U.S. Wholesale Market Report

RAPAPORT... During this typically sleepy month, when many U.S. diamantaires traditionally close up shop for the week or two following July 4, business has been better than one might expect. Stomach-churning sales declines seem to have leveled off and wholesalers widely noted that they are anticipating additional improvement in the fall.

More Stability
Stanley Grossbard, president of The Original Radiant Cut Diamond in New York City, admitted that after returning from vacation, “I would have preferred to have more voice mails. But it depends on what you are comparing the market to. Am I feeling normalcy yet? No. But it’s summer, when it is supposed to be slow, and it’s better than earlier in the year, when it was supposed to be busy. I sense that things are stabilizing. I am expecting September to be better than last year, but nowhere near where it was two years ago.”

Similarly, Shailesh Jhalani, chief executive officer (CEO) of Prompt Gem Importers in New York City, commented, “I think the wholesale market is looking better than in the beginning of the year. Retail is showing signs of improvement. It won’t be like 2006 or 2007 — those were excellent years — but we are optimistic. You feel the momentum this summer and we see a push going into the rest of the year.”

Positive Expectations
“Summer is going slow,” Prashant Goenka, vice president of sales at New York City’s Vinod Kotahwala, said. “But I expect more activity in the lower qualities in the fall.”

At Rahaminov Diamonds in Los Angeles, owner Amir Goldfiner observed, “We have seen a big improvement in the market in the past several months, and have become cautiously optimistic about the near-term future. Since things have turned up, we are becoming more aggressive than during the first half of the year.”

Demand for larger diamonds and high-end items appears to be stirring. Shailendra Sacheti, owner of M.S. International in Houston, Texas, noted that sales for 2- to 3-carat diamonds had picked up, remarking, “That is surprising.”

Goldfiner recognized, “Most of our sales have occurred in expensive and specialty-type items. We carry a new line of colored polished rough diamonds, which has been very successful, and we have also been moving high-quality and larger goods.”

Shortage of Fancies
Better fancy shape diamonds remained hard to find. Grossbard explained, “We went through a period of time where virtually no diamonds were being manufactured. There was never a glut of well-made fancies. You ended up with shortages of fancies because only rounds were being cut.”

Grossbard said that recently, fancies seemed to hold their prices better than rounds, which he attributed to their scarcity. Referring to the cut he specializes in, he attested, “Well-made radiants are very few and far between.”

Unfazed by KP Drama
Despite a stream of negative news regarding the Kimberley Process (KP) — nongovernmental organizations (NGOs) issuing statements about holes in the system, a resignation from the KP in protest, human rights abuses linked to diamond mining in Zimbabwe — wholesalers overwhelmingly considered the certification scheme a matter for retailers.

“We all have to think about it,” clarified Grossbard. “It’s an issue that is near to my heart. But people aren’t really making buying decisions based on KP certification. At the end of the day, especially with the economy in the toilet, how many people are going to pay 15 percent more for a conflict-free diamond? I think it is a serious issue, but from a business standpoint, it’s a talking point, like cut.”

Sacheti conceded, “People are again asking for KP certification, but not much. Not like when the ‘Blood Diamond’ movie came out.” Jhalani said that most of his clients are not really asking about the KP, and he described his business as “neutral on the topic.” Avi Simkhai, director of Kanton Diamonds in New York City, saw little interest from his clients, describing them as primarily “price-oriented.”

Much thought is still being dedicated to cutting expenses. Grossbard declared, “You need to be more creative when times are tough. You evaluate your marketing. There is debate about whether to market more or less in times like these.”

Depending on the region, some diamantaires have garnered significant savings through lower rent. In New York City, Simkhai contended that he doesn’t know anyone who hasn’t renegotiated their lease. However, in Houston, Sacheti reported that landlords aren’t as eager to make deals.

Looking ahead, Goenka is working to prepare his company for a changing marketplace. “People don’t want to go to any mall. They want to go to the local jeweler, get comfortable over time and get the service.  I think that’s what’s going to happen in the future. It’s going to be a big change. It’s going to be a good change for us. We are ready for it.”

The Marketplace

• Diamonds under $10,000 are selling best, though demand for larger stones and specialty items is improving.
• The bridal market is still dominant, driving limited purchases of diamonds between 0.80 and 1.50 carats.
• Most sales are for diamonds with colors from G to J.
• Clients are looking for clarities in the range of VS1 to SI2.
• There are shortages of well-made SI1 to SI2 fancy cuts.
• Requests for matched pairs are generally in the range of 2 1⁄3 to 4 carats total weight.

Article from the Rapaport Magazine - August 2009. To subscribe click here.