Rapaport Magazine

Made in America

With most manufacturing happening overseas, can the US rejuvenate its own jewelry production industry?

By Lara Ewen

It’s a difficult time for US jewelry manufacturing. Domestic production is in decline, while overseas factories are expanding their market share. And it’s not likely to get better, according to a December 2017 report from IBISWorld, which predicts that the US jewelry-making industry will continue its downward spiral through 2022.

Already, it’s practically impossible to avoid overseas manufacturing. “There are vast factories overseas, and you either manufacture your own goods by being a partner with them, or you buy from them,” says Marc Feder, owner of Jay Feder Jewelers, which has a wholesale operation in New York and retail stores in Colorado and Florida. “How many 5-point diamond melees do they mine in the US? None. Every piece of a piece of jewelry, every stone, is coming from somewhere that’s not the United States.”

Even companies that do manufacture domestically often need to compromise.

“There’s a lot of pride [in] buying product that’s manufactured in the US,” says Kathy Corey, vice president of merchandising and co-owner of Day’s Jewelers, which has stores in Maine and New Hampshire. “But a lot of the companies that manufacture in the US also manufacture overseas. It’s a global environment, and the competition is fierce in diamonds, especially in the last 10 years.”

On top of that, there are governmental challenges that limit what companies can call domestically-made product. The Federal Trade Commission (FTC) “doesn’t allow us to say ‘Made in the USA’ unless everything is mined here,” says Corey. “‘Made in the USA’ insinuates that all the parts are from the USA.”

A multi-pronged approach

If the US wants to rejuvenate its domestic production industry, it needs to make changes on multiple fronts, say industry professionals.

“Bringing manufacturing back to the United States is possible, but to see substantial growth in this sector, there must be a 360-degree approach, from government to businesses to consumers,” posits Victoria Tse, founder and CEO of jewelry design house VTse in Pasadena, California. “Ideally, the government would offer tax breaks and credits to incentivize companies to keep operations in the United States. Retail buyers should also make concerted efforts to focus on purchasing increased amounts of ‘Made in America’ products, and to adamantly promote and communicate the value and quality of these products to their customers.”

In short, she says, “there is no one solution.” Of course, cost will always be a determining factor, and that’s where companies abroad have the advantage.

“Retailers are always looking closely at the cost of goods,” notes David J. Bonaparte, president and CEO of trade group Jewelers of America (JA). “As long as the quality is maintained in manufacturing, and there are sufficient quality control systems in place, retailers will continue to source goods overseas.”

Those cost savings give retailers more flexibility in how to merchandise and sell to consumers, Bonaparte says, but there are still domestic alternatives. “Manufacturing still does exist in the US, albeit far reduced from years ago. There’s a chance for specialty manufacturing to return on a small scale.”

Finding home-grown talent

But even if there’s demand and opportunity, the industry can’t do much without trained craftspeople. Local bench jewelers are gradually retiring, and there are fewer and fewer new ones stepping up to replace them.

“It’s a problem with all industries when it comes to [staffing skilled trade professionals],” remarks Corey. “So we’re trying to be proactive and groom interested people who want to learn the trade through an apprenticeship program. We start grooming them now — grow your own! As an industry, we need to wake up and be a lot more active in the training process.”

Tse, meanwhile, says it’s about sourcing as much as training. “There is still a wealth of qualified bench jewelers in America. The tricky part is locating the right jewelers for your manufacturing operation.”

Bench jewelers are an extremely niche market, she notes, which means that unlike in other industries, there are no go-to services that can match up companies with would-be employees. “Companies have to rely on word-of-mouth and advertising through trade associations. But the process can take a very long time, and it leaves the manufacturer scrambling to fill the gap.”

On the plus side, Tse continues, the United States is home to several training programs and initiatives, all of which encourage careers in jewelry making. “There is a new generation of jewelers on the rise,” she affirms. “And with advancements in technology to cut costs, I think we will see a resurgence of manufacturing [domestically].”

Price and provenance

Additionally, the market for US-made products may be greater than the industry has managed to tap so far.

“The demand from the consumer has changed,” says Matthew Ego, CEO and founder of jewelry manufacturer Guild+Facet. “The consumer is no longer looking for a stock item out of the showcase.” Over 50% of brides and grooms seek custom wedding rings, according to a report he cites from wedding website The Knot.

“With the demand for custom and personalized jewelry increasing, retailers are forced to work with companies domestically because of their quick lead times and the ability to communicate efficiently,” Ego explains.

Bonaparte doesn’t think consumers value price savings over local provenance, but regardless, he believes domestic goods can generate their own value. “If jewelers were able to identify goods as ‘Made in the USA,’ this would create a new opportunity for US retailers to create a differentiator and tell a story. Today’s consumers want the story behind the products they’re buying. We believe there’s a market for this, especially based on the current business climate.”

Tse agrees, at least when it comes to the high-end market. “Luxury collector consumers tend...to care about where their products are produced, and the quality of what they purchase,” she says. “The challenge is price-driven consumers who are seeking the cheapest option and who are willing to sacrifice quality to get a better price.”

While that discrepancy will always exist, it’s important for the jewelry industry to educate consumers and create conversions, she says. “Lack of knowledge is a great factor in driving a customer to put cost before quality. If they simply don’t know the difference, the price tag will win.”

The Trade War EffectOn September 24, tariffs on billions of dollars’ worth of US and Chinese goods went into effect after months of escalating rhetoric — and legislation — between the two countries. Analysts have warned that the ongoing dispute could raise prices of household goods in both nations. But what impact will the trade war have on independent jewelers?

The JA’s David J. Bonaparte discourages jumping to conclusions before there are any clear-cut results. “It’s too early to consider any impact, as there have not been any tariffs implemented yet for jewelry.”

Kathy Corey of Day’s Jewelers agrees that speculation is premature. “I think there’s a bit of chasing butterflies here,” she says. “We have to let things settle. Economically, at this point, until it affects the direct consumer, it doesn’t impact [independent jewelers].”

In any event, smaller companies are unlikely to be at risk, maintains Marc Feder of Jay Feder Jewelers. “It won’t impact jewelry unless you’re one of the majors ordering in mass quantities and reporting to stockholders. The independent jeweler is not focused immediately on these trade disputes. They’re more concerned with diamond prices. And you have this whole thing with De Beers and lab-created gems” — a reference to the Lightbox line of synthetic-diamond jewelry. “As an independent, I’m much more focused on what the market is doing there than I am with overseas trade disputes.”

In fact, there may be indirect benefits to the US-China clash, according to Matthew Ego of Guild+Facet. “I think the trade dispute is good for business. It will create a level playing field for [local] manufacturers to compete with overseas manufacturers. Long-term, I think it will push the retailer to work smarter, and ensure that the increase in cost gets passed on to the end consumer.”

He elaborates that the tariffs could “push brands, majors, and independents to work with domestic partners versus overseas partners. And I can’t see any drawbacks to bringing back more manufacturing and more jobs to the US.”

As the retail world becomes more internationally integrated, it’s increasingly important that the US and China find a middle ground, adds Corey. “Together we’re stronger. China has elevated the quality of their manufacturing, and there’s a place for both of us in the world. If, in the next few months, both [countries] can allow the dust to settle, then we can benefit from each other.”

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

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Tags: Lara Ewen