Rapaport Magazine

Hopeful for the Holidays

U.S. November Retail Market Report

By Lara Ewen
The holiday season is coming up, and retailers are trying their best to maintain a positive outlook after last year’s disappointing end to the year. Store owners who have kept their inventory and their expectations low are feeling more robust nowadays, but everyone acknowledges that the last month of the year is going to be nerve-racking. Customers are spending less and starting their shopping later and later, so predicting holiday traffic has become practically impossible. “Cautious optimism” is still the catch phrase of the times.

Hope and Caution

“I hope Christmas this year will be different, because last year was the worst Christmas in our history,” said Mike Lordo, president of Lordo’s Diamonds in Ladue, Missouri. “I think people were afraid because everything hit the fan. They were being very conservative. But people are tired of being scared. There are some predictions that this year’s fourth quarter will slip back into recession, but I hope not.”

Even stores that had a decent Christmas in 2009 are worried about the next few months. “I think this Christmas won’t be any worse than last year, but I don’t know how different from last year it’ll be,” said Abraham Frost, president of Frost & Co. Diamonds in Pittsburgh, Pennsylvania. “The jewelry business is different now, and not just because of the economy, but because of the attitude of the customers. And if you’re not in the bridal business, I don’t know why you’d want to be in the jewelry business at all. There’s no appetite for the diamond lifestyle anymore. Even those who can afford it don’t think it’s a big deal to have real diamonds.”

Gail Friedman, owner of Sarah Leonard Fine Jewelers in Los Angeles, agrees that this Christmas might feel like last year, but also acknowledges that last year wasn’t as terrible as it could have been. “I don’t know if this year’s holidays will be different,” she said. “On one hand, I think it won’t be as tense for the customers. We had a decent Christmas last year, but I think the climate is tough, because California is bankrupt and Los Angeles is bankrupt. Yet, our customers haven’t really been affected. They’re still working. They’ve curbed a lot of their spending, but they still want to buy things.”

In areas that haven’t been hobbled by the recession, the mood is more optimistic, but tempered by practical considerations. “In our area, I’m expecting a better Christmas this year than last year,” said Lance Buttars, owner of Molinelli’s Jewelers in Pocatello, Idaho. “2009 was better than 2008, and we haven’t been hit as hard as other areas by the economic conditions, though we’ve had to change our tactics a little. The average ticket price for Christmas gifts has gone down, so we’ve focused on price points. Last year, people were holding their breath. This year, people are tired of being afraid, and they just want to live their lives.”

Benny McNair, owner of McNair Jewelers in Gadsden, Alabama, is seeing fewer big-ticket sales, but makes up for that lack of income with other services. “I think this Christmas is going to be okay,” he said. “We do lots of remounting, restyling and repairs, as well as custom pieces. That keeps it going. But big diamond sales have stopped. Another thing that happens is that some of your customers just don’t have anything else left to buy after a while. They get all ‘bought out.’ They’re saturated.”

Last-Minute Buying

In addition to worrying about how many sales they’ll be making, retailers are concerned about customers who do all their Christmas shopping at the last minute. “Holidays shopping in our area starts in earnest on Black Friday, but that’s never been a good day for us, really,” said Buttars. “That’s a Kmart and Wal-Mart kind of day. Last year, we were behind from our 2008 numbers until the last week before Christmas, and my friends in the business say their biggest days are the ones just before Christmas. Men are late shoppers, and economic pressure makes them think more about what to buy. Then they get down to the wire, and they think jewelry can’t miss. Also, there’s a chess game between the retailers and the consumers. Consumers think if they wait they’re going to get a bargain, and then the retailers play into that and slash prices to move inventory.”

That said, if this year’s holiday sales are even halfway decent, most store owners will breathe a sigh of relief. And expectations for next year are mostly sunny. “I think for 2011, you need to be optimistic, but be cautious,” said Lordo. “You don’t need to go crazy. Keep your expenses low, but don’t be overly cautious. I think it’s got to get better.”

Friedman agrees. “We had a way better year this year than last year,” she said. “But flat is the new up, so if we stay the same in 2011, we’ll be happy.”

The Marketplace

• Round is the top-selling shape, followed by cushions.

• 1.25-carat stones are in high demand, as are 0.75-carat stones.

• SI1 is still the best-selling clarity.

• G-H is the top color range.

• In settings, platinum is the metal of choice at high-end stores, and 14-karat white gold does better at midmarket retailers.

• The average price for an engagement ring, including stone and setting, is $7,000.

Article from the Rapaport Magazine - November 2010. To subscribe click here.

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