The Dubai chain Pure Gold Jewellers is planning an aggressive push into India over the next five years to take advantage of the population's growing spending power and traditional affinity for the metal.
Pure Gold plans major push into India
DUBAI // The Dubai chain Pure Gold Jewellers is planning an aggressive push into India over the next five years to take advantage of the population's growing spending power and traditional affinity for the metal. Firoz Merchant, the chairman and founder of the chain, which has 75 outlets in the GCC, said Pure Gold planned to open 200 stores over the next five years at a cost of US$200 million (Dh734.7m). It will start by opening 25 stores in India this year, he said.
"There is a huge consumer demand in the India market," Mr Merchant said. "Gold is part of the Indian culture." Pure Gold's expansion plans come after a tough year for gold retailers, whose sales have been hampered by consumer thrift and the record-high price of gold. Total demand worldwide last year dropped 11 per cent from 2008 to 3,385.8 tonnes, the latest figures from the World Gold Council showed. The Middle East took a bigger hit, however, with demand for gold down 28 per cent last year compared with 2008. In the UAE, particularly in Dubai, jewellery sales struggled due to fewer tourists and expatriate workers, the council said. Demand dropped 32 per cent from 100 tonnes in 2008 to 67.6 tonnes.
Last year, the price of gold peaked at more than $1,200, and the annual average price was $975.35 an ounce. This was up 12 per cent from the average price of $871.96 in 2008. Spot gold was trading at about $1,090 yesterday. In India, although demand for gold last year fell by 33 per cent to 480 tonnes from the previous year, the country still held on to its position as the biggest buyer of the metal worldwide.
Alison Burns, the regional head of precious metals at Standard Bank's Dubai branch, said that although jewellery demand had fallen globally, India continued to be an essential market. "In terms of looking to the future and in terms of percentage of consumption, India is still very much up there," she said. "If you are not in the market and looking to expand and diversify, I would suggest that is a good place to be."
Mr Merchant said that by opening 200 stores in five years, the company aimed to achieve annual revenues of Dh2.38bn. Pure Gold has already signed on for 10 stores in Mumbai, which will open in the next three months, he said. "India has a huge population, and we want to go all over India, east, west, south and north," he said. "We will start from the west, from Bombay [Mumbai], and slowly go to the eastern side."
Mr Merchant said the company also planned to enter Saudi Arabia and Qatar, opening a total of 15 new Pure Gold outlets in the two countries, and would add four or five outlets to the 45 stores it had in the UAE. Last year, the company's revenue and profit fell by 20 per cent, mainly due to the 30 to 40 per cent fall in the chain's gold sales, Mr Merchant said. But the high price of gold pushed consumers to alternatives offered by the company, and its diamond sales rose between 20 and 30 per cent last year, he said.
This year, Mr Merchant expects Pure Gold's sales to increase by 20 per cent across the GCC. He said the growth would stem from the regional economy stabilising, an increase in tourists to the UAE and more consumers looking to gold as an investment after watching the price rise continuously over the past year, he said. "I believe this year the market will settle. I don't think this year the business will be low considering that whoever has invested in gold they are now confident and understand that gold is the best investment."