UAE’s jewellery retailers take drastic steps as gold demand declines
JOYALUKKAS CLOSING SOME STORES, MALABAR GOES FOR ‘PHASED’ REOPENING AS SALES PLUNGE
Two of the UAE’s leading jewellery retailers are taking drastic actions to counter the Covid-19 impact on gold demand.
Joyalukkas is closing its “weak performing” outlets, while Malabar Gold & Diamonds has decided to delay opening all stores until there is clarity on rent reductions from its landlords. The gold trade has been the worst hit by the virus outbreak, as most residents stopped spending on anything other than essentials, while tourists too have been absent after the suspension of flights.
The initial plan is for Joyalukkas to exit seven of its 24 stores in the UAE, and repeat the process in the other Gulf states. The UAE contributes the highest share of the retailer’s revenues, at 40 per cent.
Not sustainable
“It has reached a point where we can’t retain all stores,” said Joy Alukkas, Chairman. “There will be a dip in our UAE sales because of the closures, but nothing too drastic, I hope. We will be better served by retaining just one store in locations where we had two or even three.
“Because there is such low consumer demand for gold jewellery right now, it’s better not to reopen some stores — that way retailers will end up with less expenses.”
Flagship stores in prime locations command rents of Dh800,000-Dh 1 million. Right from the moment Covid-19’s impact became apparent, retailers have been trying to get their landlords to offer some sort of rental compensation.
This is what Malabar is doing, by deciding to reopen its 54-store network in the UAE in
40% Share of total revenue that Joyalukkas gets from the UAE
“phases”. “No one in the gold trade thinks they will be making money this year — which is why landlords need to hear our views patiently,” said Abdulsalam K.P., Executive Director.
“We are asking all our landlords for a four-month waiver and for the rest of this year, to drop their rents by 50 per cent. All stakeholders should support these requests — the government has already shown the way.”
According to gold and jewellery industry sources, if consumer buying won’t improve any time soon — it’s unlikely
50% Rent reduction being sought by Malabar Gold due to closures
with gold well above Dh190 a gram — more stores will face closure. That can only mean more cuts on the workforce.
Job cuts imminent
“So far, we have tried to retain as much of our staff as possible, through the lockdown and then the subsequent opening from April 26,” said the owner of a leading gold wholesale and retail business. “But when stores are shuttered, there’s no way staff there can be absorbed elsewhere.
“By summer, the gold trade
will have a full measure of job needs and losses.”
Abdulsalam is willing to play the waiting game, until landlords decide one way or the other. “A lot of our locations are dependent on tourist shoppers; so, there’s no point in opening those outlets now,” he added.
Thankfully, for the UAE’s gold trade, online selling has not intruded into their prospects for now. Local shoppers need the sense of touch and instore experience when it comes to jewellery.
Once gold prices settle down and buyers feel the urge to pick the yellow metal, they will be back at the stores.