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The Marketing of Gold and Gem Set Jewellery: Dubai’s Story Tawhid Abdullah Chief Executive, Damas Jewellery Group Good morning, ladies and gentlemen. I have a quick premise: without retailers, nothing could happen. Imagine what would happen if, on the third of June 2003, retailers around the world decided to go on strike for six months – how would that affect all of you here? Here is a small example of the power of promotion by retailers. On 1 February, we decided to launch a Valentine’s Day product in Dubai called “diamond in a gold heart”. The result? In that small city, 17,000 pieces were sold. The customer age range was 17 to 50, and the cost of the promotion was $300,000. LBMA Conferences have always been remarkably organised with excellent speakers covering important topics, but unfortunately with a very humble presence from the jewellery retailing and manufacturing sectors, which account for 85% of the world’s consumption. I will elaborate on this later. This is the first time I have been able to represent Dubai’s growing jewellery sector at the LBMA’s annual Precious Metals Conference, and I am delighted to be here. In addition to being the managing director of the Damas Group, I represent the Dubai Gold and Jewellery Group as their chairman. To give you a little background, the Damas Group has over 140 retail stores around the Middle East region. The Dubai Gold and Jewellery Group is a non-profit organisation made up of 450 trade members based in Dubai. The LBMA has done a fine job of ensuring that its members continue to meet the needs of the global bullion market, and I have to say that the presentations so far have been very informative. Dubai: a Middle Eastern Hub for Jewellery At the outset, I would like to emphasise the Dubai government’s determination to develop Dubai as an organised hub in the Middle East and the Indian sub-continent. This applies in no uncertain terms to the gold and jewellery industry. Many of you are already aware of Dubai’s reputation for jewellery. To give you an idea of the growth in jewellery imports, in 1996, we imported about 150 tonnes. This figure increased to over 300 tonnes in 2002. The LBMA Precious Metals Conference 2003, Lisbon We are proud to say that Dubai sells quality at the world’s best prices. This is made possible by three factors: low import duties, which are guaranteed by the government as an incentive to the trade, the very high volume of jewellery we import, and the fact that suppliers and retailers operate on very low margins to keep prices competitive worldwide. There are over 600 outlets in Dubai selling gold and jewellery. Our famous gold souk, which covers an area of only half a square kilometre, has over 275 retail outlets, one next to another – this gives you an idea of the density of the jewellery shops. At any given time, the gold souk has over 25 tonnes and $500 million of jewellery on display. Dubai is a very cosmopolitan place, with over 130 different nationalities, including a large number from the Indian subcontinent. Over the years, this has bred a very healthy respect for the yellow metal in its many different caratages and styles. The city was therefore always destined to have a thriving gold industry whether in 18-carat for European tourists, 21-carat for Arab expatriates and local residents or 22-carat for Asians from the subcontinent. The city is also a major export and re-export centre for gold jewellery to the Middle Eastern and Asian regions. Page 127 The Marketing of Gold and Gem Set Jewellery Promotional Campaigns in Dubai In 1996, the first Dubai Shopping Festival was launched and the Dubai Gold and Jewellery Group was created to act as an umbrella organisation to collectively market Dubai’s jewellery trade and the DSF. Together, with assistance of the World Gold Council and Dubai Economic Department, the Group decided to brand Dubai as the ‘City of Gold’. This flagship slogan has continued to be used in all our jewellery promotion. Many innovative marketing and promotional concepts were created during the annual shopping festivals that followed. For example, for the 1999 festival, the world’s longest gold chain – measuring 4.1 kilometres and weighing over 200 kilos of gold – was created. The record-breaking chain was cut up afterwards and the sections were sold to consumers as a souvenir of the event. In 2000, we created a special heart-shaped locket to celebrate that year’s festival theme, ‘To Mother with Love’. A whopping 288 kilos of gold were used in that promotion. Our latest promotion in 2003 involved over one and a half million dollars in jewellery. These are just a few of the success stories resulting from the Group’s participation in the Dubai Shopping Festival. Such major promotions could only be possible with the unified co-operative participation of the entire jewellery trade in Dubai. In support of the Dubai government’s vision, we have been actively promoting the Dubai jewellery trade both regionally and internationally. Participating in an event such as this conference and holding our own annual conference are both examples of our deep involvement. Some of you were present at our first conference in January 2003, where the theme was ‘City of Gold – a Vision for the Future’. I would like to extend my invitation to all of you for our next conference, scheduled for the first week in December this year. It should be noted that branding Dubai as the City of Gold was conceived to cover not only gold but other categories of jewellery as well, including gemstones. The sizeable increase in the volume of gemstone business established that our branding objective had been well served. While I will not speak for very long on diamonds, it is essential to mention this topic, as there has been significant growth in diamond jewellery over the last three years. In 2001, Dubai became the world’s fourth largest diamond market, after the US, Japan and India. The LBMA Precious Metals Conference 2003, Lisbon Tawhid Abdullah Today this represents a market size of $1.13 billion, or 395,000 pieces sold. But the amazing story is that although we are not the largest market for diamonds, Dubai is the first region in the world to have been established as having the highest desire to buy. One of the factors behind this growth was the work done by the diamond trading company to promote the “everyday diamond”. This was a campaign to encourage consumers that diamonds were affordable and could be worn for any occasion. As a result of this and other promotions, a market that in 1995 was $300 million became $1.3 billion in size today. There has been a very noticeable move on the part of the trade to market diamonds. This also applies to visual merchandising, which has greatly improved. Traders today realise that a good display can play an important role in a consumer’s choice. In Dubai’s duty-free section at the airport, there is an 85 square metre area mainly devoted to gold. This area generated over $42 million in sales during the past year, which is equivalent to about four tonnes of gold, or 47 kilos sold per square metre per annum. This could only be possible in Dubai, the City of Gold. Claudia Schiffer, the world-famous model, was used to promote one of our jewellery brands. As a result of that campaign for a simple gold necklace, we sold 3,850 pieces weighing a total of 400 kilos in the first year. Another gold brand necklace of ours sold a half tonne in the first year. Another promotion involved Harmony, a 22-carat brand by Italian designers. Now in its third year, it remains very popular with Asian consumers, averaging 600 kilos per annum. On another front, we also look forward to the opportunities that are being provided by the Dubai Metals and Commodities Centre, which will contain a commodities exchange and manufacturing and refining facilities. Our facility so far does not have London Good Delivery status, but we intend to seek it as soon as we are in a position to apply. A tiny city with a population of less than a million, Dubai is already making its mark on the global market. Nothing could be more appropriate than a visit to Dubai to see how quickly the city is transforming itself to offer the world’s best opportunities for the future. An Expression of Concern After having said all this, I have decided to share some of my concerns for the future with you, at the risk of not being invited to speak again – but I feel that I must bring these issues to your Page 128 The Marketing of Gold and Gem Set Jewellery attention. My sincere passion for the jewellery business is the result of having been born into the business – the third generation in my family – and having worked hard in it all my life. I hope my ideas will generate further thinking and discussion, leading to effective solutions that will benefit all of us in the long term. The issue at hand is the marketing and promotional support required for the gold jewellery trade from each of you. As people who are all well aware of what is happening in the world, you will realise that jewellery has never faced such a high degree of competition as it does today. The purchasing power of people who used to blindly buy jewellery is being diverted into other products. We offer value – perhaps other products do not, but people are still tempted by items such as watches, fashion products, perfumes, mobile phones, entertainment, travel and so on. I hardly need to remind you of the billions of dollars being invested by the companies concerned into the marketing and promotion of their lifestyle products. These efforts are focussed at the grass roots level – directly at the consumer – where it matters. We, on the other hand, are taking people – and their purchasing power – for granted. Today’s customer is slowly forgetting jewellery. Soon they will be content to purchase non-precious jewellery, because we haven’t been using our resources to convince them that they should still desire our products. We should all be shocked to learn that today’s modern teenagers prefer to avoid wearing jewellery. Remember that we depend on them for the future of our business. The marketing efforts of our competition are better structured and financed than ours are. We will receive a shock soon if we do not act now to protect the jewellery trade. Organisations such as the World Gold Council, De Beers and the Platinum Guild deserve our appreciation for their invaluable contributions, but compared to the massive benefits they have gained from the trade, I am sure they could do much more. It’s a shame that others in this hall have done nothing so far. No matter what the limitations are for the bullion manufacturers and dealers, bankers or wholesalers, most just enjoy the benefits with no financial input whatsoever. The entire burden of protecting the jewellery trade is conveniently left to the retail trade. Tawhid Abdullah and luxurious lifestyles you enjoy are the reward of the success of your business, but are ultimately driven by the jewellery trade – and are you doing it justice; are you giving it the support it needs to keep it healthy? Take it from me, if you do not support the trade and promote the business of jewellery, you will soon realise that this trade will not be able to support you any longer. This is a matter for all of you to think about. As chairman of the Dubai Gold and Jewellery Group, I feel I should not miss the opportunity to convey this serious message to you: please wake up now and think of the long-term future. Be fair to the jewellery trade by contributing a better share of what you gain. Marketing and promotion is the only answer to competing effectively. This requires a lot of money – are you ready to support it? My inspiration to work hard for the jewellery trade comes from none other than our leader, His Highness, General Sheikh Mohammed bin Rashid al Makhtoum and his vision to develop Dubai – a tiny city in geographical terms – into one of the most ideal model cities in the world for living, investment support, education, culture, health, entertainment, tourism, security – you name it. He has done this by strongly supporting those of us who work in these various sectors. In Dubai, we know the value of marketing – think about the depth of the ‘Dubai, City of Gold’ branding and the strategy behind it. A similar global strategy is required to retain and increase customer interest in jewellery. The time has come for all of us to work together under one umbrella – a world jewellery marketing body. Here we would not allow ourselves to compete against each other. We would work together for a common goal: to promote jewellery, regardless of whether it is gold, platinum, diamond, pearl or other precious stones. Every one of us who benefits from the jewellery trade would participate. This is the humble dream of a representative of the jewellery trade. But only all of you as decision makers can make the dream become reality. If we could achieve this, do you think any product category in the world could match our power? Thank you for your attention. ■ Many of you spend huge amounts of money on research and establishment costs. Consider the benefits you have all received from the hard work being put into the trade. The posh offices The LBMA Precious Metals Conference 2003, Lisbon Page 129 The LBMA Precious Metals Conference 2003, Lisbon Page 130