Most foreigners know the Mall of the Emirates in Dubai as the desert hotspot that houses an authentic year-round ski slope with actual snow (though the snow here seems to be missing some of the characteristic softness one finds in the Swiss Alps). This week the Mall got a new attraction – De Beers LV opened its retail store at a well-positioned corner in the mall, more or less next to Tiffany & Co., Damas, and Dhamani. We walked into the stylish, somewhat aristocratic, almost formal looking store during its first day of business. While browsing there, Ibrahim Daher, a senior sales associated confided that “except for a small insubstantial sale, no serious items had been sold yet.”

            Most of the diamond jewelry displayed in the store was either in white gold or platinum. The one necklace that might have pleased my wife was priced at $1.5 million – I politely passed. “Maybe next time,” I murmured.

            Ahmed, my host, predicted that the De Beers Dubai store will quickly become the most successful jewelry outlet in the U.A.E. “Locals will go for the brand, for the name; they couldn’t care about the price tag. Just as in automobiles and many other luxury items, local women want brands. The store will have to replenish its stocks within a few months.”

            Dubai does not seem comparable to any other place in the world. Dubai is Dubai, potentially offering the largest and most ostentatious of everything. It has a population of slightly more than 1.2 million people, which is expected to grow to four million within the next 15 years. No more than seven percent of the population is comprised of local nationals. Some 60 percent are Indians and 20 percent are from the Philippines. According to local experts, the total Dubai jewelry market is $3 billion annually. The diamond jewelry part of this is estimated at $408 million, and, visibly, one of the fastest growing markets in the world.

            For such a small population, the number of jewelry stores seems enormous: 850 retail outlets. About 20 percent of these stores are part of a chain; 80 percent are stand-alone retail outlets. However, if one looks separately at the 50 largest retail outlets, then 50 percent are chains and 50 percent stand-alones. But even the larger players are relatively small. There are only six retailers in Dubai that employ more than 100 people. This small city also boasts about 1,000 jewelry manufacturers. According to a recent survey, 48 percent of all jewelry sold is locally manufactured; the remaining 52 percent consists of imports.

            But we must be careful when using these figures. There is research that says 67 percent of all retailers are also involved in either manufacturing or wholesaling – or both. There are some stores that are proud to be only selling to consumers – and we assume that De Beers LV is joining that minority. So there may be an overlap when reporting on the number of retailers and jewelry manufacturers.

            I wondered who would be the buyers. According to a recent Nielsen survey, 54 percent of all sales are to tourists, 45 percent to Dubai residents, and one percent to others. Ahmed observed that most tourists are British, but they aren’t spending. It’s the Russian tourists that really blow the big money – no diamond jewelry item is too expensive for them. The Nielsen survey confirms that 46 percent of all retail consists of gold jewelry, followed by 36 percent for diamond jewelry. All other categories (silver, precious stones, pearls, etc.) are in low one-digit percentage figures.

This year alone, there will be eight million tourists visiting Dubai. This number is expected to grow into an estimated 22 million tourists in 2020. In order to facilitate this, some 200 more hotels are in the planning. The future potential of tourism here cannot be understated.

            The wholesale market behaves rather differently from the retail sector, and in this column, I am mostly interested in De Beers LV, its competitors, and its place in the market. Some 50 percent of the retail outlets employ fewer than 10 employees, with another 22 percent falling in the 10-20 employee range. Who works at these stores? According to Professor Howard Reed of the Dubai Women’s College, some 99.8 percent of all jewelry market employees are expatriates, while also some 98 percent of the owners are foreigners or foreign residents. These figures sound plausible, given the fact that there are hardly any local nationals living in Dubai.

            The “novelty” of De Beers may well be that it brings such a strong brand to the jewelry market. Most store owners have their own “single” store brand and don’t sell other branded jewelry products. Not surprisingly, 90 percent of the local wholesale market sells unbranded jewelry. Wholesalers also serve clients beyond the local scene. Some 52 percent of all wholesale sales are to local retailers; the rest is being exported to other emirates or beyond.

            What is particularly interesting is that both the wholesale and the retail markets are largely cash based: about 50 percent of retail sales and 40 percent of wholesale sales are in cash only. Some wholesalers will also accept checks, though credit cards (at 8-10 percent of all wholesale transactions) seem simply unacceptable. On the retail side, this is even more pronounced with over 50 percent of the sale being paid for in cash and the remaining amount being paid for by credit card. The reluctance to use checks may also have some practical reasons: if one’s check bounces, the inevitable and almost automatic outcome is a jail sentence. The law is merciless in this respect.

            Walking through the Mall of the Emirates one cannot escape seeing Damas and various other retailers (often Indian/Dubai partnerships) in which diamond jewelry brands either licensed from, developed by, or supported by the DTC are offered.

            It occurred to me that at this mall, under one single roof, DTC supported brands are now competing directly with De Beers. Though, ideally, we like to believe that in branding competition everybody wins, in Dubai, we will be able to see whether the heavy money goes to De Beers or to the DTC-supported brands. Clearly, there will be winners and losers. In theory, everyone could be winners, but it doesn’t work that way in practice. Whatever the outcome, we shouldn’t be looking at Dubai’s diamond and jewelry market for what it is today, but for what it will become tomorrow.

            Let’s see what De Beers’ entry will do to all the other jewelers at the Mall of the Emirates. The expectation is that De Beers will do well – and if that comes at the expense of retailers supported by DTC Sightholders, who are promoting DTC-supported brands, this Dubai Mall could literally become quite a hot spot – A hot spot worth watching.

            Have a nice weekend.