Rapaport Magazine

U.S. Wholesale

By Brian Bossetta
Higher Demand for Lower Quality

With many economic indicators pointing toward recovery, diamond dealers in the U.S. wholesale market were cautiously optimistic heading into the Christmas season. They were hoping that better financial health for most American consumers would translate to purchases of diamond jewelry.
   But, unlike a decade or so ago, when jewelry had little competition in the world of luxury, today jewelers have to fight harder for those luxury dollars, which are increasingly going to other goods, especially those in the digital universe. “In the old days, it was just jewelry,” said Reuven Kaufman, president and owner of Reuven Kaufman Inc., a diamond manufacturer in New York City. “Now there’s more competition outside of jewelry, especially for the middle class.”
   Kaufman, who was happy with the run-up to the Christmas season — “we were expecting it to be worse” — said he was selling more less-expensive SI goods, which have compensated for a drop-off in sales in the higher-end VS and VVS range. “I think consumers have more disposable income,” Kaufman said. “But I think they are spending less of it on luxury goods.”
   Nati Nassimi, an executive officer at Yellow Diamond, a New York City wholesaler specializing in colored diamonds, said more competition in the luxury sector has made business more difficult. “You have to push your inventory,” Nassimi said. “People are no longer calling nonstop. But if you go door to door and promote your goods, you will make a sale.”

The Online Factor
   Andrew Rickard, vice president of operations at the Rochester, New York–based loose diamond and jewelry manufacturer RDI Diamonds, had a similar take on tech goods pushing into the luxury market. “It’s not just that there are many other options beside jewelry,” Rickard said. “The internet also provides accessibility to luxury goods in suburban and rural areas where there used to not be any.” Increased web access, he added, has also made consumers more knowledgeable and discerning.
   Rickard, like Kaufman, reported fewer high-dollar sales — “$20,000 and up” — and more lower-dollar SI sales. Still, the volume of those less-expensive sales added up to one of the best Christmas seasons for RDI since the company opened in 1992. “2013 was our best season ever,” Rickard said. “And 2014 is up around 20 percent.”
   Consumers spending more on electronics than jewelry was a factor contributing to less robust sales for Nilesh Sheth, president of Nice Diamonds in New York City. “We had a good June and July,” Sheth said. “But things have slowed down in the past six months. The momentum we were hoping for going into the holidays was not there.”

Asian and Russian Impact
   Kaufman, whose business is structured in two tiers — an American market and an Asian market — said a burgeoning middle class in India and China is helping to drive demand, especially in bread-and-butter commercial goods. A few years ago, Asian consumers, particularly in China, who could afford diamonds, desired only VVS and higher. But now, Kaufman noted, the rising Asian middle class is looking for SI and even I1 goods. “This creates new demand and keeps prices stable,” Kaufman said. “It’s very healthy for business here in the U.S. to have this diversification and a growing market.”
   However, as positively as a strong Asian market affects business in the U.S., a slowdown in the Far East could mean trouble for dealers here at home, Sheth cautioned. “Right now, India and China are okay, but if China stops consuming, that could significantly hurt the U.S.”
   Ongoing turmoil in Russia, the weakening ruble there and skyrocketing Russian interest rates — jumping from 10 percent to 17 percent in mid-December — could also have harmful effects on the entire industry, Sheth said. Should Russia’s economic woes continue, it could result in lower demand for Russian diamonds. “The falloff of the Russian ruble concerns me,” Sheth said. “Everything is connected.”

Fancy Colors
   For more than a decade, fancy colors have been growing in popularity, according to Sammy Namdar, president of Namdar, Inc., a manufacturer of loose diamonds in New York City specializing in fancy colors. Fancy color demand, Namdar said, has increased yearly, except for the first couple of years after the 2008 crash. In Namdar’s view, celebrities sporting fancy colors — “such as Jennifer Lopez’s 6-carat pink diamond” — have been a substantial factor in their growing status, “more than people want to admit,” Namdar said.
   Sheth, who also deals in fancy colors, has noticed the same increase in demand, in addition to a growing trend for fancy colors in the bridal sector as well. More people getting engaged today, Sheth said, are not as traditional and are looking for more unique designs, with many opting for fancy colors as the centerpiece of the ring. Though yellow seems to be the predominant fancy color, Nassimi said, “anything in color is popular these days. You can’t get enough pinks and blues.”

Article from the Rapaport Magazine - January 2015. To subscribe click here.

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