RAPAPORT... The slowdown that the U.S. wholesale market endured during the beginning of the year returned this past month, as the brief pickup during March appeared to be an all-too-quickly passing phenomenon. In fact, for some, the drop in action has been more severe than it was during the preceding quarter. “This past month has not seen that much activity; in fact, we are down 20 to 25 percent from last year at this time,” said Sam Nazarian of A&M Diamond and Jewelry Inc. in Los Angeles, California. “However, things are fairly okay and I am still very optimistic about the upcoming period.”
While some sluggishness is typical this time of year, said Mike Rabbanian, International Diamond Club Inc. of Los Angeles, this year the effect appears to be exaggerated. “Overall, the market has been slow, and usually it is slow this time of year,” he said. “Nevertheless, in general, the market is slower than other years.”
Finally, Jit Jariwala of Jewel Goldi Inc. offers a short-and-sweet assessment of the current market reality: “Very competitive and very slow,” he said.
However, to every rule there is the exception, and this month it comes from Kelly Boyd of Leo Frank & Sons, Inc. in Troy, Michigan. “We have been doing wonderfully, and actually had our biggest week the third week of April,” she said. “We are up for our quarter and we are forecasting that next month should go well too.”
Interestingly, Boyd notes that the company’s recent success has been due to strong activity in their accounts on the East and West coasts, not at home in the Midwest. “In the Midwest market, everyone is crying,” she admitted. “The accounts elsewhere have been pulling us through, while the Midwest market suffers.”
Electronics and Auto Job Loss Main CulpritsWhen asked for their take on why the market has slowed down, many industry insiders maintain that electronics are claiming a bigger market share in luxury goods, “People are definitely spending more on computers and other electronics than they are on diamonds, especially with the price of diamonds so high,” Nazarian said.
Those comments are echoed by Jariwala. “The final end users are not buying as much as we thought they would. We are competing with electronics like iPods, laptops and mobiles,” he said. “It’s all luxury spending and gifting. People like to change their mobile three or four times a year and get the latest cameras, so they are spending their money there. But, five or six years ago, everybody was obsessed with the internet and eventually that died down. So, too, will this trend. In the meantime, we are spending more money on advertising to combat the effect.”
But Jariwala attributes the state of the market to a few other factors as well. “You have to keep in mind that the past few months have seen major holidays and tax time, both of which have an impact on market activity.”
Rabbanian agrees, believing that the listlessness of the market actually doesn’t have anything to do with the market itself. “I don’t think that the cause is related to the diamond business — it is probably just a slower economy. Retailers are really complaining. They say there isn’t any business and they aren’t selling as much as before.”
In contrast to her counterparts on the coasts, Boyd points the finger straight in the direction of the failing auto industry. “The whole automotive job loss trend is still continuing,” she said. “I have actually heard that Michigan leads the nation in foreclosures. If people can’t pay their mortgages, they sure aren’t going to go buy diamonds for themselves.”
Trends
Overall, said Rabbanian, the production of goods has dropped because market conditions are not encouraging cutters to manufacture a lot of stones, especially in the smaller goods. That said, the usual stalwart of activity — bigger stones — has faltered somewhat in the smaller sizes of that range. “Two carats and below is very weak, while 3-caraters are still very popular,” said Rabbanian.
Boyd has had a similar experience. “We are selling a lot of big stones, 3 to 5 carats on average, in the G color and SI1 to SI 2 clarity range.”
The Marketplace
• Trading activity has slowed.
• Polished prices are uneven.
• Rough prices fluctuate.
• Bigger and better goods are mixed.
• 3-caraters and up are hot.
• Stones below 1 carat are better.
• Fancies are stable across the board.
• 2- to 3-carat fancies are weaker.
• Princesses continue to get calls.
• Cushions are healthy.
• Asschers, emeralds and radiants are even.
• Pears and ovals continue to grow.
• Hearts and marquises are typically
sluggish.
• Fancy colors remain in demand.
Article from the Rapaport Magazine - May 2007. To subscribe click here.