RAPAPORT... For many wholesalers in the U.S., the post-holiday mood was somber, with demand across the country limited mainly to less-expensive bridal goods and promotional items.
Sales Sag
Shailesh Jhalani, chief executive officer (CEO) of Prompt Gem Importers in New York City, explained, “People are skeptical of better goods. Deep discounts are being given.” Moises Mareyna Rosenberg, president of Houston-based M&M Diamond Imports, acknowledged that overall business is “very, very slow,” with large diamonds particularly hard hit.
Retailers are buying based on sales only, keeping little in stock. Rosenberg observed, “When prices were going up, people who bought inventory were compensated. Now people who buy are punished, because prices are going down.”
Retailers are paying their bills more slowly, as well. “Instead of 60 days, they are taking 90 days,” Jhalani reported. Atit Mehta, vice president of Atit Diamond Corporation in New York City, concurred. “Liquidity is a big issue right now.”
Most who spoke to RDR reported low Christmas sales, in line with industry-wide expectations. Joseph Evich, senior vice president of GN Diamond in Philadelphia, contended that his firm was able to react to the economic climate and mitigate some losses. “The news was out in October. Things really didn’t change from then. We were proactive when we saw things moving in a new direction. We were strong enough to take the inventory and distribute it elsewhere. We just adapted and kept moving. We’re happy where we are now. We’re not chasing, which is great.”
Credit Paranoia
Credit continues to plague business transactions. Evich admitted, “It has been an issue obviously from the top of the food chain down. The banks have not been that kind to the industry.”
“It is affecting the normalcy of the business,” Jhalani attested. Morris Szklarski, president of New York’s Kelsol Diamond Company, echoed the sentiment, describing the industry as “a little paranoid” in the wake of credit problems that are “slowing business down quite a bit.”
Even among those who have capitalized on Valentine’s Day in the past, few expect Cupid to save the day. “We usually gear up for Valentine’s Day. This year, I don’t see a huge demand coming in. Retailers are going to continue to push what they still have. They are pretty heavy with inventory right now,” noted Mehta.
Evich stayed upbeat. “Traditionally, studs are a big player for the holidays. But that wasn’t the case this year, so we are stocked with a nice selection for Valentine’s Day.” Jhalani hoped for the best. “I think positive. I would say it shouldn’t be in negative territory. That’s what we anticipate.”
Buckling Down
In an acknowledgment of the unforgiving climate, many were redoubling their efforts to stay within their budgets, stick to the basics and manage credit risk in the year ahead. Szklarski was determined to set and maintain limits. “I am very careful with my buying. I’m a lot more selective than I used to be. I am trying to be sure that I don’t overextend myself. I never have, but now I am more careful than ever. We do a couple of shows and I think we are going to cut back because of the state of credit right now — not because of the expense,” he stressed.
Mehta reasoned, “Receivables and inventory are going to be a big problem throughout the year. We are going to keep our inventory as low as possible. We are trying to be cautious about adding new customers to our receivables list. We are making sure we don’t exceed the caps we have on our current customers.”
Similarly, Rosenberg pledged to tread carefully. “I’m buying good deals only,” he declared.
Evich remarked, “We’re just dealing with the economy. We like to stock the bread and butter, the basics, for the creditworthy people. We service the heck out of our people and I think that comes to the forefront at times like these. We’re going to try to stay as normal as we can and let our clients know we’re solid and ready to flourish when they flourish, when all this settles out.”
In an alternate tactic, Prompt Gem Importers has been “focusing more on international trade and doing more international shows,” stated Jhalani.
Looking toward the coming months, Rosenberg was blunt. “The world economy is still going down. Before we can see any hope in our industry, the economy has to level off. Unfortunately, in our industry, when the recession comes, we are the first to know. When the recovery comes, we are the last to know.”
The Marketplace
• Sales of fine-quality, large diamonds are very slow.
• SI2 and lower clarities are selling in weights up to 3 carats.
• H through J colors are meeting some demand.
• Certified goods and collections are moving much slower than in 2008.
• Colored diamonds in all sizes are meeting moderate demand.
• Rounds remain the most popular shape, with princesses increasing slightly in
popularity.
Article from the Rapaport Magazine - February 2009. To subscribe click here.