As wholesalers tallied holiday sales, they remained optimistic that the pace of trade would continue through the first half. But historic inflation levels, a lack of inventory, and a pandemic that showed no signs of abating could not be overlooked.
New York: Targeted buying
“We’re still busy coming off 2021, which was one of our busiest years ever,” said Lior Sofer, vice president of New York diamond manufacturer Beny Sofer. “By the fall of 2020, we seemed to be back to 100% of business; 2021 felt like 120% the entire year.”
He cited 1.50- to 3-carat rounds as top sellers for 2021, with rectangular fancies also performing well. Basic fashion was “very hot”: The company sold more tennis bracelets and necklaces than ever before.
In a strategy shift, Sofer took a step back from online selling to concentrate more on his retail partners, who require larger stones. However, he continues to sell smaller stones online, in the 0.50- to 0.75-carat range.
If 2021 was the “trifecta — spending, growth, and selling product almost quicker than you could purchase it,” 2022 could be a “different ball game,” Sofer said. Continually rising prices, which are reaching increases of 20% or more, could dampen demand, he explained. He remained cautious about future business, believing that pent-up demand was already satisfied at this point. He also pointed to the impact of inflation, which hit 7% — the highest since 1982. He remains focused on “buying exactly what I need at a decent price” to replace the stones he sells.
Unlike finance or banking offices, which remain closed in New York City, the jewelry industry is back in full force, Sofer stated. Still, “it’s an industry that is learning to live with challenges.”
Chicago: Locating supply
Keith Zimmerman described 2021 as substantially better than 2020, despite supply challenges. “Selling wasn’t hard, but purchasing was very, very difficult,” stated the president of National Diamond Syndicate, a wholesaler in Chicago, Illinois.
Zimmerman focuses on diamonds of 0.30 carats up to 3 and 4 carats, all SI goods, primarily with Gemological Institute of America (GIA) certificates. He sells almost all the stones on short-term memo. While everything sold across the board in 2021, he noted that 2-caraters were impossible to keep in stock.
Like 2020, 2021 was a year of adapting at his company. “If a strategy didn’t work, we had to adjust — as we still do. It’s a necessity to avoid potentially serious problems. There is no choice,” he said. “Buying remotely was new for us. Our suppliers weren’t traveling, so we had to trust them to get us the quality goods we sell.”
Finding goods to buy was by far the biggest issue for 2022, he reported, and rising rough prices complicated matters. He does not advocate the approach of buying at any price, a sentiment he believes most diamond dealers share. In any case, he wasn’t sure that goods in some sizes were even available at the “any price” rate.
Zimmerman predicted a strong first half this year, but qualified that optimism with the caveat: “as long as we have the product to sell.”
Los Angeles: ‘You have to make it happen’
The “perfect storm” analogy almost never applies to a positive situation, but it worked for Kalpesh Jhaveri’s description of the diamond industry in 2021.
“It was a combination of the shortage of goods, decreased production, and consumers flush with cash that resulted in strong selling in all categories,” said the CEO of Los Angeles-based wholesaler K.R. Gems and Diamonds Int’l, who also serves as vice president of the Diamond Club West Coast (DCWC).
Almost 80% of Jhaveri’s business consists of GIA-certified, 0.50- to 5-carat stones. He sells primarily for stock and only uses memo for unsold goods that he then lists on diamond portals such as RapNet.
In response to the acute shortage of goods, he took a proactive approach, going to “hidden sources and connections that go back 20 to 30 years. You have to make it happen,” he emphasized. That sentiment also reflected his reaction to the pandemic and adapting to everyday business, which now includes lab-grown.
Jhaveri sells only a small percentage of lab-grown in response to client demand, and he stresses the importance of being transparent about its advantages and disadvantages. However, he has experienced problems with lab-grown producers’ inability to “commit in terms of quantity and price.”
While he forecast a strong first half in 2022, he also took a longer view.
“We’re at the tail end of the industry as it is now. Five years out, we’ll be seeing something very different,” he said. “Change is coming not because of demand, but [because of factors ranging] from technology to logistics, to banking and the movement of money, to the way we pursue goods. New ideas and products are creeping into the market, which collectively will be a major boost to our industry.”
Article from the Rapaport Magazine - February 2022. To subscribe click here.