Rapaport Magazine

U.S. Wholesale

By Ricci Dipshan
Hitting a Speed Bump

Since the beginning of 2013, a sense of optimism has pervaded the wholesale market. “There is less fear of owning goods, and I think the public is asking for more goods — demand has been great from the start of the year. Overall, there is a lot more confidence in the industry,” said Morris Szklarski, owner of Kelsol Diamonds in New York City.
   At the start of the year, the market seemed unstoppable. “Sales for January and February were very strong — both record months. We saw an increase in a number of areas and multiple price points were in play,” said Andrew Rickard, vice president of operations for RDI Diamonds in Rochester, New York.
   That momentum, however, hit a speed bump in March. “Our sales were up in January and February, but they definitely slowed down in March,” observed Shakeel Japanwala, manager of the certified diamond division of New York City’s C.D. Diam.
   Ann S. Arnold, chief executive officer (CEO) of bridal wholesaler Lieberfarb, a manufacturer and designer of bridal jewelry in Rahway, New Jersey, saw a similar situation. “In March, the market was quiet. There were a few orders from larger retailers and some of the high-end independents but, for the most part, retailers remained conservative and quiet.”

   One trend that has continued into spring is widespread price stiffening. “In the past couple of weeks, prices have started to rise significantly in both rounds and princess cuts in higher qualities — stones with a G color or higher and SI quality or higher — and in Gemological Institute of America (GIA)-certified goods,” said Szklarski. He added that prices on all fancies in qualities lower than SI and lower colors have risen as well, though not by as much.
   Many wholesalers lament that fluctuating prices are holding back consumer spending. “If prices are stable, people will buy with confidence,” declared Japanwala.
   The price increases, however, do not extend to melee diamonds or diamonds under .50 carats. “We have not experienced any price changes in the sizes we use for production and we have not experienced price resistance either,” said Arnold.
   In response to high prices overall, consumers are opting for less expensive, lower-quality goods. “When prices soared, almost all our retailers lowered the quality they were carrying by a full grade,” noted Arnold. This buying habit has accelerated since the holiday season. “What we saw at the end of 2012 is continuing into 2013 — there is more and more interest in middle to low-end stones in VS and SI qualities,” observed Szklarski. “There is still a weakness in top goods, meaning colors G and above in VVS and IF quality.”
   Specifically, “rounds from .75 carats to 1.50 carats in G to J colors and VS2 to I1 qualities are quite popular right now,” noted Rickard. “There is also a continued interest in all fancy shapes, but there are definitely shortages in them,” added Szklarski.

   Difficulty replacing goods, however, is not as pronounced as in previous months. “Our inventory is strong, supplies are there,” declared Rickard, adding “princess supply — which has been an issue — has improved, but prices are up on the nicer goods. Ovals, Asschers and emeralds continue to have limited supplies.”
   “We continue to buy and sell, but the problems are in the goods that are very much in demand — we just seem not to be able to get enough of them,” added Szklarski. In melee, there hasn’t been a huge shortage of goods, “though recently .10-carat rounds in G to H colors and SI quality have been hard to find,” said Arnold.
   Despite the slowdown in March, some wholesalers still predict that 2013 will be a strong year for the U.S. diamond market. “Overall, the feeling has improved and people are more optimistic. Strong sales from December to February are leading most to believe that 2013 will be a strong year,” said Rickard. “The ‘fiscal cliff’ has come and gone, and, despite a press that is determined to report that the country’s financial situation worsens by the hour, consumer confidence is up overall and the market is steady.”

Conservative Outlook
   Others, however, think that the strong start to 2013 will be a short-lived anomaly in an otherwise static market. “We are always optimistic, but realistically, I would predict a conservative spring and a fair JCK Las Vegas show compared to 2012,” predicted Arnold. She noted that “the majority of retailers had a soft fall season and, aside from the strong holiday season, from the fall until now, it’s been a pretty soft, stagnant market and retailers will probably be inclined to hold back more in 2013.”

Article from the Rapaport Magazine - April 2013. To subscribe click here.

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