RAPAPORT...
Selling diamonds and jewelry in a weak economic climate has
always been an uphill battle for most wholesalers. But while fighting the
headwinds of high prices, volatile markets and frugal consumers can prove a
daunting challenge, it is a challenge that must be faced. “To survive, you have
to do the same thing you have been doing, just do it sharper and be
aggressive,” advised Oren Sofer, a partner at New York City–based loose diamond
and jewelry supplier Beny Sofer.
Sofer, who has seen sales at his company rise by single
digits year on year, noted that the growth was due to “everyone working harder
— because it’s certainly not the economy. We have adjusted to the new reality
and it seems like it is here to stay. Our success is a direct result of us
working harder, doing mass mailings, printings, doing more shows and traveling
more.”
Being proactive is what made the difference in today’s
marketplace, Sofer said. “There are so many of us who do the same exact thing
in the diamond business so you have to differentiate yourself with your
service. There are patches that are doing better but there are also patches
that are flat to worse,” he noted.
Andrew Rickard, vice president of operations at the
Rochester, New York–based RDI Diamonds, attributes his company’s profitable
October to a more active push for business. “We have experienced an increase in
sales year on year in the range of 30 percent,” he said, explaining, “We have
continued to grow in size and scope, and our inventory has increased over the
past year. But what really helped us was our focus on jewelers who shared our
approach to doing business — you have to be aggressive and stay in front of
jewelry stores.”
Rough Squeeze
To survive in today’s market, however, wholesalers also need
to hunt for an increasingly limited supply of rough diamonds. This situation is
particularly troublesome for companies who stock their inventory regularly. “I
buy steadily throughout the year and keep a pretty good size inventory, but I
have noticed a decrease in the amount my suppliers are showing me. And they
aren’t buying or cutting as much — probably because of high rough prices,”
observed Greg Telonis, president of Mr. Baguette, a manufacturer of small loose
diamonds and jewelry in New York City.
Adam Mirzoeff, vice president of East Continental Gems, a
New York City–based supplier of diamonds and precious stones, summarized the
current supply dynamics: “Overall, it has been harder to buy inventory and it
has been harder to sell inventory.” Morris Szklarski, owner of Kelsol Diamonds
in New York City, argued, however, that while tough, the current climate can
produce sales. “People who are really serious and want to stay in business are
the ones who are biting the bullet and doing what they have to do to stock the
goods and sell the goods.”
Stabilized Prices
One bright spot for wholesalers is that after many months of
sharp increases, prices across the board have become much less volatile. “We
find the prices have stabilized; they aren’t rising so fast anymore,” said
Sofer, adding, “We understood that if the Hong Kong show was flat, which it
was, prices would remain stable.”
Despite the slowdown in growth, prices still remain at
record highs, and are showing no signs of coming down anytime soon. “In the
price of baguettes, marquise and ovals, I’ve seen an increase of 10 percent,
and I have noticed a 5 percent increase on non-cert stones,” observed Telonis.
In order to circumvent these prices, jewelers are continuing
to buy down — a trend that has been gaining steam since early summer and one,
according to Rickard, that has been a long time in the making. “Diamond pricing
has increased this year — in some places upward of 30 percent. At the same
time, the American consumer hasn’t gone into the jewelry store willing to spend
30 percent more. What does that mean? It means that retail price points haven’t
changed, so something has to give. That something is quality. Jewelers still
want to spend $3,000 to $4,000 for a 1 carat, so now they buy I to J, SI
instead of F to H, VS.”
Holding Out for Holidays
Given the highly competitive market and the uncertain
economy, wholesalers are ambivalent in their holiday sales forecasts.
“Obviously, we are optimistic about end-of-the-year sales, but there are still
concerns about the economy and whether consumers are going to come out and
spend discretionary money on jewelry,” said Rickard. One certainty, however, is
that wholesalers will have to remain relentless in their push for sales through
the close of the year. “The business is there,” remarked Sofer. “No one is
closing up America — that’s for sure. All it requires, though, is a lot more
work.”
The Marketplace
- Consumers are buying lower-quality diamonds, opting for I
and J colors, and SI stones over more expensive qualities.
- .75-carat to 1.50-carat stones are high in demand, while
demand for stones larger than 3 carats is tepid.
- While rounds are still the most popular, princesses and
cushions remain popular and demand is steadily increasing for heart and pear
shapes.
- Rough production has decreased, making it harder for
wholesalers to find goods.
Article from the Rapaport Magazine - November 2011. To subscribe click here.