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Sun 20 Jan 2019 02:54 PM

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'If you want to be number one in the world, just be number one in India'

A softening market has seen a global dip in sales, but Malabar Gold & Diamonds says currency fluctuations have driven up investment in gold

'If you want to be number one in the world, just be number one in India'
KP Abdul Salam, group executive director, Malabar Group and Shamlal Ahamed MP, managing director, International Operations, Malabar Gold & Diamonds

It’s not a bad day at work when a customer walks in and orders millions of dollars of jewellery in a single visit. But that’s not entirely uncommon for jewellery retailer Malabar Gold & Diamonds at their stores in Dubai, Shamlal Ahamed MP, managing director, International Operations, Malabar Gold & Diamonds, and KP Abdul Salam, group executive director, Malabar Group, tells Arabian Business.

“Ease of buying is very important in Dubai,” Salam said, crediting the UAE’s safe and shopper-friendly environment.

The Indian-born multi-billion dollar global brand, which started in 1993, runs 53 stores in the UAE and some 250 outlets in 10 countries across India, the Middle East, South East Asia and America. Malabar Gold holds the largest market share – more than 20 percent – in the 22 carat jewellery segment in the UAE. Twenty five years on, the company is continuing its expansion with a plan to triple its retail network to 750 outlets over the next five years. The Malabar Group says it aims to achieve an annual turnover of more than $6.85bn by 2023. About 40 percent of the group’s turnover is expected to come from its operations outside India.

And Bollywood is playing a starring role in helping with its growth. While the company’s brand ambassadors include B-town superstar Kareena Kapoor Khan, the recent string of Indian celebrity weddings has also given the Indian jewellery business a big boost, especially with millennials.

Newsfeeds in the latter part of 2018 – also ‘wedding season’ in India – were littered with pictures of famous actors tying the knot – from Sonam Kapoor to Deepika Padukone and Ranveer Singh, to the Hollywood-Bollywood marriage of Priyanka Chopra and Nick Jonas.

“These weddings are good marketing for Indian jewellery,” Shamlal says, for both customers in India and overseas. “For the whole world, India is Bollywood. And for celebrities like these, there’s a huge following. And jewellery is heavily showcased... especially like at Deepika’s wedding... at all four [of her] wedding functions she was wearing different heavy Indian jewellery. Priyanka went with diamonds but [the design] was still traditional.”

Malabar’s plans in the US market include targeting South Asian customers in Chicago, New Jersey, Dallas, Houston and Los Angeles.

Asked if the investment in big name celebrity ambassadors is worth it and if footfall at stores is visibly and directly impacted when a movie star-lead campaign is launched, Shamlal recalls just-another-day at one of Malabar’s stores.  “In the US recently, we had a man come in and order three of the necklaces modelled by Kareena Kapoor for three of his daughters,” he shares. “That’s about a few hundred thousand dollars’ worth [of sales].”

Indian model and Miss World 2017 winner Manushi Chillar is also one of Malabar’s ambassadors. The brand made waves last year with a video advert starring both Chillar and Kapoor. As Chillar describes her ideal wedding, the commercial launched into visuals of her daydream showcasing ensembles complete with sparkling jewellery. Kapoor, who is married to famous actor Saif Ali Khan, is enamoured by Chillar’s description and says she wants to have a wedding too but Chillar quickly reminds the actress that she’s already married.

“It’s very common for people to come [to our stores] and ask for the piece that Kareena or Manushi was wearing,” Shamlal says. Stores also feature special catalogs showcasing its celebrity collections for customers to choose from. Declining to share names, Ahamed adds that for Malabar’s celebrity customers as well as royalty, the brand has special “co-creation teams” that custom-make designs.

The outlook for global growth dimmed by weak economic data has also helped the case for gold. While the group is having to weather a softening market, including in the UAE where it has seen a “single digit” sales dip in the low oil price era and following the introduction of value added tax (VAT), Shamlal remains bullish because currency fluctuations have driven up investment in gold.

“Everywhere there is tension with paper currency, so everybody is shifting assets to gold,” Shamlal explains. “It’s a hedge against any inflation. A lot of funds are investing in gold. More than the physical demand there’s a huge investment demand towards gold.”

We have seen 100 percent growth in Chinese buyers

He adds that customers are “still buying” and that even though consumer spend has reduced, Malabar’s market share has gone up from 17 percent to 20 percent. “Our average ticket size has gone down rather than the number of purchases, which is okay.”

The executive forecasts a $500 increase in gold prices over the next three years.

“Definitely, going forward, gold will go up,” he says. “It’s a good level to buy gold [now]. I think by the end of 2019, we are expecting a $100 hike, from $1,250 now to $1,350. By 2023 I think it will be about $1,750 and up.”

Salam also believes in the positive outlook, and adds that based on figures from Dubai Customs, the top three categories for business in the UAE are jewellery-related businesses. “The top three are: gold, gold jewellery and diamond jewellery, [which accounts for] 35 percent of Dubai’s total business.”

Asked if the introduction of value added tax is likely to hurt figures, Salam says it is unlikely.

“Even after 5 percent VAT, we are still the cheapest in the world and about 8-9 percent cheaper than the South Asian market,” Salam says. In fact, he adds, Malabar’s customers’ are the “second largest in any category” in terms of tourists claiming VAT.

However, Malabar’s biggest buyers in the UAE market are still Indians and those from the Indian subcontinent, including Pakistan, Sri Lanka, Bangladesh. The demographic changes during tourist seasons. “We see a lot of Chinese come in but we don’t see too many Russians anymore,” Salam says.

“The Chinese are very specific buyers,” he adds. “They buy solitaires or diamonds. They know what caratage, colour, clarity and quality they want, and they do their homework before coming so they already know the prices elsewhere in Hong Kong or Macau, for example.”

Shamlal adds that the introduction of visa on arrival for Chinese visitors to the UAE has made a “huge difference”.

“We have seen more than a 100 percent growth in Chinese buyers,” he shares. “A lot of rich Chinese people come and buy more than AED100,000 ($27,000)-AED200,000  ($54,000) worth of jewellery on the spot, off the shelf.” It’s why the company has a minimum of two to three Mandarin speaking staff in most of its stores.

“We have more than 15 nationalities working in our gold souk store who speak more than 50 languages,” he adds.

The Indian-headquartered group’s major focus is still its own country though. Among the organised chain retailers, Malabar stands in the top spot with a 3-5 percent share of the Indian market, worth about $42.3bn.

“As per the World Gold Council’s prediction, by 2023 the Indian market for gold will be worth INR400,000 crore ($56.3bn). If you want to be number one in the world, just be number one in India.”

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