Jewellers end obsession with 22k gold
THEY ARE TRYING TO CREATE A NEW GENERATION OF GOLD SHOPPERS BY SPARKING 18K DEMAND
They are trying to create a new generation of gold shoppers by sparking demand for 18k, which allows them to experiment with more designs |
The UAE’s gold jewellery retailers are shedding their obsession with the 22 karat. They are working to create a new generation of shoppers — the younger ones, preferably — and the way they are doing this is via the 18k route.
Their strategy is quite straightforward — 18k allows jewellers to experiment with more designs and come up with lighter pieces too, which is not something they can do as easily with 22k. And with more trendy designs to offer, the 18k collections can appeal to a younger shopper.
In short, gold jewellery as a fashion statement and not just as an investment. (In 18k, the gold component is about 70 per cent with alloys making up the rest. That is why it tends to be more flexible than the 22k and 24k variants. On Monday, 18k was commanding Dh121 a gram in Dubai, while 22k was at Dh148 and 21k at Dh141.25.)
One thing is clear: the sector needs ways to get back into growth in some way or the other. It had a horrid run all through 2017, except for a late rush of buying in December. The first five months of this year have turned out to be a bigger let-down, with cost-conscious shoppers staying away.
No joy from VAT scrapping
The introduction of valueadded tax (VAT) from January 1 had a lot to do with the drop in gold jewellery buying, with first-quarter sales being the worst ever in recent times, according to World Gold Council data. So much so that even the withdrawal of VAT on all wholesale transactions in the jewellery sector has so far not sparked demand at the retail level.
“Shoppers are still staying on the sidelines despite gold prices now averaging $1,300 [Dh4,775] an ounce against $1,350 last year,” said Shamlal Ahmad, managing director of International Operations at Malabar Gold & Diamonds. “The 22k segment is the most affected because the whole focus of this market is geared towards sub-continental buyers and their preferences. In dull market phases, this focus on 22k can no longer sustain the trade.
“With the 18k push, the UAE’s jewellery sector gets an opportunity to address new audiences. These shoppers no longer view buying gold jewellery — the 22k kind — as an investment. They want to experiment with designs, buy more frequently, and the price points in 18k collections allow that.
“On the resale side, 18k jewellery has a 70 per cent resale value — but the younger shopper is not too bothered by the resale value aspect. They want to use their jewellery as a statement and to be in-trend.”
(For MGD, the retailer plans to open a mix of in-mall and high-street locations. It now has six in the UAE.)
None of this means that the era of 22k in the UAE is over. But more jewellery retailers will have to mix and match between 22k, 21k and 18k.
“There’s no point in opening an 18k store in a Lulu hypermarket, in Karama, Satwa or [Sharjah’s] Rolla Street,” said Tawhid Abdullah of Jawhara and head of the Dubai Gold & Jewellery Group. “Those are 22k hotspots.
“But there are locations in the UAE where you have a higher concentration of Arab buyers and ideal for 18k and 21k. UAE retailers need to plan their exposures the smart way to capture these buyers.
“One is not talking about ditching the 22k culture — that will remain basic to the Asian community. But what about the rest of the shoppers in the UAE? They will need their 18k and 21k... or we can create demand for these categories. The young shopper is the future.
“The jewellery sector in Dubai and the UAE is ready for a reset. The old ways of selling gold cannot work forever.”