US wholesale

Holiday sales results brought a welcome sigh of relief to diamond wholesalers, spurring confidence for the first quarter — and the year ahead.
   “We really caught up after the slackness in sales we experienced early in 2017. The momentum is there,” said Nilesh Sheth, president of New York-based manufacturer Nice Diamonds.
   Amish Mehta, president of Amipi — another manufacturer in New York — echoed that sentiment: “The season was stronger than expected and helped us to maintain growth. January definitely felt like a continuation.”

Inventory and profitability
Most wholesalers concurred that prices had been steady. “We don’t see a huge volatility,” said Nick Jain, vice president of sales at manufacturer Paramount Gems in New York. However, inventory issues appear to be surfacing.
   “I think on the supply side, it is harder to find choice goods right now,” he commented. “A lot depends on who is buying rough and when they are buying it in relation to production. It is really hard to gauge when it is going to peak or plateau.”
   Mehta said reduced production had made it “impossible to profitably replace” Gemological Institute of America (GIA)-certified diamonds in VS2 to SI2. However, Sheth has implemented a refined system of stock replacement, supported by a “steady source of diamonds from India.”
   “The system has built-in lead time for each item, which helps us make sure we are never out of a particular item,” he explained.

Tax bill impact
The continued strength of the US economy, bolstered by a stock market hitting record highs, has contributed to the optimistic viewpoint many wholesalers have expressed. However, some wholesalers recognize that there are still a lot of unknowns — including the GOP Tax Cuts and Jobs Act — that can impact the market and, as a result, the sale of luxury goods.
   “On the macro level, the tax bill sounds like a good thing. But It is hard to really identify what is driving business,” said Jain. “I think the tax bill will help luxury goods, given that in general, people will have a few extra bucks to spend. But there are other political headwinds out there — the uncertainty is still there.”
   “Sure, it will help business,” added Sheth, who thinks the bill’s provisions will provide benefits across the board. “The bigger corporations will bring in assets sitting outside the country, and when they do that, their employees will also benefit, besides the shareholders. Walmart and other retailers recently announced an increase in hourly wages for [their] employees, which will create more disposable income at every level.”
   And while some economic experts predict a market correction, Sheth put a positive spin on that possibility: “People will be scared to put new money in the market if that happens. They’ll be better off spending it on diamonds, which, even with ups and downs in the economy, have historically grown in value.”

Driving demand
Diamond demand still remains an issue. “I believe the new tax bill will be beneficial to the sale of luxury goods in general, but demand for diamonds and diamond jewelry is declining,” Mehta pointed out.
   Sheth cited continuing cooperation among the local trade groups that have united to form the US Jewelry Council as a positive force in addressing industry issues. Media is another powerful tool driving diamond sales, he noted.
   “It all depends on what happens on the red carpet,” he said, referencing the publicity surrounding the Golden Globes in January, which kicks off the awards season. “The stars showed off their jewels that contrasted with their all-black gowns. Those pictures go viral — and social media is where everything is.”

Article from the Rapaport Magazine - February 2018. To subscribe click here.