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Malabar is Eying Big

 

Ahammed MP, Chairman, Malabar Gold & Diamonds, speaks exclusively to Bullion Bulletin about entrepreneurship that made Malabar what is today. Started with a single shop retail in 1993, its turnover has touched Rs. 30,000 crore today, with 196 outlets. The company has now ambitious plan to establish 500 outlets by 2020. Excerpts…

 

Founded in 1993 by a team of enterprising businessmen led by Mr. Ahammed MP at the northern city of Kozhikode, Kerala, Malabar Gold & Diamonds has come a long way to become the world’s fifth largest jewellery retailer with 196 showrooms spread over nine geographies with its annual turnover touching approximately Rs 30,000 crore. This is a rare feet for a business house that started its long march as a single shop retail outlet and reached the pinnacle of its business vertical in such a short span of time.

 

Factsheet

Total outlets - 196

In India, Malabar Gold & Diamonds has 89 showrooms.

Outside India, Malabar Gold & Diamonds has 106 showrooms which includes regions such as Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, Singapore, Malaysia & UAE.

You have established manufacturing centres in major industrial parks in Kerala, Andhra, West Bengal and Gujarat. What is the idea behind establishing so many manufacturing centres? What is unique about each of them? How many artisans are employed directly in these units? How Malabar helps and supports them in improving their workmanship to address new design and technology aspects?

We have set up our manufacturing facilities across India not by default but by design. This is because India is characterised by various cultures as far its diversity goes. Therefore, to understand the customer's choice, needs and preferences, we should know their culture. There is no better way than know these diversified cultures from close quarters rather than flipping through history books. We have a well networked R&D team and a bevy of historians and connoisseurs of art who give their valuable feedback that goes into our ornaments. For Indian’s you know, gold is something special and always has a sentimental value attached to each and every occasion. So we have that special one for everyone’s special occasions that make them feel special. And this is our specialty. So if Germans have their automobiles, Japanese have their electronics, Swiss have their watches, we (Indian’s) have our jewellery tradition to show off to the world. I think that explains your question at least partially.

On retailing  Malabar is widely present in India and 9 international destinations. How is retailing gold and diamond jewellery in India different from retailing elsewhere? What is the typical profile of a customer walking into your store in India (in terms of age, education, wealth, aspiration, awareness level, price etc) What are the key differences between an Indian customer and an international customer? 

India has a cultural history spanning over around 5,000 years. Our social mosaic is characterised by family bonds which has been enduring and endearing, a trait that is simply not present in say New York or London or in Paris. But, of late, the human bondage among Indian families has been fast gaining currency in the West. Since gold is an integral part of any Indian family, we plan to cultivate this filial culture to strengthen our brand value further.  It goes without saying that for ages people trusted gold more than currency. Gold has been considered as auspicious by everybody. And as a store of value, its track record is impeccable. It is not as volatile as paper currency. Remember, till a few decades ago, after the World War II, all the nations pegged their currency against US dollars which in turn was pegged against gold. It was called Gold Standard after the US reneged on fixed conversion rate. Even after the collapse of that arrangement, still most of the countries keep a lion share of their reserves in gold.  

How does Malabar differentiate itself from other organised players in retailing?

 

There are hosts of factors that keep us different from the crowd and listing all of them will be a tedious task for both you and me. So let us be very specific on this. Our differentiators include lifetime product service, free product insurance, 14-days return window, sale of only certified Jewellery, detailed product details, pricing, easy exchange, third part security, BIS hallmark, after sale service etc.

 

Malabar is present in over 9 countries with different regulations, different taxation structure, different currencies and so on. What is the risk management policy followed by Malabar? How do you implement it?

We have an international consultancy which helps us to comply with all the rules and regulations of different nations in which we have business interests. We follow them in letter and spirit with zero tolerance. Since we deal in local currencies, we he have a natural hedge against currency volatility. It is as straight and simple. Any additional hedging will be done by our hedge desk.

UAE is introducing VAT next year. There is general concern in the market. What is your observation in this?

 

Well, so far the UAE has been a tax free country since Dubai is known as one of the world’s biggest shopping centres and tourism hotspots. But now they will have to roll out VAT since they are part of the Gulf Cooperation Council (GCC) nations. But there is a general misnomer that has been doing rounds spooking market sentiments. The fact is that GCC is not going to slap VAT on gold. The tax is applicable only on making charges. We will make good for this additional tax burden by absorbing it so our customer can go on shopping as they used to be.

 

What is your assumption about the growth of jewellery in GCC region in next three to five years?

 

We have established our brand in this region and our after sales service team is doing a good job. We have been clocking a run-rate of 20%-25% CAGR. The growth is mainly driven by our strong brand recall. Earlier we were targeting Keralites only, later we spread our net to cover Indians and now the entire world population is our market irrespective of nationality and origin. Hope I made myself clear here.

 

This year, you took an ambitious plan to cross 200 outlets to its existing network of 195 outlets across Gulf, India and Far East with an investment of 620 Crore. What prompted you taking this massive expansion plan? What is the outcome?

Already we have touched the 196 showroom mark. By December the count will hit 200 and in next 3 years we will be running 300 showrooms. Our Vision 2020 once fully played out will have 500 showrooms. Beyond business, we also want to be a responsible corporate citizen. We have earmarked 5% of our revenue for such initiatives under our corporate social responsibility (CSR) programmes. We give back part of what we earn to society. We route it through our philanthropic institutions like Malabar Housing Charitable Trust, Malabar Education Charitable Trust, and Malabar Medical Charitable Trust.  Most of our financial backers are non-resident Indians (NRIs).

Disclaimer: Views are personal and not the views of the publisher.