Jewellery retailers are being hit harder than most as the price of gold climbs to record levels above $1,000 an ounce.
Gold souk loses lustre for shopkeepers
DUBAI // In the year since Fires Omran opened his Felopateer Palace shop in the Dubai Mall gold souk, he has had just one paying customer, who bought two watches for Dh17,000 (US$4,628). So when the mall management sent him a notice last week raising his rent 40 per cent to Dh371,000 from Dh265,000 a year, he decided to get out.
Mr Omran said he closed the store on Wednesday, resulting in a company loss of Dh2 million. "There is nobody in the gold souk," Mr Omran said. "Sometimes I catch the staff and they're asleep. I ask, 'Why are you sleeping?' They say it's because there is nobody outside." This year has been tough for retailers in Dubai, as the number of tourists slowed after the economic downturn hit the Emirates and local shoppers became wary of spending.
Jewellery retailers are being hit harder than most as the price of gold climbs to record levels above $1,000 an ounce. Retailers in Dubai Mall's gold souk, with spaces for more than 220 shops making it one of the largest indoor gold markets in the world, say their struggle to survive is compounded because of the souk's maze-like design, which they say makes it difficult for customers to find their stores.
Retailers say revenues do not cover their expenses and they have been in talks with the developer of the Dubai Mall, Emaar Malls, for rent reductions and a redesign of the souk layout to encourage more customer traffic. In a statement, Emaar said it was working with its retailers to improve customer flow through the shopping centre, but would not address questions about the gold souk. "Emaar Malls Group will continue to undertake several concerted measures to strengthen customer traffic and ensure sales conversion through innovative campaigns with the support of our retailers," a statement from the company said.
The souk's gold and jewellery retailers say they first approached Emaar in January and met individually with management in May and June, but no progress has yet been made on rent changes or entrances. While Dubai Mall has seen more than 30 million visitors so far this year, Behrooz Aback said he was lucky if 100 people a day passed his store on Diamond Road, one of the inner wings of the gold souk.
Mr Aback, the owner of Maitha Jewellery, said the original mall floor plan had more entry points but it changed before his store opened last November. He has also been pushing for a rent break, but believes redesigning the layout would be the best solution. While some of the outlets near the main entrances have sales of more than Dh100,000 each month, Mr Aback said his sales were just Dh10,000 a month.
He said the average jewellery shop had Dh1m in inventory and that he had lost Dh200,000 so far this year. Mr Aback said the economic downturn was a factor, but not the main one. "The problem is not the recession, not the goods. The problem is there is no footfall," he said. "No one passes through this corridor." Mr Aback said at least six nearby shops had closed in the past month. Haja Shamsudeen, the manager of Mahallati Jewellery, said no more than three or four people passed his store daily and no one bought anything.
Another issue was the lack of bathrooms, he said, as the nearest one was 15 minutes away, outside the souk. Mr Shamsudeen said his store sold about Dh100,000 worth of jewellery each month, a figure that was far below overhead costs. "We have not made any profits, from one year until now," he said. Naeem Ghafoor, the chief executive of Skyline Retail Services consultancy in Dubai, said the mall was well planned but the gold souk was very hard to navigate.
"I think the souk is a fantastic idea but once you get in there, although there is a big atrium inside, you get quite lost," Mr Ghafoor said. "You end up walking down these alleyways and not knowing where you are going." But he acknowledged that there were always problems that needed to be ironed out in new malls. Tamjid Abdullah, the deputy managing director of Damas Jewellers, said his two stores in the souk were faring better than most, due to their locations near entry ways.
But Mr Abdullah said he was also in talks with Emaar and was optimistic that mall management would take some action. "We need to be more patient and tolerant," he said. "I'm sure that the management of the mall will look seriously into the lack of traffic, lack of sales of all these shops. I'm sure they will be compensating the jewellers with a substantial rent period." Mr Aback is eager for something to change, as he said he had been forced to dip into his savings to cover costs. He said he was reluctant to close the store because it would be an even bigger loss in overall investment. "I still have hope they will do something for us," Mr Aback said.