing around 100g. But these days gold has be­come an item of fash­ion, so you see more hol­low gold weigh­ing as lit­tle as 5g to 10g,” he states.

“How­ever, while the mar­ket may change, it will not die. Gold has a huge his­tory and there is no other al­ter­na­tive to it, no re­place­ment,” he stresses.

The com­pany is also work­ing on styling a new con­cept in Asia, which is ex­pected to open by the first quar­ter of next year, and di­ver­si­fi­ca­tion into the food and bev­er­age sec­tor, Mer­chant adds.

Brighter goal

In re­cent times, Mer­chant has fea­tured more ex­ten­sively in news head­lines for his other big pas­sion – phi­lan­thropy. His For­got­ten So­ci­ety ini­tia­tive, started 10 years ago, has seen him free thou­sands of pris­on­ers from jails in the UAE.

The ini­tia­tive clears the fi­nan­cial li­a­bil­i­ties of pris­on­ers who have been in­car­cer­ated for money-re­lated cases and those who re­main in prison de­spite com­plet­ing their sen­tences be­cause of a lack of funds.

“In 2008, af­ter the cri­sis, hun­dreds of con­struc­tion work­ers lost their jobs af­ter con­tract­ing com­pa­nies shut down. Many of these work­ers were put in jail be­cause of var­i­ous is­sues – mainly re­lated to visa vi­o­la­tions.

“So we took up an ini­tia­tive to send them back home. We worked with the UAE au­thor­i­ties to draw out a plan and ex­tended help to peo­ple from all na­tion­al­i­ties. We paid for their tick­ets and their fines and re­united them with their fam­i­lies,” ex­plains Mer­chant.

More than 15,000 peo­ple have ben­e­fit­ted from the ini­tia­tive, in­clud­ing 5,000 from Aj­man Cen­tral Jail.

Mer­chant’s phil­an­thropic ac­tiv­i­ties also cover the health­care and ed­u­ca­tion sec­tors and have seen him do­nate more than Dh­s20m ($5.44m) over the years.

“Busi­ness­wise I’m very sat­is­fied – there’s not too much of a re­quire­ment for my per­sonal in­volve­ment. It is well set-up and or­gan­ised and I only get in­volved on a macro level. The op­er­a­tional level is han­dled by my son [Karim],” he says.

“Now I want to fo­cus on leav­ing a legacy for my chil­dren and grand­chil­dren. It is not about money but about do­ing good deeds. If some­one bumps into one of my grand­chil­dren years later and rec­ol­lects a good deed that I have done, I would have left a true legacy.”

Pure Gold is tak­ing a new min­i­mal­ist ap­proach to its con­cept stores

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