Gold retailers in UAE takes drastic measures to combat drop in shoppers

The industry is one of the worst-hit due to COVID-19 and the resultant lockdown.

By Rahul Vaimal, Associate Editor
  • Follow author on
Representational Image

Major gold retailers of UAE are planning to take drastic measures including shutting down stores or delaying reopening as the industry struggles to cope up with the impact of the global pandemic.

As people have started to spend only on essentials and the absence of tourists have contributed to this financial crisis for the jewelry industry. Joy Alukkas, one of the top players, is looking to close down their “weak performing” outlets in UAE. After shutting down 7 of its 24 stores in UAE, they contemplate going ahead and doing the same in other Gulf countries too.

Joy Alukkas, Chairman and MD

“It has reached a point where we can’t retain all stores. There will be a dip in our UAE sales because of the closures, but nothing too drastic, I hope. The fact is 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 jewelry right now, it’s better not to re-open some stores – that way retailers will end up with fewer expenses.”

UAE contributes 40%, the highest, to the retailer’s revenue.

Malabar Gold & Diamonds, another major player, has decided to delay the reopening of their stores until there is clarity from the landlords regarding rent reduction. They have more than 100 stores in the GCC out of which 54 are located in the UAE.

Flagship stores in prime locations command rents of Dh800,000 – Dh1 million. Talks have been going on between the retailers and landowners since the impact of the pandemic on the jewelry industry started becoming evident.

Abdulsalam K.P
Executive Director
Malabar Gold and Diamonds

“No one in the gold trade thinks they will be making money this year – which is why landlords need to hear our views patiently. We are asking all our landlords for a four-month waiver and for the rest of this year, to drop their rents by 50 percent. All stakeholders should support these requests – the government has already shown the way by dropping fees on all government-related services.”

These closures mean having to cut down on the number of staff. With shoppers less likely to get back to buying gold due to the pandemic and also its price, which is at Dh190 per gram, more employee layoff seems inevitable.

“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.”

Thus, the retailers believe that shutting down the stores makes more sense financially. Many of them have returned their inventory to bullion banks, which acts as a market maker for precious metal markets, to get some funds.

“If there’s no business likely to happen, why pay interest to banks and rents to landlords,” the retailer said. “Best option is an exit.”

Malabar group has decided to wait until some kind of confirmation comes through. “A lot of our locations are dependent on tourist shoppers; so, there’s no point in opening those outlets now,” the Executive Director added. “Our message to landlords is consistent – when we can afford to re-open, we will”.

Though many landlords had deferred the rent during the initial days of the lockdown, there has been no discussion regarding extended rent-free periods.

The same issue is faced by the retailers of every category and they have to compete with the online platforms too. But, customers still opt for the touch and feel when it comes to buying gold. Thus, buyers will definitely come back to the store once this settles down bringing a glimmer of hope for the future.