Transforming the business model of a gold manufacturer, distributor, and retailer

The situation

When the price of gold doubled in 2016, putting a damper on purchasing power, the gold market declined by as much as 35 percent, creating problems for the client, a gold manufacturer, distributor, and retailer in the MENA region. Given these new market realities, the client asked Strategy& to assess the current dynamics in the market and define the market outlook, as well as to redesign the business model and identify potential commercial and operational improvement opportunities.

How we helped

To understand the new dynamics of the gold market as well as the projected market outlook, the Strategy& team visited more than 25 customers in six main regions and coordinated two surveys, one with 200 retailers and one with 800 customers. Comparing the client with market competitors yielded a baseline of performance and position. We then conducted a full-performance assessment by product line, examining value proposition and differentiation, pricing, sales channels and geographic presence, and profitability. We used a top-down and bottom-up approach to assess the retail opportunity and potential number of stores; and to assess the manufacturing for third parties, we compared the production cost among the client’s factories across various countries, and determined the cost advantage compared to other international manufacturers.

Results

The team delivered a plan consisting of three strategic pillars and 10 initiatives for the company to focus on. We educated the client’s management about the opportunities in the market; consolidated manufacturing and created a hub for the client’s own production as well as production for third-party jewelers; and detailed a retail expansion plan, by store type and region. Our comprehensive turnaround plan with prioritized initiatives along core business, retail, and manufacturing is expected to boost revenues by more than 30 percent and EBITDA by more than 6 percentage points over three years.