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U.S. Wholesale
By Brian Bossetta
Diamond dealers in the U.S. wholesale market are a bit perplexed as to why the pace of business isn’t keeping up with the economy which, by all accounts, seems to be in a steady, albeit gradual, recovery. “It’s a mystery,” said Michael Taub, partner at Louis Newman & Company, a diamond wholesaler and manufacturer in New York City. “No one really knows the answer.” A steady softening has been settling over the diamond industry for the past 15 to 18 months, Taub added, and it has dealers concerned. One possible explanation cited by Taub was the strong dollar and its impact on foreign currency exchange rates. Since the dollar is the currency of the diamond trade, a strong dollar dampens the market because it reduces the purchasing power of other currencies when they lose value against the dollar. “But the strength of the dollar should only account for about 10 percent to 20 percent of the industry’s softness,” Taub said. “With the good shape of the economy, we shouldn’t be seeing this softening. It’s hard to pinpoint.” Andrew Rickard, vice president of business development at RDI Diamonds, a wholesaler in Rochester, New York, described the current business climate as “a weird time” and shared Taub’s view that better economic health hasn’t resulted in the more robust sales dealers were hoping for. Though Rickard said sales “were up a bit” from a year ago, he was disappointed that they weren’t stronger. Parag Shah, president of Gem International, a diamond wholesaler and manufacturer in New York City, described business as “even” compared to a year ago, though still with a “slow tone.” “The Northeast can blame the terrible winter. The oil states can blame the steep decrease in oil prices,” Shah said. “But this slowdown in business is worldwide, with far-reaching reasons.”
The Asian market, particularly China, which has been such an important growth market in recent years, is in trouble, or “it’s just dead,” according to Alan Lipworth, owner of Lipworth Diamond Corporation, a diamond wholesaler and manufacturer in New York City. “Europe is dead, too. It’s just the American market that we’re relying on at the moment. The mood is worse across the entire industry than it was in 2014. There’s just not enough volume to cover overhead.” Joshua Niamehr, cofounder and chief executive officer (CEO) of EnchantedDiamonds.com, an online diamond retailer in New York City, who said his Asian clients, especially in Hong Kong, are among his top customers, agreed that the Asian market is dead. Business in Russia, due to all the geopolitical turmoil there, has also been extremely quiet, according to Niamehr, and the Gulf States, another top market for Niamehr, is also struggling as a result of drastic drops in oil prices. And the New York market, he said, isn’t as reliable as it once was, “especially since the crash in ’08.” To compensate for the drop-off, Niamehr said he’s been concentrating on his luxury clients and just being patient.
Diamond prices, both rough and polished, in Lipworth’s view, need to drop to “more realistic levels” in order to get the market moving again. Taub agreed that prices were too high and said they’ve been too high for the past ten years. “There needs to be a correction. Once the dollar hits its ceiling, then maybe prices will drop and we’ll have a little bounce back,” Taub said, adding, “but right now I’m not seeing any rebound.” Some vendors, Niamehr said, have been slashing prices on certain goods, particularly in SI, but the supply of those goods is hard to come by “for a good price.” Soft prices, Rickard said, have made it a “buyer’s world,” with commercial goods in SI easier to sell, but higher-end VS and VVS harder to move. VS and VVS are too expensive, Taub said, especially compared to what is available in SI. “Those VS-and-up prices need to come down relative to SI,” he said. The one bright spot for Shah during this slow period has been a growing demand for cushion and oval cuts smaller than 3 carats in VS1 through SI2 in F through I colors. “Nice SI1 and SI2 clarity stones are always being sought at the right price,” he said.
Niamehr holds an optimistic view of the diamond industry going forward and said succeeding in the business today is a matter of having the right focus and knowing your customers. “You have to be strategic and offer value,” he said. “Today’s customers, especially the younger generation, are smart and sometimes know more than the dealers.” “Customers today want to see photos and images of the diamond,” Niamehr said. “They want to see its hearts and arrows, how it sparkles, how it looks to the naked eye. That’s why VVS is not moving at all. Consumers have become too smart. They know a VVS grading has no effect on the diamond’s beauty and is just an indicator of rarity. But they’re not investing in what’s rare. They’re investing in what’s beautiful.” Article from the Rapaport Magazine - May 2015. To subscribe click here.
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