Lightening up the lives of Saudi women

Lightening up the lives of Saudi women
Updated 08 May 2017

Lightening up the lives of Saudi women

Lightening up the lives of Saudi women

One of the pleasures of public company status is to watch your share price react to macroeconomic news — events that are outside the control of the chief executive. And so it was for Selim Chidiac last month when, in a surprise move, the government of Saudi Arabia decided to resume benefits to public sector workers.
The payments had been cut last year, as part of a policy of fiscal tightening brought on by the fall in oil prices. Those same government employees affected are also big customers of Chidiac’s company L’azurde, which is the biggest jeweler in the Kingdom.
As the shares ticked upward on the Tadawul exchange, he could reflect: “The return of benefits for the Saudi government employees was a very positive event. We noticed an immediate downturn last October when it was cut, not just in terms of cash spent, but in the mood too. It is too early to see a return of that spending, but we certainly expect a positive effect. It will have a big effect on consumer confidence. It is just before Ramadan when there is always big spending on gifts and consumer items,” he said.
Saudi women love jewelry. Since 1992, L’azurde has been in business “to lighten up the life of women with incomparable, elegant and innovative jewelry,” according to its mission statement. It sells more than 1 million pieces per year in 52 countries, but mostly in Saudi Arabia and Egypt, both countries where it has big manufacturing facilities.
“Arab women see jewelry as an investment, an accessory and a saving, which is a saying in Arabic. But many will also change their jewelry twice a year, exchanging old for new. ‘What’s new?’ is the first thing you hear a Saudi woman say when she comes into one of our shops.
“There are cultural factors at play here. Many women in Saudi Arabia tend to stay at home more than in other parts of the world and they will show off their jewelry to their friends and family,” he said.

A corporate high-flyer
Chidiac has learned a lot about jewelry, from a standing start, since he joined L’azurde six years ago. A Swiss national of Lebanese descent, he honed a career as a corporate high-flyer with stints at Harvard and Insead business schools, as well as the University of California school of management, which qualified him to be a brand manager for consumer multinational Procter & Gamble (P&G).
Then, in a sharp career shift, he headed off to drinks group Red Bull, in Tokyo and Los Angeles, when a headhunter came calling on behalf of L’azurde.
“I had worked for a big quoted global company P&G, for a private family business at Red Bull, where I had done all I wanted and I was interested in working in a private equity environment. It was difficult to imagine leaving LA for Riyadh but what drives me is a challenge. There was also the equity incentive,” he said.
He was hired to drive through a cultural transformation at L’azurde. Despite its venerable origins under the leadership of the Al-Othaim business family, the company had been bought in 2009 by private equity investors led by Investcorp of Bahrain, with a long-term strategy to list it on a public market. It was Investcorp’s biggest Saudi investment and the only one where they had majority control.

A changing society
Over lunch at a five-star hotel on Dubai’s Jumeirah strip, Chidiac mulls over the significance of the market listing. “It was the third initial public offering (IPO) in Saudi Arabia in 2016 and the last. Now we are waiting for (the listing of Saudi) Aramco. The Saudi market is bigger than any in the region, but who knows, maybe we will have a dual listing later, to raise more funds,” he said.
He is acutely aware of the huge changes underway in the Kingdom and in many ways is riding on the transformational wave that is propelling it toward economic diversification, according to the Vision 2030 strategy, with all that means for consumers, especially women. But he has a word of warning: “Maybe they are trying to do it too quickly, Saudi people are not used to rapid change.”
That is surprisingly cautious, as L’azurde could be viewed as both an agent of that change, and a big potential benefactor from it. Its brand ambassador and social media influencer in the Kingdom is “Lady Fozaza,” the glamorous Lebanese-Saudi designer also known as Alanoud Badr, who is a million miles away from the traditional image of Saudi women. “She has a great look, and, as a successful designer and entrepreneur, is a great role model for Saudi women,” said Chidiac.
The role of women in the Kingdom is one of the focuses of the Vision 2030, and Chidiac has direct personal experience of the challenge. He first lived full-time with his family in Riyadh but said his wife found it difficult.
“She could not drive, she couldn’t go out alone,” he said. Now his family lives in Dubai and he commutes to Riyadh.
“But, on the other hand, I have found there are many good things to compensate in Saudi Arabia. Family life is very good and there is strong bonding between generations,” he said.

Sparkling demand
So what do Saudi women — who make up 90 percent of Chidiac’s customers — want in jewelry? The traditional “Arab look” is for gold pieces, often of 22 karat gold, with a “yellow” look. That is the kind of gold that has been imported into the region for hundreds of years and is also still extracted in the ancient Mahd adh-Dhahab mine — the “Cradle of Gold” — near Madinah.
But although there is still a market for traditional merchandise, times, and tastes, are changing. “Lighter jewelry is in fashion now. Less is more, is our buzzword. This was influenced too by the consumer downturn. Our manufacturing techniques mean that we can have a similar-looking piece to the heavy jewelry, but it will be lighter and cheaper,” he said. And there is a trend for 18 karat, which is perceived as more “European,” Chidiac added.
The market is still dominated by wedding jewelry, with the traditional four-piece set of ring, earrings, necklace and bracelet a big seller. The price range is anything from SR1,000 ($267) to SR2 million, but most purchases are in the SR4,000-SR5,000 range, Chidiac said.
“At the moment, customers buy mainly in person from malls. Saudis love malls but there is much less leasable space per head than elsewhere in the GCC (Gulf Cooperation Council), so that trend (toward bigger malls) is going to continue. That is why there is so much potential. But that will change as society changes. If women are going to be going out to work more, they will buy more online, because they won’t have so much time to go to malls,” he said.
Branded jewelry is also a growing market trend, with L’azurde mark pieces beginning to compete with the likes of Tiffany and Bulgari.
“Branded jewelry is the coming thing. It has mirrored the rise of luxury fashion brands, like Gucci and Armani. We have 99 percent brand awareness in Saudi Arabia and Egypt, which is higher than Apple,” Chidiac said, with some satisfaction.
Another growth area is men’s jewelry, but here the product has to be more specialist. There are sanctions against men wearing gold in Islam, so pieces have to be made from silver or platinum, which are not forbidden.
“Most global brands market to both men and women. So now we produce a range of very high-quality cufflinks, rings and bracelets for men. They know the brand because their wives and daughters know it. At the moment, among men, awareness is high, but consumption is low. We are changing that,” he said.
Selling glittering baubles in upmarket malls is the glamorous public face of the L’azurde business, but equally important from a commercial viewpoint is manufacturing and production, which is sustained by a big research and development budget.
L’azurde produces 5,000 new pieces a year, all in-house in the Riyadh and Cairo premises. Another coming thing is 3-D printing, which accounts for 30 percent of the range and rising.
“3-D is a game-changer for any industry, including jewelry,” said Chidiac.
And there is the wholesale business, which supplies jewelry to other independent retailers, mainly in the Middle East. Some 2,200 third-party shops receive L’azurde goods every year.

IPO funding
All that adds up to a lucrative business, even in the tough market conditions of “austerity” Saudi Arabia last year. L’azurde reported revenues of SR405.4 million in 2016, and net profits of SR72.1 million, both down about a quarter on the previous year. But gross margins — at 60 percent — were still among the best in the business, and Chidiac is confident that the cost-control measures put in place last year will continue to be effective.
That is good news for the shareholders who bought in during the IPO, and for the ones who — like Investcorp — remained invested to some degree. Chidiac has just produced L’azurde’s first annual report as a public company and said that the IPO experience in the Kingdom was a good exercise in discipline.
So how will he use the new access to funds that the IPO has provided? The ambition is to double the size of the company in the next two years, which he can achieve partly through organic expansion via new brands and outlets to become a multi-brand jeweler.
A new range, Kenaz, offers high-quality pieces at more affordable prices, and last year Chidiac signed a deal with Amazing Jewelry, an international franchiser, to get 25 years of rights in nine markets, including Saudi Arabia and Egypt.
Or he could go a more impactful route. He has just appointed a former banker to head up a mergers and acquisitions team at L’azurde so that gives some indication of his thinking.
“We can do acquisitions, and we’re looking at the region if we find the right target at the right price,” Chidiac said.
So he will soon be shopping around the regional corporate jewelry scene, pretty much like the typical Saudi woman, for an accessory that is also an investment.