RAPAPORT... "A typical New York dealer may buy his rough in Russia, send it to China to be manufactured, send it to the Gemological Institute of America (GIA) in Carlsbad, California, to have it certified, and back to New York, and then might have it shipped out to Hong Kong to sell it to the Far East market and send the funds back to New York. So New York is essentially part of the global village,” explained Hertz Hasenfeld, vice president of diamond manufacturer Hasenfeld-Stein, at the September 10 Rapaport International Diamond Conference (IDC) 2009.
Hasenfeld, who is co-chair of the Diamond Manufacturers & Importers Association of America (DMIA) gemological committee and a member of its executive committee, showed that figures culled from RapNet reveal that in New York, the vast majority of stones listed are between 50 points and 3 carats. “And that’s what I think defines New York,” he stated.
“We’re trying to extrapolate what this year is going to look like and basically, we’re looking at a 50 percent drop in imports. That would be polished and rough. This is the best guess we can come up with,” Hasenfeld reported. He noted that mining companies’ sales are also down “about 50 percent.”
But somehow, New York sales are not down 50 percent. So Hasenfeld turned to data from the website The Knot and found that the economy has little effect on the amount spent on engagement rings. “That’s a dramatic statement,” he remarked.
“So although sales are down 50 percent, I submit to you that bridal is probably down 4 percent or 5 percent and it’s the big stones that are down these heavy numbers,” Hasenfeld reasoned. Following this logic, conspicuous consumption took the biggest hit, with large diamond sales falling off dramatically and accounting for most of the losses in the industry.
“Bridal is the number one product category and survival is based on selling what sells today. New York is adapting. New York is selling the 1- to 3-carat stone, which is still doing very well,” Hasenfeld contended.
Hasenfeld went on to warn that he sees shortages in the near future. “If sales are down 30 percent and supplies are down 50 percent, you have a huge gap between demand and supply.” He estimated that gap to be more than $5 billion. Hasenfeld cautioned that the days of excess inventory are over. “In this rather poor economy, there are still shortages. At the present rate, we are going to see shortages at every level of the market that are going to affect sales,” he predicted.
Equating inventory with survival, he pointed out, “You can’t sell from an empty wagon.” Wholesalers and retailers will have to anticipate customer demand and stock enough inventory to fulfill it. “You can no longer expect customer loyalty if you don’t have what they need. ‘Be backs’ — customers who say they will be back — don’t come back,” he quipped. Hasenfeld advises wholesalers to “be braver. Instead of buying back 60 cents on every dollar, you need to buy back 70 cents.”
Article from the Rapaport Magazine - October 2009. To subscribe click here.