RAPAPORT...What sort of impact do the much discussed housing crisis, the high inflation rate and the rising cost of fuel have upon holiday sales for diamond wholesalers? Besides their complaints about the holidays moving later and later every year, wholesalers around the country speak of a slow or, in some cases, a dead season compared to 2005 or 2006. On the other hand, wholesalers who have cultivated relationships with key customer accounts over the years report strong holiday activity. These wholesalers say they do not find their success surprising, because their more affluent customers are affected only slightly in the short term by the marginal upward creep of a gas bill or an interest rate.
Widespread Hesitation“People are frightened,” said Jose Garcia, owner of Jose Garcia Jewelry Inc. in Miami. Garcia recently got back from the Jewelers International Showcase trade show in Miami Beach, where his company had a booth, and he reported that “a lot of people simply didn’t show up” at the event. Some customers who might have been strong candidates for a diamond jewelry purchase, explained Garcia, may be holding onto more of their discretionary income because they’re considering bigger purchases, such as a new house. Yet, even in the generally slow environment, Garcia reported consistent demand for 10 pointers, as well as 1-carat diamonds set in rings and earrings. “Accessories are in demand,” he said.
“Retailers are not confident enough to buy because they don’t know where it will lead, and nobody seems to be happy,” said Mike Kahen, one of the principals of Afco Creation, Inc. in New York. The absence of a clear sense of direction means, in this context, that retailers are worried they might stock up on an item that customers turn out to have zero interest in. “If they buy something, they’re afraid it’s going to go down,” Kahen added. Nevertheless, his company was experiencing significant demand for 3-carat-plus stones, with a number of the off-sizes — 2.75-, 5- and 6-carat diamonds — doing particularly well.
Elizabeth Ellner, office manager of Cardan Diamonds Inc. in New York, speaks fondly of the holiday seasons in years past when the volume of calls and orders was so heavy that she rarely left the office before late at night for weeks on end. In the current season, many of Ellner’s friends who work at Saks Fifth Avenue, and other high-end retailers, have reported that inventory doesn’t stay on the shelves for more than 24 hours because it meets such strong demand from affluent customers. At the same time, things have slowed down for Ellner and her colleagues to the point where she proclaims, “There is no holiday season. People are too worried about heating their house at $3.15 per gallon of oil.”
Accelerating DemandA number of wholesalers interviewed by RDR took issue with any pessimistic assessments. Jeff Conkey, president of Don Conkey & Sons, Inc. in Pittsburgh, admitted that marquises, pears and oval stones were moving very slowly, but said that “Things have picked up — business is back on track.” Specifically, he cited strong demand for Journey pendants, as well as round and princess cuts of 1.25 carats. Demand is strong enough that many independent jewelers are getting tougher with manufacturers and wholesalers, putting pressure on them to fulfill stock orders in a timelier fashion, Conkey explained. Many of his friends in the industry face a lag time of four to five weeks, a problem that Conkey himself doesn’t have to worry about because he does his manufacturing stateside and faces only a three- to five-day turnaround for many orders.
“Some retail stores are complaining that they’re not getting much traffic, but I can’t complain because we’ve been doing well,” stated Sharon Aharoni, brand manager for the Alito collection at GN Diamond in Philadelphia. Aharoni remarked that in 2006, she and her colleagues were fulfilling holiday orders by September, and this year the process didn’t commence until October, but things are still looking good. In particular, the 3-carat-plus stones in the Alito collection are selling decently.
“The better goods are much more in demand,” agreed Rajeev Daga, one of the principals of the Real Gems Corporation in Houston. But this success depends upon doing new things, carefully cultivating existing accounts and trying to entice new ones. His company recently began selling through Rapnet, and it has successfully reached out to new accounts in recent weeks, snatching sales from the jaws of potential defeat.
The Marketplace
• 3-carat rounds and princesses are very popular.
• Marquises, pears and ovals are moving slowly.
• 5-carat+ goods are very much in demand, but supply is constrained.
• Demand is strong for off-sizes, 2.75 carat+.
Article from the Rapaport Magazine - December 2007. To subscribe click here.