|
|
Israel
By Avi Krawitz
Israeli diamond suppliers were relatively optimistic following the U.S. holiday season even as they recognized the challenges that lay ahead. With the U.S. political transition adding to uncertainty, the industry is contending with an oversupply of polished, tight profit margins and adapting to the online selling environment at the start of 2017. “The hope is that President Trump’s policies will result in a rise in household incomes that will translate to higher jewelry sales,” said Shachar Dvash, owner of Onyx Diamonds Israel, a diamond manufacturer specializing in square fancy shapes. “We’ll have a better idea in six months if he delivers on that promise.” Shmuel Mordechai, Israel’s diamond controller, said the first signs of recovery were evident already toward the end of 2016, after trading activity was slow for most of that year. Israel’s diamond exports fell 6 percent to $4.7 billion in 2016, with shipments to the U.S., its biggest market, down 8 percent and to Hong Kong, declining by 9 percent. Still, Israeli dealers who spoke with Rapaport Magazine estimated the holiday season was about in line with the previous year. Dvash stressed that regardless of market conditions, his focus is on figuring out how to move forward in an ever-changing market environment.
The biggest revolution, Dvash claims, is in how the trade adapts to marketing diamonds as consumers increasingly make their purchases online. While ecommerce was a standout trend this holiday season, the industry has to improve its capabilities to enable stronger consumer jewelry buying via the internet, he noted. Online is changing the market, agrees Moshe Pinkusewitz, owner of Selected Diamond Traders, but he stressed brick-and-mortar stores remain an important aspect of the jewelry experience. Therefore, traditional retailers still have their place, especially since not everyone is online. Regardless, he emphasized that diamond suppliers need to strike a balance between building an ecommerce presence and maintaining a relationship with their clients. “The diamond business is a relationship business. It’s not about the short-term sale where you discount in order to make the sale,” Pinkusewitz said. “Lower prices are not the solution to revive the industry. We need to focus on building relationships before anything else.” That’s especially true in the U.S. market, where Selected Diamond Traders started operating just two years ago. Strengthening those personal bonds with clients enables stronger trading across all platforms, including online, Pinkusewitz added.
Dvash observed a shift toward lower-priced goods during the holiday season, noting that “demand is a function of price” with buyers prepared to compromise on color and clarity to meet their price points. Suppliers’ profit margins were consequently squeezed as it is difficult to compete on price, Pinkusewitz added, especially for the top-quality diamonds he supplies to high-end jewelers. “Buyers don’t recognize that one D color, VVS clarity diamond can be a very different quality to another,” he explained. “They see the price of commercial diamonds and try to apply it to the better-quality goods, but really they’re a different market.” Profit is also being squeezed by the strength of the rough market relative to the polished, Dvash reported. He expressed concern that manufacturers continue to buy rough and raise polished production, thus fueling an oversupply of goods in the market.
While demand has stagnated with retailers requiring less inventory, production continues at a steady pace, Dvash explained. Pinkusewitz agreed that inventory levels are high but argued you need stock in order to sell effectively. Holding large inventory puts a strain on profit but it’s the normal way of doing business, he added. In such an environment, Pinkusewitz and Dvash foresee further consolidation in the industry, both in the retail and diamond dealer sectors. Dvash stressed there are simply too many companies operating in the industry, which is contributing to the oversupply of goods. That means the stronger companies will survive and weaker companies will be forced to leave, he emphasized, adding the only way to ensure space for more players is to tackle lagging end-consumer demand. “We have to stimulate demand if we’re going to be an economically viable, profitable industry,” Dvash said. “And I’m optimistic for this year. We cannot dwell on how difficult things are but rather think of ways to improve, how we can sell more.”Article from the Rapaport Magazine - February 2017. To subscribe click here.
|
|
|
|