Independent jewellers suffer as gold price continues rising

Many adjusting their product lines to stand out from chain stores

Independent gold and jewellery retailers are feeling more pain than chain operators as the price of the precious metal rises. Tushar Patni, the owner of Ajanta Jewellers in Abu Dhabi and a member of the emirate's Gold and Jewellery Group, said chain stores were better placed to weather the storm because of economies of scale.

"The bigger ones will always have a bit of better marketing and products to offer," he said. "So they can take away the business when its slow." However, independent retailers are adjusting their stocks to target particular customer segments and set their offerings apart from the big retail chains, said Chandu Siroya, the vice chairman of the jewellery group and the owner of Siroya Jewellers. "Everybody tries to find their own niche, in terms of products, services or their clientele," he said. "The bigger stores, the chain stores, they would all have a similar collection in all of their stores."

Last year was difficult for many retailers, especially those selling big-ticket, non-essential items such as jewellery. But with the rising price of gold, jewellery retailers in the UAE have had an even tougher time staying afloat. In the first quarter of this year, the price of gold averaged US$1,109.12 per ounce, up 22 per cent from $908.41 in the first quarter of last year. And the rise shows few signs of abating. The price of gold hit a record of $1,264 on Monday, then fell to $1,230. It closed at $1,246.05 on Friday. Alison Burns, the regional head of precious metals at Standard Bank's Dubai branch, expects the price to go higher,passing $1,300 by the end of the year.

"It's really just the nervous global investor," she said. "They're very concerned, as this news of the euro-zone debt is every day giving more cause for anxiety. There is that safe-haven status in moving into gold. That really has been the driver for gold moving up to these levels." Some jewellery buyers in the UAE seem to be adjusting to the high price of gold. In the first quarter of this year$674 million (Dh2.47 billion) worth of gold jewellery was sold in the Emirates, up by 58 per cent from $426m in the same period last year, data from the World Gold Council showed.

In the first quarter of this year, 18.9 tonnes of gold jewellery was sold in the country, a 29 per cent increase from the 14.6 tonnes sold in the same period last year. However, this is still less than the 21.9 tonnes of gold jewellery sold in the first quarter of 2008. Gold retailers are having difficulties getting bank loans, Mr Patni said. Amid the global economic downturn and the financial problems that have beset even large gold and jewellery chains, banks are reluctant to lend to these merchants, he said.

"It's nearly impossible these days, the way the banks are behaving," he said. "They just don't want to give out anything." There are some advantages, though, for smaller retailers. Their overall costs are smaller and easier to manage, Mr Patni said. "They have been struggling, but none of them have closed," he said. "They all open. They're alive and kicking." [e-mail]