It comes as no surprise that the big slump in oil prices has had a global impact. For many economies, it has been relatively positive, as lower energy prices have meant that consumers have that much more disposable income to spend. In the Middle East, where much of wealth generated comes from the oil industry and its ancillaries, lower oil revenues have adversely affected the luxury industry. As the appetite for luxury has shrunk along with sinking oil prices, what position can we luxury goods dealers claim in today’s ever evolving global market? Trying to adjust to ever-changing market conditions is an overwhelming task as there seem to be ever increasing economic upheavals and fewer possible solutions. We all are desperately seeking some stability, some hope in this turmoil, yet is it even remotely possible to sail these turbulent waters without capsizing?
Here in Dubai, the jewellery industry wasn’t really affected in 2014 when oil prices began dropping. There were a variety of reasons for this, primarily the fact that Dubai, which has a close geographic proximity to India and has a huge resident Indian population, is also a supplier of preference for the Indian jewellery market. Gold and diamonds are traded between India and Dubai and trade continued to flow smoothly in 2014. Also, Tourism was booming at that point in time, we also had Indian tourists visiting. Dubai’s retail industry owes a large chunk of its flourishing existence to transit passengers and tourist traffic from all over the world, particularly from South Asia and the Middle East, the Gulf Cooperation Council (GCC) countries being foremost among them.
It was all well and good until the first quarter of 2015, when the economy had been drastically disturbed. There seemed to be no end to the drop in oil prices and the purchasing patterns of GCC tourists began to reflect this. Economic uncertainty around the world meant that diamond imports into India were also severely impacted. It was tough trying to sell luxury gold and diamond jewellery in such turbulent and unpredictable times.
So what does a jeweller in the Middle East do to stem the bleeding?
Oil prices are still at an all-time low and there isn’t much we can predict as economists and leaders work on salvaging the oil and non-oil sectors we need to realise that we can’t do anything about oil prices. Gold is fluctuating beyond all imagination. This has inevitably resulted in a drop in consumer spending power and a rise in uncertainty. All these external factors are givens that we as retailers can’t do much about. So the answer is to focus on the things that can be controlled. Here’s what we need to work on when circumstances are beyond our control:
Control costs. - This point is quite self-explanatory. A rigorous internal audit and some decisive intervention in areas where costs can be cut, and you are well on your way to getting on top of your game.
Redefine your value proposition to the customer. There is no single, all-encompassing answer when it comes to redefining your value proposition to the customer. This is something that is always a work in progress. Each consumer has a different perception of value and a jewellery retailer has to continuously refine strategy to come up with a wide variety of value propositions. Price points and ‘value-for-money’ offerings are always there, but there’s also a whole range of other options. In societies that consider gold as a status symbol, extravagant and elaborate designs that weigh less will do the trick. Then again, bold designer jewelry attracts its own specific clientele.
Customisation always works when it comes to meeting a client’s requirements. Offering bespoke design services, implementing creativity and innovation while keeping up with ongoing market trends are ways to ensure you give your clients that something extra. As I mentioned earlier, redefining your value proposition is a constant work in progress. I cannot emphasize enough, the importance of analyzing the situation from the inside out, rather than outside in. Your business is your brainchild; no one else knows your strengths and weaknesses the way you do.
Build relationships with your clientele. Always aim to leave your client with a great experience more than anything else. Every brand needs to tell a story, you succeed when your consumer relates to your story. Work on showing why you stand out rather than offering the ‘cheapest’ Valentine jewelry. In my humble opinion, building trust is the best way to guarantee long term success in our industry. Trust is key in luxury retail, particularly in jewellery. Breach trust and one does irreparable harm. Reach out to your consumers, come up with new marketing tactics and strategies that will highlight your market value, polish your brand image as much as your craftsmen polish your diamonds. You don’t need to take any drastic or overly expensive measures, take small steps and you’ll eventually get there.
Contrary to what I’ve mentioned above, many in jewellery retail have reacted to the current situation by simply resorting to massive undercutting as a means to generate sales. This is a self-defeating exercise. It may work temporarily, but it shatters the value of the entire product segment and industry. Then there are those who want to blur the lines when it comes to issues such as the valuation of diamonds. This is a disastrous route as it will only lead to an inevitable downfall in the long run, it must be avoided at all costs.
Unsettling times aren’t here to stay, they will pass soon; we’ll lose if we quit, and we’ll survive if we persevere. So while one might think I’m being simplistic, I truly believe that the only real way to survive and thrive in the current global economic environment and particularly in the Middle East, where we find ourselves afloat in a sea of sinking oil prices, is to control what is within our grasp and build bridges with our consumers. Right now, the key is survival and endurance. Both are entirely up to us.