RAPAPORT... A month ago, many in the U.S. wholesale market complained that overall, the first two months of the year were unusually slow as many retailers weren’t restocking, especially in the middle goods. Now, however, there are reports that business may be beginning to pick up a bit, at least for some. “For us, business this past month has been okay,” said Morris Szklarski of Kelsol Diamond Co., Inc. “It is all a function of inventory. If you are a player and you maintain inventory, then business will find you. If you are relying on other inventories, it is becoming more challenging.”
Shakeel Japanwala of C.D. Diam, LLC also has done well. “This past month was very good for us, compared to last year,” he said. However, he doesn’t expect the momentary increase in business to last. “With the holidays this month, it might slow down again.”
In Fancies, it’s Hip to be SquareOne market segment that has been experiencing a lot of demand is fancy shapes, and within that sector, the prized shapes seem to be the squares. “The princesses are hot in the U.S. market, from 1 carat to 2 carats” said Japanwala. “Also, cushions are very popular in those sizes as well.”
Jay Moskovitz of Robert Moskovitz Co. Diamonds agreed with the assessment. “We are selling mostly square shapes, princess cuts and cushions. I think people just prefer those shapes now. Back in the olden days, people liked marquises and ovals, but that isn’t the case anymore.”
However, not everyone believes that it is only the square shapes that are most in demand. “There is a premium for pear and oval shapes right now, 4 carats and up, and marquises are starting to come back as well,” counters Mayer Majer of Tov International, Inc.
Lack of Rough, Production Fuels ScarcityWhy the conflicting reports on demand? Szklarski offers a theory. “There is a tremendous scarcity of fancies in the market, 1.5 carats and larger,” he said. “And, in general, there is a lack of rough available. Princesses, Asschers and cushions are being cut in depth due to their popularity. However, pears, ovals, marquises and hearts are so low on the Rap sheets, it is not economical to cut them and, as a result, there aren’t a lot on the market — if we are looking for more production of those shapes, then Rap needs to raise the prices on the sheet.”
“So, pear shapes are hot for the reason that they are not around and marquises are catching up because no one is cutting them,” Szklarski concluded.
Majer has a similar view of the situation. “I think this demand is due to a couple of factors — for a while, pears, ovals and marquises were sluggish, so production of them slowed as well, causing the shortage we have today. Secondly, the world market is gobbling up pear and oval shapes, especially in the Far East.”
Finally, said Majer, many calls are for more than one stone. “A lot of customers are trying to match the stones and are looking for pairs, which again creates more demand.”
Proprietary Fancy ShapesOne avenue that many manufacturers in the U.S. have explored as an alternative to the generic fancy shape market is developing and producing a proprietary fancy shape. This approach, however, has no guarantees, warns John Harris, III of Harry Kotlar & Co, manufacturers of the Kotlar Cushion® cut. “A unique cut is neither a ticket to success nor path to failure in the marketplace. With companies like Costco and Wal-Mart selling diamonds in grocery warehouse environments and internet retailers like Bluenile.com selling diamonds by computer, consumers are building a belief that diamonds are an undifferentiated commodity.
“With a unique cut, a manufacturer can break away from the commodity mentality and create and benefit from the perception of providing higher-value goods,” said Harris. “Consumers pay higher prices for goods with a unique market position, regardless of the actual manufacturing cost. The Tiffany Lucida is a perfect example. This is not a revolutionary cut, but they charge a substantial premium because they have used their marketing expertise to build an enormous perceived value on the idea that a Tiffany Lucida diamond is more valuable than a ‘regular’ diamond.”
The Marketplace• Trading activity remains mixed.
• Polished prices fluctuate.
• Rough prices are uneven.
• Bigger and better goods rule the roost.
• Stones below 1 carat are weaker.
• Fancies see scarcity across the board.
• 4-carats-and-up fancies are especially hard to find.
• Princesses continue to be in demand.
• Cushions have picked up.
• Asschers, emeralds and radiants are healthy.
• Pears and ovals are growing in popularity.
• Hearts and marquises see a relative increase.
• Fancy colors remain even.
Article from the Rapaport Magazine - April 2007. To subscribe click here.