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U.S. Wholesale
By Shuan Sim
Many wholesalers described a quiet April but were not surprised by it. Most were glad that business in recent months had been on par compared to 2016, though some reported worse conditions year on year. The Easter and Passover holidays also impacted business. Despite diamantaires hearing from others that the economy has been strong and the U.S. stock markets have been good, many point out that all that does not translate into favorable retail results. “The economy is not as good as the numbers indicate,” said Josh Fishman, president of A. Fishman & Son Diamonds in New York City. Some in the wholesale end felt that the industry has been gripped by buyers not wanting to stock diamonds for inventory and only buying the stones when needed. No briskness in the economy will improve the wholesale situation unless buyers start stocking, they added.
“While pricing overseas is reasonable, it’s hard to find good material,” commented Nick Jain, vice president of sales at Paramount Gems, a New York City wholesaler. The shift of demand to SI diamonds in recent months has left supplies low, as manufacturers of those diamonds did not anticipate the spike in demand. Supplies of well-cut triple EX diamonds are running tight as well. “India has been manufacturing much less than they used to,” explained Jai Bhansali, vice president of sales at Diagem, a wholesaler in Chicago. “People are buying the better patterns and all that’s left behind are the weaker patterns that are hard to move,” he said. However, Bhansali is optimistic that the supply tightness will ease. “I’m expecting more goods to come in from India, when they see how the demand has been here. They should be cutting more soon.” Fishman wondered if the liquidity squeeze had anything to do with the reduced manufacturing. “India’s banks are not providing liquidity to these cutters, and that’s going to ultimately affect us,” he said. Puneet Lakhi, vice president of Vishinda, a manufacturer in New York City, added that it has become untenable on a cost-profit basis to cut certain diamonds. “There are starting to be shortages in diamonds below 1-pointers. It’s just not cost effective for a cutter to cut those diamonds as they don’t sell for as much, and the effort to produce those stones could have been spent on bigger stones that fetch more money.” He noticed that overall, many manufacturers have been reducing their production of sub-1-pointer stones.
“Customers don’t want to spend a lot of money these days,” said Michael Moskovitz, salesperson at Robert Moskovitz Co., a New York City wholesaler. He noted that customers are asking for steep discounts and that they can easily take their business elsewhere since many sellers are engaged in a price war. Wholesalers and diamantaires feel they have to change the way they conduct business to survive amid falling profit margins in the wholesale sector. “We’re starting to do a lot more consignment orders as margins have become weaker than in years past,” said Bhansali. Others have taken to working directly with jewelry designers, retailers offering custom jewelry or even customers interested in building their own jewelry. “People these days either want cheaper jewelry — which they can buy online from China or India — or they don’t mind paying more for something custom and unique to them,” said Lakhi. He said that while working in wholesale moves more volume, there’s always the pressure on prices and buyers are always asking for more discounts. “It’s very price sensitive, a lot of haggling and a lot of pushing. For custom retailers or designers, they’re more willing to go off our prices and then they just add their own markup,” he said. While sales volume in such transactions might be lower, the improved margins offset the low margins of the wholesale business, Lakhi said. “They keep saying our industry is changing, and we’ve got to change with them. ”
In the absence of strong indicators of good business ahead, wholesalers are waiting to see how the JCK Las Vegas show will turn out to judge the climate. “Independent jewelers don’t have it easy, unless they have some sort of added value, which is hard to come by,” surmised Jain. He offered that if this year’s JCK proves to be a strong show, the industry should fare well in 2017. “We’re still in a period of economic and political uncertainty,” Lakhi said. “The tax cuts that were talked about don’t seem likely to happen any time soon,” he said. On the positive side, there haven’t been any factors indicating a downturn. “We had such a strong January to March that I don’t see why things should take a sudden turn for the worse,” pointed out Bhansali. “For me, I’m hopeful,” said Moskovitz. “The months of May and June should be good,” he concluded. Article from the Rapaport Magazine - May 2017. To subscribe click here.
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