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U.S. Wholesale
By Shuan Sim
Wholesalers were left scratching their heads as to why diamond sales did not grow as much as they had hoped this holiday season, even as overall retail sales saw strong boosts. “The recent months have not met expectations. There was no Christmas rush,” pointed out Karen Raz, owner of SFD Trading Inc., a diamond importer and wholesaler in San Francisco, California. Raz did share that despite the lack of a big jump in sales, business had been stable. Most other diamantaires around the country agreed that they were at least happy that they saw some steady, even if gradual, growth in December.
Diamond manufacturers noted that overall consumers seemed to have warmed up to buying diamond jewelry during this holiday period compared to 2014. However, many chose to buy from online-only retailers. This took business away from traditional brick-and-mortar establishments, which in turn hurt the manufacturers. Online-only retailers are not subject to the same sales tax that jewelers with a physical presence in a state are, allowing the online merchants to offer similar products for a lower price. The price differential could be as high as 10 percent in some states, such as in California. “Small jewelers are going to be put out of business,” said Mervyn Hahn, owner of Los Angeles Diamond Factory, a manufacturer based in Los Angeles, California. “It’s very difficult to compete today because everything is so transparent anyone can buy anything online,” expressed David Lob, owner of Liberty Diamonds, a wholesaler in Irvine, California. “It’s the biggest fear right now. If there’s no flat tax, there’s no level playing field for the rest of us,” Lob commented. The issue of the flight to buying online seems to be heightened as consumers increasingly become savvier with technology and have greater access to information at their fingertips. “My retailers say to me, ‘I don’t know why we can’t make the sale. We’re price competitive,’” Raz said. She agreed that unless something is done about the lack of online sales taxation, mom-and-pop jewelers will have a challenging time competing with the internet.
Raz noted that prices for her were not as substantial as they used to be, though vendors have been asking for reasonable prices. “Prices came down in November, before Thanksgiving,” pointed out Steve Eisen, secretary at Nat Eisen & Sons Inc., a wholesaler in New York City. The price drop allowed many to close more sales during that period, as well as letting both retailers and wholesalers be more aggressive with their marketing. The price drop has not been unacceptable for some wholesalers. “We’re fairly satisfied with prices this year, though I foresee we’ll be in tighter supply in the coming year,” commented Stanley Zale, vice president of diamonds and gemstones at Stuller Inc., a manufacturer based in Lafayette, Louisiana. “The decrease in manufacturing in the past six months or so is sure to cause a looming issue in January, when we have to restock some stuff,” Zale speculated. “It’s not going to be as easy replacing desirable goods,” he said, describing diamonds of H color, VS to SI clarity. In fact, Zale noted that he has even started getting calls from dealers inquiring about goods, while the bulk of his clients tends to be jewelers and retailers.
Many diamantaires could not confidently say that 2016 would be a good new year. “I don’t think the economy is as good as they say it is,” confided Lob, adding that the industry is going to have to work twice as hard to achieve what it has currently. “We have to be careful with our inventory and we have to watch prices,” said Raz. She noted that her clients were watching the upcoming 2016 presidential elections and were of the opinion that it might impact the diamond industry. “Some want a big change, but if there isn’t, then everyone seems to feel like they will have to hold on tight,” Raz added. Eisen felt that the upcoming year would be very challenging just to get traffic through the door. However, it wasn’t all doom and gloom for him. “Maybe it might even be a good year. I did see some of the generic advertising for diamonds that was reported earlier this year and it seems to have kicked in. That is always helpful,” Eisen concluded.Article from the Rapaport Magazine - January 2016. To subscribe click here.
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