Recovery Ahead of Schedule
By Karolyn Schuster
In October 2010, Doron Rozen, president of Doron Diamond Merchants in Memphis, Tennessee, surveyed the landscape of the devastated U.S. diamond industry and projected it would take five years for the market to rebound. In April 2011, Rozen said, “We’re turning around right now. We’re way ahead of schedule on this recovery. I think JCK Vegas will be exciting and profitable this year and the best JCK since 2007.”Rozen bases his assessment on the fact that “everyone’s inventory is down, so they need to buy. That’s why Tucson was so busy. That’s why people bought up everything in Hong Kong. If you had goods there, you sold them. No one bought in 2010 because they didn’t know what Christmas would bring. But now — now they’re buying.”Not Scared Off By Prices The strength of the market is apparent in the continually rising diamond prices — and the fact that those prices are not scaring off buyers — along with the shortages of goods in a number of “highly desirable” categories.“I think this is the first time I am not seeing people refusing to buy because prices are expensive,” said Moises Mareyna Rosenberg, president of M&M Diamonds in Houston, Texas. “I think they are finally accepting the concept that the U.S. doesn’t dominate the world price of diamonds. There is a sense that ‘If I want to own it, I will have to pay the price.’”“There’s more world demand and the supply isn’t getting any bigger,” said Sam Frank, president of Leo Frank & Sons in Troy, Michigan. “Most of the goods are going to Asia — and we’re stuck with the leftovers — because sellers can get higher prices in Asia.”Morris Szklarski, president of Kelsol Diamond Company in New York City, isn’t surprised by the escalating prices. He said that in a world where “everyone is willing to pay $1,400 an ounce for gold and $1,800 for platinum and $40 for silver, well, then, it follows that diamonds as a cash-intensive commodity should follow. Add to that the fact that investors want to get out of currency because banks aren’t paying them any interest.”“Retailers are starting to understand that their customers have a price point and they need to work with that price point,” said Frank. “Maybe they need to loosen up on the make, maybe be flexible on fluorescence in the stones.” Frank also has noticed some retailers shaving costs by switching from Gemological Institute of America (GIA) certs, which are more expensive, to European Gemological Laboratory (EGL) certs.Wedding bells are continuing to ring cash registers — and higher prices aren’t changing that. But, even in the bridal market, price points are critical. According to Rosenberg, “You don’t hear a customer say, ‘I’m not going to get married because I want a carat-and-a-quarter ring and the price is too high.’ What you will hear him say is, ‘What can I get for $2,000, or $5,000 or $10,000? Okay, maybe I’ll move down to a carat or to a J or H.’”Rozen reported seeing a new bridal profile — “older couples getting married for the first time. They have been working awhile, they’ve got some money in the bank, maybe a house. They can afford a bigger ring. They might spend $15,000 on an engagement ring versus the 20-year-olds who spend, at the high end, maybe $7,000 to $8,000.”Supply Shortages“Dealers are increasingly cash rich and diamond poor,” Szklarski said, noting that “retailers accustomed to taking goods on memo are having an especially hard time. The price increases have hit them hard. They’re having trouble understanding that six months ago, you offered them something at X dollars and now it’s X plus 25 percent.”In some high-demand categories, “you begin to wonder if sellers are holding on to inventory because they know prices are going up and they just don’t want to sell,” Szklarski continued. Although the shortages of goods can lead to empty space in retailers’ display cases, he joked that “You can always put out another watch – or another plant.”Adjusting to the TimesDespite the volatile market, U.S. wholesalers are surviving by adapting their approach to business. Leo Frank, headquartered in the Midwest, where the manufacturing-focused economy has been hard hit, is seeing significant increases in its 2011 business, partly by expanding South and West and hiring additional salespeople to tap those new markets. The increased sales, said Frank, “don’t seem to be a one-month thing. We’ve been consistently up by a significant amount — well into the double digits — for at least the past six months.”“Wholesalers have a significant advantage over retailers when it comes to expanding,” said Frank. “We aren’t limited to the 20-miles radius of our store.”In one recent week, Rosenberg “bought 15 stones from 15 different suppliers. I went to the net, found the stone, phoned them, negotiated and sent them a check. If I had bought all 15 stones from the same dealer, I would have paid more.”The Marketplace- The make of a diamond has become much more important in marketing a stone because of its assurance of quality.
- Carats and carat-and-a-quarters are really strong and 1.50 carats are in short supply and move very quickly.
- Grainers in 4 through 8 sizes are easy to sell in quantity if priced right.
- Wholesalers are taking advantage of recent price increases by reviewing old inventory and pricing it to sell.
Article from the Rapaport Magazine - May 2011. To subscribe click here.
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