In this price-sensitive market, wholesalers are going above and beyond in expanding services to their clients. And they’re staying closer to home. Most have indicated they have no plans to attend the upcoming Hong Kong Jewellery & Gem Fair, citing cost as a factor.
New York: Pressure on margins
“It’s all about price points. You can sell I, J, SI2, but G, VV2 — forget about it,” said Israel Kornbluh, president of New York-based wholesaler Z Kor Diamonds Corporation. “Everyone is shying away from the more expensive goods. Although the wealth of the US is in better shape than it has ever been, we’re not getting the trickle-down effect on diamonds.”
Citing the “longest cycle of downtrends in price,” Kornbluh explained that everything revolved around profitability. “Not only are margins being pressured by competition from online retailers, but your best stone for a specific color and clarity is competing as well with an inferior stone being offered online. You’re only as good as the same stone posted online that could be 20% to 30% cheaper and/or inferior with the same Gemological Institute of America (GIA) certificate.”
Furthermore, Kornbluh described the inability to sell a stone without a GIA certificate as another example of the “collateral damage” the internet had inflicted on the industry.
The oversupply of diamonds also has critical implications for the trade, continued Kornbluh. “In the past, the miners watched our backs by controlling the flow of diamonds into the marketplace so that prices didn’t fall too sharply. As a result, prices kept going in the right direction most of the time. However, in the last few years, we dealers have had to literally change roles and watch the miners’ backs by absorbing the oversupply they irresponsibly spilled into the marketplace.”
Yet he remains optimistic. “We believe everything is cyclical. We adjust as necessary and forge forward. As a fourth-generation diamond business, we’re here to stay,” he declared.
Chicago: Where are the ads?
“Business has been surprisingly busy,” reported Ami Sarbagil of E.M Trading, a diamond manufacturer in Chicago, Illinois. He attributed it in part to his significant memo business, which gives clients more flexibility. Even so, “people are buying very specific pieces,” he added, explaining that “it’s more about demand than prices. Everyone wants white, eye-clean stones. So demand has shrunk into very, very specific categories — G, H, I, J. SI1, SI2. The market offers a much wider spectrum with a lot of VVS, VS and collection goods. But people don’t want them.”
Sarbagil, who doesn’t import from China, believes tariffs will not affect the diamond market. Overall, he thinks the impact will be to spur more “Made in America” products. As for lab-grown,
he said confidence in them was “zero.”
Maintaining a strong, trusted relationship with clients remains increasingly important for wholesalers, according to Sarbagil. “We take care of all their needs. You can go online to purchase a stone, but you are missing the service that goes along with it.”
Sarbagil predicted a good holiday season. Yet he was adamant that the industry needed a dedicated and sustained advertising campaign, similar in scope to the kind De Beers once provided. He proposed that funding come from a tax — perhaps 0.05% — on every export from India and Israel. As an example, he cited the Israel Diamond Exchange, which used tax revenue from imports to produce videos promoting mined diamonds.
Sarbagil recognizes that advertising on a national scale would require high-level management. Still, he insisted it was the only way: “You have to promote diamonds every minute, every day.”
Los Angeles: Next-level service
“Business over the summer was surprisingly very good. We have been seeing many custom and detailed special orders — next to loose diamond and colored-stone requests,” noted Arch Kitsinian, president of S.A. Kitsinian and Vanna K in Lake Balboa, California. “We’re basically acting as the back office for the retail jeweler.”
Jewelers are having an extremely difficult time finding skilled diamond setters and watch-repair experts, according to Kitsinian, a manufacturer. He recently purchased an expensive Sisma laser machine to cut nameplates and even hired a full- time graphic designer to enhance the process. “If this is what it takes [to provide service to clients],” he said, “we’re here to help them.”
As a manufacturer in Los Angeles and Europe who imports little from China, Kitsinian was not concerned about tariffs. But he had a stronger reaction to lab-grown diamonds — which he prefers to call “created diamonds,” emphasizing that they were not produced in a lab, but in a factory. Kitsinian will only sell natural diamonds with grading reports from a reputable laboratory.
“You have to pick your lane when it comes to diamonds right now. We won’t jump on the created-diamonds bandwagon, because if you do, you’re going to be sickening the industry,” he asserted. “You’re taking advantage of someone to make money for a day. And then what? Will they refer friends or one day send their children to you when they find out that the ‘created diamond’ you sold them isn’t worth its value?”
Article from the Rapaport Magazine - September 2019. To subscribe click here.