RAPAPORT... In the wake of unemployment figures jumping past 10 percent for the first time since 1983, U.S. wholesale diamond sales remained largely dormant. “That’s never good. That’s obviously the reason consumers aren’t buying. It’s about job security,” commented Nitesh Daga, sales manager for Real Gems Corporation in Houston, Texas.
“I think it does get into minds,” conceded Andrew Rickard, vice president of operations at RDI Diamonds in Rochester, New York. “The beauty of our business is that it’s bridal. If you position yourselves properly, you can capture that. I think that is the one area that continues to be steady for jewelers.”
Stanley Grossbard, president of The Original Radiant Cut Diamond in New York City, said, “It’s still very quiet. We have pretty good comparisons to last year, but it’s hard to say compared to last year, because last year was completely bizarre. I’m hoping there is enough sell-through in inventory that people have to start restocking.”
Waiting for Demand Many retailers lacked the confidence to buy inventory for the impending Christmas season, preferring to wait for customers first. “So far, it looks like any other month of the year,” remarked Ran Amiel, president of Globe Diamonds, Inc. in New York City. “If someone doesn’t have the money, it doesn’t matter if it’s 50 percent off the Rap list or 90 percent off the Rap list. They won’t buy. They don’t want to hear the price. I’m talking about mom-and-pop stores, not the dealers on 47th Street,” he clarified.
Rickard noted, “We’ve sold quite a bit of stock, but they are asking for extended terms. They are asking for 90 days.” Serge Fischler, president of New York City’s Fischler Diamonds, reported, “In my market, they are waiting as long as they can.”
Additionally, supplies are tight. According to Daga, “There are massive supply issues. They’re not manufacturing.” Rickard stated, “Supply has tightened up in princess cuts, especially. Princess is a tough find. Sometimes there are better deals in 1¼-carat rounds than in 1¼-carat princesses and your retailer doesn’t understand that. You have to explain.”
Far East Competition “There are fewer goods coming in and the American market is feeling heavy competition from the Far East,” observed Fischler. “These countries have sunk their teeth into what Americans like. It is getting more desirable to sell to the Far East than to Americans. They have no memo issues and better liquidity. I personally believe that if things keep going the way they are going, American jewelers will have to adjust the way they procure diamonds. There are other people in other markets — India, China, etc. — who are not putting conditions on the sale, such as memo and return rights.”
Most agreed that rough prices have risen without a corresponding demand for polished. “If rough prices go up, then the prices in India go up and then the prices go up here,” Daga cautioned. Fischler said, “I don’t deal directly with rough, but rough prices are very strong, which obviously makes things a bit more difficult.”
Credit continued to be a hot topic. “The people who are buying are taking more time to pay,” Daga pointed out. Rickard frequently utilizes Jewelers Board of Trade (JBT) and noted, “We are seeing a ton more retailers rated three or four. Obviously, this is telling us that people are having a harder time with bills. You have to err on the side of caution, because if they close their doors, you’re not going to get that back.”
Grossbard acknowledged, “It doesn’t make sense to force business” in the current environment. Anton Weiss, of the loose diamond division at Nanasi Enterprises, Inc. (N.E.I.), in Hackensack, New Jersey, seemed to agree. “I’m not looking for new customers. The banks cut down their credit limits.”
Saying No to MemoFischler has taken it one step further and has stopped offering goods on memo. “I need to move my merchandise, which means not shipping just for the sake of shipping, but selling. If a vendor can sell, he will not give out on memo. I can afford to sell. With reduced margins, jewelers should understand that they are buying goods at too high a price.”
Many feel that holiday sales could shape the coming year. Daga predicted, “I think if this Christmas is not so good, you’re going to see a lot of bankruptcies.”
Grossbard stated, “A lot of people can wait out a year or two, but people will be exiting the industry after that.” However, he added, “People are looking for any sign that business is going to pick up and I think we are seeing signs overseas. I’ve never expected this Christmas to be very good.”
At least, he remarked, “There’s a little more time to focus on being more creative with marketing.” Grossbard does believe things will turn around eventually. “I anticipate people will start being happy again. They will have to start restocking inventories. I’m hopeful we’ll get to that level sometime in the middle of next year.”
The Marketplace- Bread-and-butter diamonds are mainly ¾ carats, with very little over 1¼ carats.
- The 2 carats that do sell wholesale for approximately $3,000 per carat and 3-carat shoppers are paying in the range of $4,000 per carat.
- Clarity is mostly ranging from SI2 to VS.
- Color is mostly ranging from J to H.
- As usual, rounds are the most popular cut. Princesses are scarce, so they move well when they can be located.
Article from the Rapaport Magazine - December 2009. To subscribe click here.