Selling Gold Online: Luxury at a Risk
Picture of Lolya's homepage that appears first to the customer when visiting the website. March 6, 2020. Raghad Murad
With the rapid increase of e-commerce, gold and jewelry companies have joined other industries in selling their products online. Offering expensive products for sale over online platforms requires changes in the strategies of the companies involved and a fast adaptation to the fluctuating prices of gold and metals.
Online customers can face challenges as they are unable to evaluate the product fully, so they may be uncertain about the quality of the purchase and the product.”In-store luxury consumers show a higher level of risk aversion than online luxury consumers, which implies that buying luxury online may be perceived riskier than in-store shopping,” according to a study published by the Journal of Electronic Commerce Research in 2018 under the title Selling Luxury Products Online.
Lolya, an online gold retailer company headquartered in the Middle East, started as both a physical store and an online domain and claims to have been the first to do so in the region.
“We started Lolya because of the demand in the market for an online gold shop and also because people started to change their views when it came to online purchasing,” said Rateb Abdulaziz, the co-owner of Lolya who has 20 years of experience in the field. His start-up company deals only in gold jewelry and currently delivers to customers in the United Arab Emirates and Saudi Arabia.
“We use transparency as our policy in maintaining trust between our customers and us,” said Abdulaziz, through voice messages. “We guarantee all of our products as we function under a legal license issued by the government. Our customers also trust us because of our long experience.”
As e-commerce is expected to increase to make up 18% of luxury goods’ sales in the coming five years, according to the study, more and more companies are opting to expand their audience’s reach. In the Middle East, there are already a number of online-based gold shops with no physical presence, some from the region and others headquartered abroad.
“We chose to sell our gold online to reduce the cost on the customer,” Mahmoud Seyam, who is in charge of GoldZone Jewelry’s office headquartered in Dubai, said in a phone interview. “Having a physical store is more expensive than owning a website. We target the people who find it hard or inconvenient to visit physical stores to buy gold. For example, people who only get one day off can now have their affordable gold pieces delivered for free.”
“The only difference between selling online and in-store is that customers are now able to reach us faster,” said Abdulaziz. “They can easily access the website to see our newest arrivals.”
However, the “high price of a luxury product poses a higher financial risk to consumers purchasing luxury products online,” according to the study.
“Online shops can work for anything except gold,” Ibrahim Metwali, who has been working in gold refining and jewelry for 30 years, said through voice messages. “It is very risky for the customer to buy online for the fear of getting scammed.”
Gold companies operating online also deliver their products with a certificate of authenticity, though Metwali believes that both the certificate and the stamp can be forged.
“Selling gold online can be a tool of marketing when it comes to the sellers and can get them to sell some products with time,” said Metwali. “But it cannot be the ideal market platform for gold until e-commerce becomes a more trustworthy space for all products sold and not just gold.”
Edited by: Farah Bachir
