Sentiments from
diamond wholesalers and manufacturers across the country revolved mainly around
the lack of a consistent and targeted message, competition from the internet,
and the growing influence of India.
“You have to look at the market from two different perspectives,” said
Oren Sofer, partner at New York-based diamond manufacturer Beny Sofer. “From
the retailers’ point of view, the general sentiment is good. Tax relief has
come, the stock market overall is doing well, and unemployment is down. But in
our industry, sales aren’t increasing at the same rate as other luxury
products. It’s better compared to last year, but we’re still lagging behind.”
The industry has not
responded to the competition from luxury handbags, tech and expensive
vacations, according to Sofer. “We are not making the noise we used to as a
segment; the message is not there,” he elaborated. “It’s not even that we’re
not cool enough, it’s that we’ve lost our positioning in the market.”
At one time, the industry
could piggyback on De Beers’ $50 million annual advertising budget, Sofer
continued, but that has been replaced by fragmented marketing efforts from
retailers in their local markets. “We don’t have an overarching message — we
have dealership marketing instead of mothership marketing.”
Trouble from overseas
Ashish Soni,
owner of Chicago-based wholesaler Jas Diamonds, observed that “being in the
midwest, we’re not noticed as a bigger diamond market, and sometimes jewelers
have the feeling that going to New York or California is their better option.”
However, some of the issues he identified are industry-wide. “Our sales
are up, but our margins are down,” he said. He attributed the drop in margins
to an increase in the price of polished from India, the company’s main source
of diamonds.
Another issue is that foreign
suppliers are providing diamonds for US-based e-commerce sites. Soni is adamant
that he will not supply e-tailers because of his strong conviction about
supporting mom-and-pop stores.
“It is super important for me not to be in
competition with them,” he said. “[Yet] those overseas manufacturers are
directly trying to compete with us and supply us at the same time. They have
their hands in both pockets. And these manufacturers from outside the country
are digging into their profits as well as ours.”
While reversing the trend of
overseas diamonds in e-commerce may be difficult, Soni highlighted a potential
solution: “It would be nice to tack on sales tax to online purchases. Jewelers
have to charge tax — why not e-tailers as well?”
A question of value
“Our
clients in northern California, especially the Asian market, like
higher-quality stones than they do on the east coast,” reported Karen Raz,
owner of San Francisco-based wholesaler SFD Trading.
Echoing Soni’s point, she
cited the growing influence of Indian diamond manufacturers as the number-one
issue affecting the industry, with the impact increasing as these companies
open offices in the US. In general, Raz thinks her customers are “worried” and
not optimistic.
Furthermore, the
internet isn’t the only competition. Costco and other big-box stores are
selling diamonds as well.
“Customers think they are getting value for a lot
less, but in fact, these diamonds are not Gemological Institute of America
[GIA]-certified. My business model is selling to moms and pops, and these
big-box stores are taking business away from my customers,” she said.
Article from the Rapaport Magazine - May 2018. To subscribe click here.