Rapaport Magazine

Note from the publisher

By Martin Rapaport

Nothing is more important for our industry than the retailers who sell diamonds and jewelry to consumers. Some big diamond miners, manufacturers, and dealers think that they are more important and can dictate what retailers buy. That is not true. The big suppliers are nothing without the retailers whose sales fund them and the entire industry. In the words of Stephen Lussier, “All value in the diamond business emanates from the consumers’ desire to own our product.”

The Las Vegas shows were fantastic, with very strong sales exceeding optimistic expectations. Retailers restocked following a wildly successful 2021/22 fueled by unprecedented $5 trillion stimulus programs. All that money got the economy and jewelry markets hot — too hot.

With US inflation surging to 8.6% and mortgage interest rates rising to 5.8% we must sound a warning that a slowdown in demand for promotional and commercial quality diamonds and jewelry is highly likely as consumer disposable income is declining sharply. Furthermore, stock markets have plummeted by as much as 23% this year through June 16. It is important for retailers to recognize that the stimulus-driven demand is now reversing as governments severely tighten money supply to fight inflation. Simply put, consumers who need to pay more for gas, food, mortgages and everything else are less likely to have “extra” money to buy jewelry. Our euphoria needs to be replaced with rational expectations as the economy U-turns.

While it is good that retailers have made purchases for the holiday season and will now have more exciting inventory to sell in their stores, they should prepare for a more conservative value-oriented consumer. Better quality pieces reflecting emotional relationship demand such as bridal and anniversary jewelry will be important. Retailers should also recognize the values of consumers who do not want to buy “Russian Source” diamonds even if cut outside of Russia.

As demand softens, smart US retailers will protect their prices by promoting ethical diamonds that are in tight supply. Fortunately, almost all the goods sold at the shows are pre-Russian invasion.

However, some manufacturers have now bought large quantities of post-invasion Russian rough which they will cut and put on the market. An oversupply of these goods might reduce prices for Russian Source diamonds. Retailers and their suppliers are strongly advised to be very careful about what they buy. As always, buy what you can sell, but protect yourself as demand may decline.

While you might not know where all your diamonds are coming from, you can know where your diamonds are not coming from. Ensure your suppliers make clear affirmative declarative statements on invoices and watch out for suppliers who don’t require such statements from their suppliers. Rapaport will be publishing suggested statements soon. Also consider that diamonds with grading reports prior to February 24, 2022, are free of Russian complications.

The wholesale trade needs to do everything it can to protect the integrity of retailers by ensuring the legitimacy of the products we supply them. Retailers should recognize that they are personally responsible for what they buy and sell. As we go through major economic and social transformations this year, consider that the better you differentiate yourself and your products, the more value you will add and the better you will perform this holiday season.


Article from the Rapaport Magazine - July 2022. To subscribe click here.

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