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How Three Jewelers Are Coping During COVID-19
Apr 7, 2020 5:59 AM
By Joshua Freedman
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RAPAPORT... Can my company survive this crisis? How long will the shutdown last? Should I lay my workers off? Should I apply for government support? The coronavirus outbreak has left US jewelers with a string of questions.
There aren’t many definitive answers yet, as the outbreak has shown signs of worsening before it gets better, and estimates vary as to the severity of the economic impact. Rapaport News spoke to three companies in recent days to hear their initial thoughts on the downturn and how it’s affecting their sales, liquidity, diamond buying, and viability as a business.
Stuller, Lafayette
Jewelry manufacturer and distributor Stuller shut its headquarters in Lafayette, Louisiana, on March 23, and won’t reopen until April 15 at the earliest. That has had inevitable consequences on revenues, with both physical and online operations suffering.
“Transacting through the website is easy, but then it’s fulfilling [that’s the problem],” says Stanley Zale, Stuller’s vice president for diamond and gemstone procurement. “We’re exploring ways how we might be able to do it. There are no solutions yet, but there could very well be.”
For now, Stuller isn’t acquiring new merchandise because it has inventory, and suppliers can’t export, notes Carl Lehnhardt, a diamond buyer for the company. Shortages might emerge in due course as manufacturing has stopped, he points out.
However, the company is still paying its workers during the approximately three-week closure, and plans to jump back into normal business when the shutdown ends, Zale stresses.
“I’m an optimist at heart, and I think that situations like this spur innovation,” Zale continues. “I recall that in the financial crisis 12 years ago, a phrase that we heard a lot was ‘Don’t waste a good crisis.’ Let’s use this as an opportunity to figure things out and make things better,” he added, citing the digitization of the supply chain as an example.
As the wider jewelry industry battles the current crisis, financial aid from the US Small Business Administration (SBA) will greatly help many companies that form the backbone of the American trade, Zale points out. The government agency is offering forgivable loans for companies retaining their employees, as well as other credit options providing emergency relief to struggling businesses.
“There are so many mom-and-pop operations, independent jewelers [that would benefit from the aid] — that’s really the basis of the US industry, to a great extent,” he comments.
Ken & Dana Design, New York
Most of Ken & Dana Design’s business is bridal, so sales have suffered as clients have pushed off their nuptials and related purchases of engagement rings and wedding bands, explains founder Ken Leung. The uncertainty about when the company will be able to manufacture is also damaging its ability to close deals.
The business is taking one or two orders each day — which might seem OK for the middle of a crisis. But in normal times, he’d be reporting around 10 a day.
“Some clients are still placing orders, albeit slowly,” Leung notes. “Most people have postponed their [wedding] plans. The biggest sticking point is without being able to produce and give them a completion date, that really hurts our ability to carry on business.”
E-commerce has not compensated for the drop in traditional sales.
“In the beginning, we tried to encourage clients to convert their in-person appointments to virtual appointments in hopes that we would be able to keep sales moving, but the bottom line is that clients want to try things on,” he observes. “So most clients are delaying their purchases until they are able to see us.”
As a result, interactions with his vendors are limited to occasional, specific orders.
“Before [coronavirus], I’m calling and emailing five to 10 diamond suppliers a day,” he recalls. “Now, I’m emailing them once every three days. We’re not buying diamonds in a meaningful way, just because sales have fallen off.”
The company will be able to continue for the foreseeable future as it’s not buried in debts and follows a sound, conservative strategy, Leung insists. He hasn’t laid anyone off, and sent his team home to work remotely in mid-March. He’s in the process of applying for an SBA loan.
There’s no immediate danger to businesses “unless [a company is] super-leveraged and [has] huge debt from the bank, [but] I think we’re fine to weather this for a few months,” Leung continues. “Hopefully it [won’t] drag on for more than half a year, but even if that’s the case, personally we’re not in any danger of having to close up shop.”
Herzog Jewelers, Fort Mitchell
COVID-19 came at a bad time for Herzog Jewelers, which was scheduled to move to a new store in its hometown of Fort Mitchell, Kentucky, on April 1. It’s had to delay this to the beginning of May, costing it the big launch and moving sale for which owner Ted Koester had been planning, and creating unexpected financial challenges.
“I’m in the situation of [paying] current overhead, then payment of a construction loan for [the] new store,” Koester explains. “I’ve been coming in and cleaning out, as I don’t want to pay double rent starting May 1.”
The current store is closed in accordance with state guidelines, so Koester is mainly dealing with customers who want to pick up orders or repairs from before the shutdown. E-commerce is limited because his site mainly displays manufacturers’ product; he can’t sell the goods, as he doesn’t have them.
“If I did make a sale now, I couldn’t produce it,” Koester explains. “Pre-COVID-19, I was going to have the site redone where whatever is on the site is actually in the store. If I had that set up I would promote the e-commerce side, but the way it’s set up now…[most] things in the website are from manufacturers, which I can’t order anyway, so I’m kind of locked out of it.”
The old store will certainly remain shut for all of April, Koester predicts, though he’s hopeful for the May relaunch at the new site 50 feet away. He believes his business can last until the end of the year with the situation as it is, and has applied for SBA money to finance salaries, rent and utilities. The retailer has kept four of its six staff members on full pay.
Even when things return to some normality, it will take a while for business to be back where it was, he forecasts. People might start hunting for engagement rings, seeing that they’re more of an essential purchase than other jewelry types, but there won’t be a sudden rush of pent-up demand.
“There’ll be [some] bridal [business in] the summer, but it’s still going to be soft. We’re not going to bounce right back,” he says.
Main image: A “closed” sign outside a store. Inset images: Stanley Zale, Ken Leung and Ted Koester. (Shutterstock, Stuller, Ken & Dana Design, Herzog Jewelers)
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Tags:
Carl Lehnhardt, Coronavirus, COVID-19, finance, Fort Mitchell, Herzog Jewelers, jewelers, Jewelry, Joshua Freedman, Ken & Dana Design, Ken Leung, Lafayette, loans, Louisiana, new york, Rapaport News, retail, SBA, Small Business Administration, Stanley Zale, stuller, Ted Koester, US
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