Rapaport Magazine

Scrambling for Goods

U.S. March Wholesale Market Report

By Denise Romano
It’s no secret that India’s and China’s booming markets are raising rough prices — making U.S. wholesalers feel a bit uneasy. “Prices are very high today and there is a scarcity of goods,” said Jay Moskovitz, vice president of Robert Moskovitz Co. in New York City. “If you manage to find what you are looking for, it’s going to cost you.” 

Ami Koret, vice president of Davidoff Diamonds in Houston, Texas, explained, “It has gotten to the point where I have Indian, Belgian and Israeli dealers calling to see if I have any broken or rejected melee that I can sell to them so they can fix and re-sell it.” He added in jest, “It shows you how wonderful the situation is.”

Koret lamented that the days of U.S. diamond dealers getting first choice of rough stones are long gone since only markets overseas are able to afford these goods. “Maybe when the U.S. economy improves, we will regain our importance, but the consumer will have to get used to a new reality as far as the prices go,” he said.

The high prices are due to shortages across the board, Koret said, noting that “No matter what color, shape or clarity, if it’s a nice stone, there is a shortage.” Nick Jain, vice president of Paramount Gems in New York City, added that “It’s difficult to source goods 3 carats and above.” Moskovitz said that it is hard to find “anything on the cheap end, from carat sizes and up. Round stones in the price range from $500 to $2,000 per carat that are worth the money are particularly difficult to find. The Indians are buying everything up.”

Marvin Finker, owner of Trillion Diamond Company in New York City, whose company specializes in fancy shapes, admitted it is hard for him to get what his customers want. “There are shortages in many fancy shapes because no dealers are replacing them. If an order comes in from a customer for a specific color or size, I will be lucky if I have the right ones for them.”

Smart Dealers Stocking Up

Shakeel Japanwala, manager of C.D. Diam in New York City, said that while U.S. wholesalers are well aware of the skyrocketing prices, U.S. retailers are not. “Prices in America are cheaper than they are overseas,” he said, adding that, “All those retailers in the U.S. who bought cheap goods in the past are still selling them for cheap, not knowing that prices are going up.”

Japanwala continued, “Smart dealers who are anticipating the rising prices are buying and stocking. You can buy goods now that are 10 percent cheaper than the overseas market and then sell them later, making a 50 percent to 70 percent profit. Wholesalers are buying now so they can get cheaper goods and sell them to retailers in the future.” Jain agreed that “It’s hard to source goods overseas. In the U.S., if you are getting a decent deal, people are going to snatch it up.” 

Valentine’s Day sales were a mixed bag. “I don’t know if they were buying for Valentine’s or whatever but good Christmas sales continued into February. Business in general is good,” Koret said.

Jain said that retailers appear to be optimistic. “The retailers were relatively happy with Christmas as a whole. Although these price increases are hard to digest by retailers and consumers, their confidence is healthy.”

Slow Spring Expected

Despite some post-holiday falloff, wholesalers are not particularly concerned. “It’s tough to say, but I like to think it will pick up over the next couple of months because people have saved some money over the past couple of years,” Moskovitz said. Jain observed, “This is how it’s going to be over the next few months.”

Finker also expects a quiet season. “I can’t predict if it will be better or worse than 2010 though,” he said. Japanwala agreed, “Business is not bad, it’s just slow. I am afraid that prices are going to go up in 2011 — a lot.”

Koret had a sunnier take on the situation. “The mood is much more positive than it was in October or November,” he said. “But there is always a drop in business from the middle of March to the middle of April — tax season. As long as the stock market goes up and as long as people are in a good mood, they will keep spending,” he concluded.

 

The Marketplace

• Rounds are the most popular shape, followed by princess cut and cushions.

• Demand has bounced back for kite shapes and trapezoids.

• Demand is good for .75 carats to 1.50 carats.

• Anything cheap is moving well and anything good quality is strong.

Article from the Rapaport Magazine - March 2011. To subscribe click here.

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