RAPAPORT... As the temperatures begin to climb, retailers are starting to feel vaguely optimistic about their prospects for the rest of 2009, even though most report that sales are still soft compared to first-quarter 2008 figures. But, as summer approaches, stores that weathered the winter are finding their feet again, and there are small signs everywhere that a leveling off may be on the horizon.
Soft but steadyMost store owners blame the news media for scaring away customers who can afford to buy but don’t. “So far, this year has been a little softer than last year,” said Perry Sporn, owner of Perrywinkle’s, with one store in Vermont and three in upstate New York. “We believe our customers have the money to spend, but the level of bad news is scaring them into saving. We think it’s more psychological than economic. It’s generally a mood of fear.”
Don Hamann, president of Sartor Hamann, with three stores in Nebraska, agrees that the media is partly to blame for slow sales. “We’re doing fine,” he said. “The only negative is the morning news. That throws a lot of bad press out there, and a lot of it is true, but some of it is fright-and-scare tactics. There are people with money who are afraid and who don’t feel right about spending it.”
To be fair, some stores are seeing dramatically softer sales. “I would say that we’re definitely behind our 2008 numbers,” said Joseph R. Villarreal, president, WhiteFire Diamonds and Fine Jewelry in Austin, Texas. “For the first quarter of 2009, it looks like we’re down about 40 percent. Quite honestly, I’m usually optimistic, but I don’t see it getting any busier than it is now.”
The desire to stay hopeful is palpable, though, and seems to be permeating markets across the country. “This time in 2008, we were having a great year,” said Lula Halfacre, president, chief executive officer (CEO) and co-owner of Traditional Jewelers, with two stores in Southern California. “If you’re comparing year on year from 2008, we’re having a different year. But there’s a light at the end of the tunnel.”
That light may emanate from the mid-Atlantic region. Amanda Coleman, assistant general manager at Nelson Coleman, located in Towson, Maryland, and serving the Greater Baltimore Metropolitan Area, stated that 2009 “has been a good year for us. We feel very blessed and are currently up 11 percent from 2008.”
Supply and demandAcross the board, one thing most jewelers refuse to do is discount their product. “Rather then discount our product, we have been doing more community outreach and giving out more gift certificates,” said Coleman. “We work hard to make sure that every customer gets our best price.”
Villarreal agrees. “We don’t heavily discount, and we don’t advertise discounts,” he said. “People are always getting married. During these times, the diamonds are just a little smaller.” That said, Villarreal is keeping his inventory lean. “We buy what we need when we need it. I know the economy is having an effect on the vendors. They want payment quicker than what’s normal for us.”
Stories from retailers about vendor troubles have become more widespread, which is why so many stores are making a point of maintaining good relationships with their suppliers. “There’s no shortage of merchandise,” said Hamann. “Our store pays cash to our vendors, and pays every 30 days, so we don’t owe anything. But a couple of the huge chain stores are bankrupt. One supplier told me he’s never seen it so bad as far as jewelers not paying their bills.”
Forward thinkingThe pressing issue now is how long this climate will last, and what will change after the economy improves. “I think there’s no doubt that the confidence is gone for this generation,” said Sporn. “So moving forward, we’ll see less willingness from consumers to borrow in order to buy discretionary goods. But with fewer players in the market, the returns on capital will be similar.”
Coleman has already seen a thinning in her market. “We have been told some of Baltimore’s jewelry stores have closed due to the economic state, and our hearts go out to them,” she said. “We only want the best for our jewelry store peers.”
The jewelry industry itself will not be disappearing anytime soon, though. “Our industry will still be around 100 years from now,” said Halfacre. “Times are going to change. But the stores that stick to the principles of quality, service and integrity will stay around.”
Marketplace• Round is the current top-selling shape, followed by princess.
• The most popular carat weight is ¾ carat, though light carats, such as 0.80 and 0.90, are also selling well, as are 1-carat stones.
• SI1 is the top-selling clarity, followed by VS1.
• H is currently the preferred color, followed by G.
• Both 14- and 18-karat white gold outsell platinum in most markets.
• The average price for an engagement ring, including stone and setting, is $3,600, though in wealthier markets where platinum settings are preferred, that average is higher.
Article from the Rapaport Magazine - June 2009. To subscribe click here.