Rapaport Magazine

U.S. Wholesale Market Report

Survival of the Fittest

By Margo DeAngelo
RAPAPORT... November sales left little doubt that worldwide economies are slowing things down just before the Christmas season. Tanya Nisguretsky, president of New York City–based Illuminex Diamonds, commented, “Obviously, the economy is affecting everyone. Everything is quiet.” Alan Levine, vice president of Bill Levine Diamonds in New York, noted, “I guess the best way to phrase it is that we’re only as good as our retail accounts are.”
Sam Nazarian, president of A&M Diamond and Jewelry in Los Angeles, reported, “It’s not that our business has completely stopped. They’re buying the same things, but cut in half. We were hoping that oil prices going down would help sales, but it really didn’t do anything. ”
Finding a bright side, Lior Sofer, vice president of New York’s Beny Sofer, noted that this downturn may be different from those in the past. “It’s the first downswing in the internet age. Hopefully, because of the internet, we will be able to inform ourselves more.”

Sofer went on to explain what he sees as the root of the issue. “The biggest thing right now is credit: who to give credit to and who not to. Even with our current customers — do we do another credit check? And is that going to help, considering that no one really knows what’s going on right now? The struggle to find goods and sell them is not the problem. It’s ‘Who to sell to?’ and ‘Will we get paid?’ You better do your homework.”

Nisguretsky has experienced payment issues with some clients. “People who have always paid on time are now paying slower or less,” she said. “They’re saying, ‘We don’t have the money right now.’ I’ve reduced the amount I’m lending to people.” Nazarian is safeguarding himself as best he can. “We’re very strict on credit. We only deal with people we know now,” he said, admitting that the strategy does pinch sales.

Those few with cash on hand, however, are finding themselves in a strong position rife with buying opportunities. “People with money are able to buy stones at very cheap prices — up to 15 percent off — which was unheard of half a year ago. People are desperate to sell,” Sofer stated.
The reductions in the Rapaport price list, in the wake of plunging commodity and auction prices, was on everyone’s mind. Though wholesalers were dismayed to learn that their inventories had lost value, Ami Koret, vice president of Davidoff Diamond Corp. in Houston, Texas, recognized that the market has changed. “You need to reflect what’s going on in the economy. What’s selling is the commercial goods. Anyone who has a big inventory in VVS goods is in trouble right now. It’s gotten to the point where no one can afford them.” Koret stressed one aspect of the price list changes that he didn’t agree with. “Commercial goods shouldn’t have gone down at all. I don’t think that reflects the market.”

“To some degree, the market for 3 carats and up is at a standstill, which is tough, because a lot of the larger companies got into the bigger stones,” said Sofer. “Chances are you’re just going to sit on your larger goods for a while. The uncertainty of diamond prices is making life difficult. Looking on RapNet, nobody’s actually dropped their prices on listings. It will take another six months before they realize it’s time to lower prices. I’ve actually done it already. I figure, why not be realistic?”

At press time, expectations for Christmas were modest. “The media scared everyone, so it’s going to be a smaller and later Christmas,” Levine said. “Large sales are going to be more calculated, as well. If a customer comes in to buy a $10,000 necklace for his wife, he is going to know exactly what she wants.”

“I think it is going to be a last-minute Christmas with ticket prices definitely lower — I think at least 20 percent down,” Sofer predicted.

“I do expect it to bump up a bit for the holidays. People are still going to get engaged. But it’s not going to be the season we are used to,” Nisguretsky conceded. Koret stayed upbeat. “I don’t give up on anything. It might not be like the Christmases of years ago, but I think people are still buying.”

Long term, Sofer predicted survival of the fittest. “I think the business is going to really show who has the strength to survive. Those who are in it just for the short term are not going to make it. Those who don’t have the cash flow are not going to make it.”

The Marketplace
• 1- to 2-carat commercial goods are selling right now, with demand quiet for 3 carats and larger.
• I1 diamonds in the range of $4,000 to $7,000 are moving.
• Buyers with cash can negotiate sizable discounts.
• Retailers are buying based on turnover or steep discounts only, with very few stocking up.
• As usual, rounds are the most prevalent shape. Ovals, cushions and radiants are also popular.
• Princess and Asscher cuts are very slow right now.

Article from the Rapaport Magazine - December 2008. To subscribe click here.

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