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Wed 2 Jan 2019 12:31 PM

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How Malabar Gold's business model makes investors out of employees

Malabar's executives share the secrets to their rare business model that lives the talk and walks the walk

How Malabar Gold's business model makes investors out of employees
The executives behind Malabar Gold’s stunning growth include Shamlal Ahamed MP, Managing Director, International Operations, Malabar Gold & Diamonds, and KP Abdul Salam, Group Executive Director, Malabar Group

It’s not everyday you hear executives of a multi-billion dollar company casually mention that one of their organisation’s drivers is also a shareholder in the company.

That, in essence, is the philosophy of what has taken jewellery retailer Malabar Gold & Diamonds from its small start in 1993, in the city of Calicut, Kerala, in the Southern part of India, to 250 outlets in 10 countries across India, the Middle East, Southeast Asia and America.

As the company celebrates 25 years in the business, Shamlal Ahamed MP, Managing Director, International Operations, Malabar Gold & Diamonds, and KP Abdul Salam, Group Executive Director, Malabar Group, tell CEO Middle East that, in fact, 19.4 percent of the company’s 2,752 investors are full-time employees across different levels of the organisation.

Its business model has been based on “the association of many people”, Salam, 59, explains.

“We started as a small operation in Kerala with eight investors, friends and family. From day one, our chairman, Mr MP Ahammed, tried to involve more people in the business at different levels as investors and as employees. It’s like a family business in a corporate structure, which is very rare.”

The ideology helps in two ways: first, employees remain committed and care about the business that they are working for because they have ownership; and second, to a consumer or outsider entering a Malabar store, he or she is meeting a stakeholder.

Front-end operations and store management are run by an inner-circle store head, who is an investor in the company, Ahamed, 37, adds.

“That (system) has really worked for the company.” he says, especially in terms of employee retention and culture, which in turn of course has impacted productivity and growth.

“In comparison (to other firms), our employee turnover is very less for the retail industry.

“Many employees who have worked with us since we started are still working with us. Our first employee who joined us is both an investor and still works with us. Our driver in our Dubai office for 10 years is also a shareholder.”

Equity is open to anyone in the company, but the allotment isn’t automatic. “You don’t get the share just because you work here,” Ahamed goes on to clarifiy, “you should have something to bring to the table.”

“Our chairman famously said: ‘Ours is an empire built on trust, teamwork and goodwill. We derive our strength from many. Time from those who have time, talents from the talented, resources from the resourceful, and investment from the people who have the money; some from all our team, and all from some of our driving forces.’”

And for those who have put in their bit so far the investment is set to further multiply.

The Indian-born international jewellery brand’s global expansion plan hopes to see the company triple its retail network from 250 showrooms to 750 outlets in the next five years. The Malabar Group has said it aims to achieve an annual turnover of more than $6.85 billion by 2023. About 40 percent of the group turnover is expected to be generated from the company’s operations outside India. It’s plans in the US market include targeting South Asian customers in Chicago, New Jersey, Dallas, Houston and Los Angeles.

“We always wanted to expand our reach to become global,” Ahamed says. “With 53 stores in the UAE, we are the largest shareholder here so we don’t want to grow further (here). We hold more than 20 percent - the largest share - of the market in the 22 carat jewellery segment.”

So far the plans have seen the group pursue interests well beyond jewellery: from real estate to retail, including hypermarkets, as well as IT services and farming – Ahamed told us in a previous interview that farming was where the Malabar Group’s chairman first started honing his business skills.

However, gold jewellery for the masses is where Malabar reaps most from what it sows, something in which Ahamed admits the Group is having to weather a softening market. Market conditions following a plummet in crude prices have affected the  business but he is optimistic because currency fluctuations have driven up investment in gold. Malabar has seen a “single digit” decline in sales in comparison to last year, he says.

“Consumer confidence is weak. The money is there... it’s not vanished from the market... (but) everyone is cautious and they’re not spending like before. People have reduced their spend.”

However, the retailer’s market share grew from 17 percent to 20 percent. And with the influx of tourists this Dubai Shopping Festival (DSF), the implementation of the tourist VAT refund scheme, and attractive promotions, Salam is optimistic about 2019.

“Last year we had a very good DSF because of the pre-VAT sale (in 2016),” Salam, also a member of the board at Dubai’s Gold & Jewellery Group, says. “This year it is also (looking) positive because the market is almost recovered. It will not be as good as last year but it will be like back-to-normal conditions.”

This year’s promotions include special coupons for diamond jewellery purchases, with weekly raffle draws for a chance to drive away in a BMW.

Meanwhile, the company plans to double its headcount from 13,000 to 25,000 employees within the next five years, in order to manage its growth – but while staying true to its original culture and philosophy that has earned the trust and loyalty of customers across the globe.

“In each and every shop, we have a person who has invested in the business, representing the owners,” Salam says. “Jewellery is traditionally a business in which you need a lot of trust. Customers don’t want to the know the product, they want to know who is selling it, and a guarantee that they can come back if there’s an issue. Because at the end of the day, they are buying an investment.”

Ahamed adds: “You hear about this sort of thing in textbooks, but here we live it.”