The feel-good factor is returning to the country's Dh3 billion (US$816.7 million) jewellery and gold sector. Sixty-five new jewellery shops will open across Abu Dhabi next year, the largest wave of store openings in a decade. Abdulwahid al Marzooqi, the secretary general of the Abu Dhabi Gold and Jewellery Group, said the expansion plans had been fuelled by new malls, international retailers seeking a foothold here and increased consumer demand for the yellow metal. The group has forecast growth in sales of between 30 per cent and 40 per cent for next year compared with this year, which sparked the decision to open 55 new stores in Abu Dhabi and 10 in Al Ain. Abu Dhabi will now have 315 jewellery and gold stores.
"We're optimistic that 2010 will be a very good year," Mr al Marzooqi said. "It won't be as good as 2008 but it will be much better than 2009 because, psychologically, customers are now ready to spend money and people here are in a very good financial position." It has been a rough year for the global jewellery market, especially for gold sellers, as shoppers shifted to budget-friendly products and the price of the precious metal hit record highs.
Abu Dhabi's jewellery sector also felt the pinch, with sales of gold, jewellery and watches falling 30 per cent to about Dh3.3bn this year from Dh4bn last year, said Mr al Marzooqi, who is also the chief executive of Mandoos Jewellery. "There were so many elements or factors which contributed to this sales drop: the continuous increase of the gold price, less tourists coming, and people were spending less on the luxury items," he said.
Gold sales fell steepest, down 45 per cent to Dh1.2bn this year. Mr al Marzooqi said consumers were mainly deterred by the volatility of the spot gold price, he said, which ranged from $812.60 on January 15 to a record high of $1216.25 on December 3. The London afternoon fix price of gold was $1087.50 yesterday. "The high price of gold caused some consumers to switch to diamonds and to switch to even silver," said Mr al Marzooqi. "Some of those without the purchasing power to buy gold, they were looking for silver and even imitation items."
While there was a sales decline across the jewellery sector, diamonds and watches suffered less, with a decline of about 20 per cent each. Consumers are now looking more for value when buying jewellery, Mr al Marzooqi said, seeking unique, branded jewellery and certified goods. "Now they want good-quality items," he said. "Now if they are going to buy a diamond, they want to know about the quality and see the certificates, unlike three or four years back."
Mr al Marzooqi said he hoped predictions of a short-term gold price correction in the new year would encourage buying. "We think that the gold sales will increase in the first four months of 2010," he said. "Analysts are expecting that the price of gold might drop in the short term. But this will encourage everyone to spend on gold, especially coins and bars." Mr al Marzooqi said that as consumer confidence improved, in the UAE and globally, shoppers would be more comfortable to spend in the capital, which is less dependent on tourists.
Laurent-Patrick Gally, a retail analyst at Shuaa Capital, said expanding the number of stores so rapidly in Abu Dhabi was risky, but potentially rewarding. "It will be slightly challenging to open 25 per cent more stores but not crazy," Mr Gally said. "In Abu Dhabi the economy is growing and there is a rising amount of disposable income." Retailers will need to avoid clustering too many jewellery stores together and diluting sales, he said. But the recent announcement that UAE nationals working for the Federal Government would receive a 70 per cent raise on their basic salary would be a boost.
"This increase will definitely be spent on various things, from necessities to - discretionary spending, and for sure jewellery will be a big component," Mr al Marzooqi said. @Email:email@example.com