Price stability has helped gold remain the preferred choice of adornment and investment in 2012, say industry leaders. Since festivals are strongly linked to the purchase of jewellery, especially gold, among the Non-Resident Indian community, sales are expected to be good over the coming months, with Onam, Diwali and Dhanteras ahead.
This festive buying spree is kicked off in the month of August each year, as traditional Onam attire demands gold jewellery to complete the festival feel for the Malayali, or Keralite.
“During the festival periods, we have generally seen an average of 10 to 20 per cent year-on-year growth in sales across our showrooms. In 2012, we continue to see this trend,” says Joy Alukkas, Chairman, Joyalukkas Group.
“We also expect very good sales during the Diwali and Dhanteras period, since it is an auspicious time and all these festivals are strongly linked to gold and the purchase of jewellery. To us, it means that the Indian diaspora is still strongly connected to their roots and continue to celebrate the various festivals with the same fervour and excitement as they did back home.”
Onam, Eid, Diwali and Dhanteras are important festivals for gold sales, agrees Karim Merchant, CEO and MD, Pure Gold Group. “During the festival periods, we see our business increasing year-on-year between 8 to 12 per cent,” he says.
Damas introduces a new collection for every festival based on emerging customer trends. “This year, ahead of Onam, we introduced new product trends based on the demand for lighter, affordable and trendier designs,” says Mani Dharman, Head of Gold Division, Damas.
Maintaining stability
Expenditure on gold by NRIs has been comparatively stable over the past year, as prices have been less volatile compared with the same period for previous years, he says. “We have not noticed a big change in the spending habits of South Asian customers,” says Dharman. But price volatility is a key detriment to the jewellery business, he adds. Customers do not want to buy gold in the morning and realise that they could have got a far lower price later in the day, he explains. Essentially, spending habits remain stable even if prices are high, as long as volatility remains low. Gold is still at the core of the Damas business, he adds. “In the UAE alone, we have 54 stores specialising in the 22k segment and it accounts for the bulk of our business in the country,” he says.
Merchant agrees: “Even if gold prices are high, customers are willing to buy provided it remains stable. Currently, gold prices have been less volatile compared to last year. Hence, we see the gold jewellery business picking up again.”
Since gold is seen as a safe haven investment and has an associated status value, consumers also consider it wise to spend on jewellery, says Alukkas. “Besides, gold has strong traditional and cultural value, especially within the Indian diaspora. Whatever the price, they will still buy gold. Since the majority of our customer base is Indian, we have seen very little impact of gold prices on sales,” he says.
Both Merchant and Dharman see great potential in tapping a hitherto ignored niche market — the teen-to-21-year segment. “There is a large ‘youth’ demographic, which means more consumers coming of age into the jewellery-wearing category every year. At the same time, the GDP per capita is strong. Moreover, jewellery is an inherent part of the NRI culture in this region,” says Dharman. Alukkas adds that though the teen-to-21-year segment still stays away from jewellery, the right designs can help change their mind about gold.
Dharman is not willing to speculate on prices for 2012: “In terms of trends, we still expect to see a growing demand for lightweight and affordable gold jewellery in the next few years.”
Meanwhile, Merchant feels that gold prices will remain stable till the end of 2012 compared to the spikes of 2011. “We still maintain a bullish outlook on gold for the medium and long term. In terms of the retail industry, we see bigger players eating into the shares of smaller businesses,” he says. As gold prices increase, the inventory value also increases making it difficult for smaller operators to expand their businesses, he notes. “As an industry, we expect gold retail volume in 2012 to grow by single-digit figures compared to 2011.”
Keeping its shine
Alukkas believes gold will not lose its sheen and investment potential for generations to come. “There is a continuous cycle of new customers who convert to gold and jewellery buyers at a certain stage in life — mostly marriage. From this period onwards, their entire demeanour towards jewellery changes and they buy gold and jewellery for various needs and occasions,” he says.
Hence, based on past performance and consumer response, despite the economic downturn, he is very positive about the future potential of the gold industry. “Gold is a combination of traditional value, a status symbol and considered a smart investment choice. And that is not going to change for a long time to come,” Alukkas says. n
