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U.S. Wholesale
By Brian Bossetta
Though most reviews from the JCK jewelry trade show in Las Vegas that ended June 2 were positive, opinions varied among diamond dealers as to how momentum from the show might affect the U.S. wholesale market in coming months. Greg Telonis, president of Mr. Baguette, a manufacturer of small loose diamonds and jewelry in New York City, said consumer confidence in the economy would likely have more of an impact on sales than any spillover from the show.
In fact, Telonis did not travel to Las Vegas this year and hasn’t for the past five. “It’s just not worth the expense exhibiting there,” said Telonis, who explained that, in his experience, retailers purchase more goods now on consignment and do not buy as much for inventory, resulting in less sales on show floors.
However, Amish Mehta, president of New York City–based loose diamond and jewelry manufacturer Amipi Inc., said there’s always a “bump up” in business after JCK. “We received good orders at the show and met many more potential clients,” Mehta said, adding that he is hopeful the activity from the show will boost future sales. He noted that in 2013, “we had consistent growth every month. Right now, we are fighting for growth.”
Both Telonis and Mehta said business in the first half of 2014 has been strong, but Telonis said he was concerned that the second half of the year might mirror that of 2013, in which business was solid for the first six months and then dropped off. “I’m hoping we don’t have that same trend,” Telonis said, adding that business in the past couple of weeks has eased after an active spring. “It might just be summer vacation,” he said, speculating on the lull.
Sales have been “mediocre, a bit softer than last year,” said Jay Mehta, partner and director of operations for Varsha Diamonds, Inc., a diamond wholesaler and manufacturer in Los Angeles, adding that he felt the industry was still recovering from a harsh winter and is now moving into the slower summer season.
Reuven Kaufman, president and owner of Reuven Kaufman, Inc., a diamond manufacturer in New York City, whose business is structured in two tiers — an American market and an Asian market — said the Far East has been quiet in recent weeks but American sales, particularly in G to J, VS to SI — “the staple of my business” — have been strong.
Prices, across the board, have gone up recently — and the trend is worrisome for Telonis. “There’s a lot of resistance from retailers,” he said. “Prices have gone up 5 percent to 10 percent from this time last year.” Three price increases by De Beers on rough diamonds since January, Telonis added, have not only reduced inventory, but have set in place the potential for a contraction in the industry. “People can’t afford to stay in business with these prices,” he said.
Avner Almog, president of A. Almog Diamond Co., a diamond wholesaler and manufacturer in Houston, Texas, was more blunt. “Rough prices are unreasonably high,” he said. “There’s just no reason for them to be this high.”
Amish Mehta also said prices were up overall, with little room to rise any further. Prices remaining on an upward trajectory, he added, will be “a problem for the U. S. wholesale market.” And it’s the high price of rough, not economic factors, in Almog’s opinion, that is hurting the industry. “With rough prices continuing to go up with no relation to the price of polished, then how can you make a profit?” Almog asked.
The “steady climb” in prices that Jay Mehta has noticed over the past three years — “with no increase in volume to justify the increase” — will likely persist. “There’s been some fluctuation here and there,” he said. “But I don’t see a slashing of prices.”
And neither does Almog. “The mining companies are doing very well for themselves,” he said. “And so long as the money keeps coming in, then nothing will change.”
Higher prices on rough, along with increased competition, have resulted in a decrease in inventory, according to Kaufman. “I have a shortage on everything,” he said. “The whole world is vying for the same product, every country buying the same goods. Something will have to give.”
Amish Mehta has also experienced a scarcity of goods. “Everything is hard to replace, especially 2- to 10-pointers,” he said. The ongoing backlog and certification delays at the Gemological Institute of America (GIA), coupled with high prices, make replenishing goods more difficult, he added.
Less manufacturing of new goods — “because it is not profitable” — is another factor, Telonis said, contributing to the lack of inventory. “If you notice, there are fewer jewelry ads for new products,” he said. “You see the same ads over and over.”
One reason for this, according to Telonis, is that today’s consumers are savvier and know exactly what they want. “There are a lot more custom-made orders. Consumers walk into the retail store today and know what they want,” Telonis said. “There’s less buying from what’s displayed in the showcase.”
Article from the Rapaport Magazine - July 2014. To subscribe click here.
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