Though overall U.S. demand remains weak, a strong push for
sales in the usually tepid summer months is producing some encouraging results
for wholesalers. “June and July were
abnormally good, and August is going
well, too,” exclaimed Amish Mehta, president of the New York–based loose
diamond and jewelry manufacturer Amipi Inc.
He added that .50-carat to 2-carat stone
sales were up an average of 30 percent.
Sumeet Sethi, sales director for natural and fancy color
diamond manufacturer Manak Jewels in San
Francisco, also observed uncommonly strong sales for the summer months.
“We have had pretty good sales — June was strong and, after the end of July
until now, sales have been increasing about 10 to 15 percent. This usually
doesn’t happen; it’s an anomaly.”
While manufacturers were vying for the limited summer demand,
however, not all were able to prosper. “Competition is too tough,”
declared Sam Nazarian, chief executive
officer (CEO) of A&M Diamond and Jewelry in Los Angeles. “Sales are
soft and it’s quiet — slower than 2010. And even if we put out the lowest
prices in the market, it would still be slow.”
Hoping for Price Peaks
Given the modest U.S. demand, many wholesalers anticipate
prices will hit their peak sometime before the end of the year. “Soon, I think,
the price of diamonds will decrease because there is not that much domestic demand,” said Nazarian. “Suppliers
cannot hold to today’s price; they have to reduce to sell.”
Some wholesalers already are starting to see prices slow down
for certain categories, like melee diamonds, that have risen exponentially
since the beginning of the year. “The price of melee has gone up since January
anywhere from 50 to 100 percent depending on the item,” said Rick Shatz,
founder of loose diamond wholesaler Rick Shatz Inc. “But so far, the prices in
August have been encouragingly stable.”
The New Market
As the dust settles on the
price front, a distinctly different marketplace is coming into view. “Nowadays,
lower quality and lower color have more demand than higher color and higher
quality,” observed Nazarian. “Most
people want to spend between $5,000 to $10,000 for engagement rings, but
high-quality 1-carat to 2-carat stones are above that price range — so people
go for H, I and J color.”
Consumers are also more
careful with how they spend their
capital — long gone are the days of impulse jewelry and diamond buying.
“Fashion and impulse buyers have disappeared,” said John Harris III, marketing
director for Harry Kotlar, a Los
Angeles–based manufacturer of platinum and diamond jewelry. “But we have
seen sales growth in what we call ‘special
event’ purchases: bridal, anniversary and birthday jewelry. Consumers use these
events to justify spending big money on jewelry.”
Asian Attraction
Prices, however, are still at an all-time high and American
consumers, worried over a double-dip recession and a fragile economic recovery,
are resisting them more than their colleagues oversees. This is leaving some
manufacturers straining in the domestic
market. “The problem is to get the
goods, we have to pay a high price and you have to pay a high price. The
difficulty in the U.S. is that while the goods are there, you have to manage the price — you cannot
sell for the same price in America that you sell for in Asia,” said Mehta. “The
prices make a difference in the U.S., but in Asia they don’t care right now —
they need the goods, and that’s the main thing.”
With the Chinese and
Indian markets appearing more resilient, more domestic wholesalers are looking
to expand overseas. Harry Kotlar, for example, is making what Harris deemed its
“first foray into the international market. We are exhibiting in the upcoming
Hong Kong Jewelry & Gem Fair to explore the demand in the Asian market for
larger, better diamond jewelry.”
Future Anxiety
The recent U.S. credit downgrade by Standard & Poor’s (S&P) and discouraging reports on consumer spending are fueling pessimism in the diamond and jewelry industry,
and inhibiting the industry’s momentum coming out of the June JCK Vegas show.
“At the Vegas show, everyone was very
positive, but with this new market crash, we have slowed down,” said
Sethi. While some wholesalers are discouraged by recent economic events, they
are still holding out for the end-of-the-year sales. “I don’t think this year
will be good; the economy, I believe, will get worse and worse. But in the end,
I hope we have a good holiday season,” declared Nazarian.
The Marketplace
- Demand is strong for .50-carat to 2-carat stones, with
rounds and princesses the most popular shapes.
- Because of price points, consumers are buying more H, I
and J color stones.
- While summer demand is stronger than usual, it is also
limited, increasing competition among manufacturers.
- There is heavy resistance to prices in the U.S., leading
many manufacturers to believe that prices have hit their peak.
Article from the Rapaport Magazine - September 2011. To subscribe click here.