Rapaport Magazine

’Tis the season

Has the industry returned to its routine selling cycle after the pandemic disruptions?

By Avi Krawitz
Full up on turkey and possibly hung over from a football game, US consumers have traditionally gathered in the early hours of Black Friday to prepare their own offense and defense strategies for the dash to the end zone: wherever the discount sign might be. In years past, as the doors of Walmart, Best Buy, Macy’s and countless other retailers swung open at 6 a.m. the day after Thanksgiving, the world would know that the holiday shopping season had begun.

The starting whistle blew progressively earlier until 2011, when some leading outlets opened at midnight, officially extending Black Friday into Thanksgiving Thursday. A few years later, some just stayed open for a two-day shopping frenzy.

That, of course, changed with Covid-19. Consumers were forced to avoid crowding and shifted to seeking out the best deals online. But even before the pandemic, store owners were adjusting their strategies, accommodating early bargain hunters as well as panic buyers who had left their shopping to the last minute.

Moving to the beat

The diamond industry has long had a rhythm stemming from Thanksgiving weekend — the traditional start of the holiday season. After all, November and December account for a significant portion of diamond jewelry sales (see infographic). Usually, retail jewelers start looking at collections around May and June — one of the reasons for scheduling the Las Vegas shows at that time of year. They place orders, then take possession of those goods in the third quarter, causing their inventory to spike in September and October before the sales onslaught begins.

Retailers often continue to source, since they require merchandise right through December, but wholesalers, dealers and manufacturers typically plan their supply according to the aforementioned timetable, making sure they have goods ready for the peak fourth-quarter selling period. Then, just as the season ends, the supply chain starts to replenish its inventory. Rough-diamond sales tend to spike in December and January so cutters can have polished goods ready in the first quarter, when trading is at its strongest. Activity then quiets down in April and May before the cycle begins again.

Supply to China centers around the Chinese New Year, which further stimulates the midstream in the first quarter. India, meanwhile, has Diwali to consider — both as a good time to sell jewelry and as a vacation period for diamond manufacturers.

Christmas come early

The pandemic disrupted that tempo in 2020 and 2021, with sporadic and sometimes prolonged shutdowns throughout the pipeline. The Las Vegas shows, for example, were postponed until August, leaving a smaller window for wholesalers to fill holiday orders.

“The supplier needs time to get the order to manufacturers to have the product ready,” explains Carl Lehnhart, diamond director at jewelry wholesaler Stuller. Based in Lafayette, Louisiana, his company did not attend the show this year due to Covid-19 concerns. “Even though it was nice to have the show and feel that things were returning to normal, the timing was atrocious.”

Further tightening the deadline is retailers’ tendency to start their holiday promotions earlier than before, no longer waiting for Thanksgiving.

For example, Signet Jewelers, the largest specialty jeweler in the US, has been looking to reduce its reliance on fourth-quarter performance, CEO Virginia Drosos said during the company’s second-quarter earnings call on September 2. Signet is spreading its holiday sales into the third quarter to cater to different types of consumers. Besides the last-minute shoppers, there are the savvy ones — typically women — who get started early, and the value seekers, who are increasingly moving up their purchasing timeline.

“We believe that Christmas and holiday [sales] begin in September,” Drosos said. “And so we are ready with merchandise and with the right kinds of promotional cadence targeted to [those shoppers].”

Ticking clock

The percentage of consumers planning to spend on “event days” such as Black Friday, Cyber Monday and Thanksgiving Day is higher this year than last, according to Deloitte’s annual holiday retail survey. Concurrently, the percentage of people with no plans to buy on any of those days is down to 41% from 42% in 2020.

Meanwhile, six of the 10 retail executives Deloitte questioned were worried about receiving holiday orders on time, and the majority expect holiday shopping to start one to two weeks earlier this year.

While the diamond and jewelry trade is not facing the same supply chain issues as other product categories (see story on Page 23), there are a lot of goods in the pipeline, and there are concerns about supply shortages for the holiday season.

The grading labs continue to see a surge in diamond submissions, according to Angelo Palmieri, chief operating officer of New York-based laboratory GCAL. “We’ve never had more stones in our lab. There is this massive rush of goods at this point, in mid-October, because you have to get the diamond graded and mounted into jewelry and distributed to stores. So the clock is really ticking.”

That begs the question: Is the supply rush this year due to Covid-19 disrupting the industry’s routine, or is it the forerunner of a new, tighter schedule that will ultimately become the norm — particularly with retailers requiring shorter delivery times in today’s on-demand market?

Since the holiday period is looking positive, there is some confidence that the seasonality of supply will return with a strong first quarter. Even so, as the distribution chain becomes more efficient, it will also become more demanding to manage — and the trade will have to learn to keep up.

Article from the Rapaport Magazine - November 2021. To subscribe click here.

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Tags: Avi Krawitz