RAPAPORT... U.S. diamond wholesalers dared to believe in the future of their industry in May, despite sluggish demand. Though credit anxiety persisted, those who spoke to Rapaport were optimistic about a turnaround in the economy.
Nilesh Sheth, president of Nice Diamonds in New York City, noted increased confidence among his colleagues and an improving market. Discounts stopped increasing, he said, and “the dealers have also started buying. So that’s another positive sign.” He added that his customers told him that Mother’s Day was better than expected.
Phones RingingJoe Evich, senior vice president of GN Diamond in Philadelphia, Pennsylvania, reported that his firm has sold more diamonds for the year to date than in the same period in 2008, but clarified that these stones are “much smaller.” GN’s profit margins are also down, because, he said, “We’re competing with wholesalers who are dropping their drawers to sell because they are not financially sound. But at least the phones are ringing!” Evich added that memo goods are being held longer due to “tire kickers” — consumers who return two or three times before making a purchase.
Nishith Mehta, vice president of Varsha Diamonds, in Los Angeles, California, observed that retailers are still chasing discounts, but he stayed positive. “I tell my staff ‘Don’t get carried away with what other people are saying. We have a niche that’s not going away.’ For me, business is good. I’m not complaining at all. You can’t try to put your feet into somebody else’s shoes. We’ve still got calls coming in.”
Adam Mirzoeff, vice president of New York’s East Continental Gems (E.C.G.), conceded that “diamond demand is way down” but his firm found a way to pull in sales by branching out. “We are seeking out opportunities and stores are looking for angles as well. We are getting solidified calls for estate pieces, important pieces of jewelry and colored stones. Diamonds complement these sales. It is a way of bringing customers back into stores through other modes of promotion.”
No wholesalers, however, reported that they were buying diamonds. Sheth explained that, like many in the business, “We have plenty of stock so we are selling from that.” Morris Szklarski, president of New York’s Kelsol Diamond Co., Inc., elaborated, “We’re not really pushing to buy. The goods have to chase us.”
The Small SurviveThe future of the marketplace is beginning to take shape, as the shakeout in the industry is revealing likely survivors. Sheth described his best accounts: “They are financially strong, medium- to small-sized retailers. Those who have low overhead and are not highly leveraged, they are the ones who will come out of this and gain more market share.” Szklarski mentioned another important factor. “Our strongest clientele have a fairly long-term following of upper-middle-class and upper-class customers.”
Evich strives to help his clients stay solvent. “We deal with independent retailers only. We’re trying to explain to them that this is a great time to grab market share. About 30 percent of chain stores are closing. That’s a ton of market share. We want our clients to grab that.”
Sheth was aware that his top clients are likely sizing him up, too, recognizing that “retailers want to see who is strong and who will help them with marketing.”
Getting the Word OutOpinions on the role of advertising in a downturn run the gamut and wholesalers have clearly been weighing costs versus benefits. E.C.G. advertises at the major trade shows and in trade magazines, “but we are not launching any new campaigns,” according to Mirzoeff.
Sheth stated, “We are advertising, but less than we used to — but that should improve. We would not stop altogether. We advertise in trade magazines because magazine readers are more inclined to pay attention. When it comes to things like the JCK directory, it is too crowded and I would rather do targeted marketing. People would rather hear from you directly.”
Mehta stressed personal connections. “If you meet someone and actually have a conversation with them, they will remember you. I’d rather have limited exposure to the right crowd.”
But Evich attested, “We’re going after advertising. Now are the times when you have to advertise in the trade magazines and on the online portals. We’re letting our partners know. It is needed more now than when times are good, if you are looking long term.”
Szklarski weighed in on the many reports in the media that diamond prices are lower than ever. “The public is hearing that goods are cheap. They’re expecting to be dazzled by how inexpensive they are, but diamonds are not an inexpensive commodity, even in the worst of times.”
Evich pointed out that industry players might need to shift their viewpoint as well. “It’s almost like a psychological thing, getting out there and calming people down. There are still 2.2 million people getting engaged annually in the U.S. Either you’re in it or you’re not.”
Marketplace• 1- to 2-carat bread-and-butter goods are seeing some increased demand.
• VS1 to SI2 clarities are the best sellers.
• There is limited movement in VVS goods.
• The market for diamonds over 3 carats is soft.
• Rounds are the most popular shape, with princesses and cushions in second place.
• Prices and demand for brown and black diamonds from 1 to 5 carats are holding up due to limited production.
Article from the Rapaport Magazine - June 2009. To subscribe click here.