Rapaport Magazine

Price Pressures Return

U.S. April Wholesale Market Report

By Ricci Dipshan
 In March, the wholesale market lost some of the momentum it had gained since the beginning of the year, creating a slew of different experiences for wholesale companies around the nation. Some wholesalers, for example, saw their sales environment become more unpredictable. “Sales over the past few weeks have been very sporadic,” noted Moshe Salem, president of the Los Angeles–based M.S. Diamonds and Jewelry.

Other wholesalers fared better. “Sales have been typical for this time of year,” reported Oren Sofer, a partner at New York City–based loose diamond and jewelry supplier Beny Sofer. “But we have outpaced 2011 due to some atypical larger diamond sales.” And then there were those who were able to stave off a slowdown, but just enough to keep their businesses stable. “Sales seem to be flat, but steady,” said David Wiener, president of Harry Kotlar, a Los Angeles–based manufacturer of platinum and diamond jewelry.

Wiener, however, added he is confident that sales will pick up in the coming months. “There seems to be, at least in recent weeks, an increase in sales because people think the economy is getting better, so they are spending more.”

Though the market is not as robust as it was in early 2012, it does have a few strong spots. “The bridal market, for example, is doing particularly well,” noted Salem. Jay Gilbert, owner of the Los Angeles–based Coast Diamond, a manufacturer of fashion and bridal jewelry, confirmed Salem’s observation. “Bridal jewelry is totally driving our business. Our sales are ahead of the past year and we had an excellent 2011.”

Certain diamond cuts are increasing in popularity. “Fancy shapes are definitely selling well, especially ‘square-shaped fancies’ —  princesses, cushions and radiants,” declared Sofer. Still, cushions seem to be most in demand. “There is definitely a big increase in requests for cushions,” observed Salem. “Overall, they are a very strong seller.”

Wholesalers are also seeing a rising demand for colored diamonds. “As far as fashion jewelry is concerned, we have seen a stronger trend in fancy color and white diamonds — and it is much stronger than in 2011,” noted Ed Eleasian, vice president of Elie International, a New York City manufacturer of colored gemstone and diamond jewelry.

Though industry prices have held steady over the past few months, demand for certain cuts is finally causing some prices to fluctuate. “Yes, the prices have changed,” said Salem. “We have certainly seen an increase — we are seeing a huge increase in the square shapes, mainly cushion and emerald cuts, though we are seeing less of an increase in round.”

Others noted that while general prices are rising, they are also decreasing on a few items.  “Overall prices are up from 2011,” confirms Eleasian. “However, in larger stones over 3 carats in VVS quality, we have seen a drop.”

While increasing prices are nothing new for the diamond industry, many wholesalers still have to deal with retailers whose customers are cautious with their spending. “I think that everything right now is really based on how the economy is doing, and how much people feel they can spend,” observed Wiener. 

This dynamic is causing some headaches for wholesalers as they strain to meet price points that are unattainable in the current market. “People want specific price-point diamonds, people want a reasonable diamond that will cost a reasonable price — but inventory like this no longer exists. The fact is that prices have gone up,” explained Salem. “We are seeing a little bit of a mismatch between expectations and reality, because consumers are still coming up with prices from the past.”

Some also fear that if prices continue to rise at a fast pace, they may undercut a burgeoning demand that is growing alongside the economic recovery. “As the economy continues to recover, we are seeing a move back into diamonds,” observed Sofer. “But there is a problem — a lot of consumers are being unpleasantly surprised by the dramatic increase in the price of diamonds.”

While Sofer sees signs of sales picking up again, he is still guarded in his prediction of how the wholesale market will fare over the next few months. “I see business slowly improving, but for many jewelers, there is still uncertainty in the market. Some retailers are still on hold, selling what they have.”

Others are wary that the demand in the U.S. has hit its peak and, while it may remain steady, will not be able to sustain the domestic wholesale market like it once did. “I don’t see a strong consumer demand in the U.S. anymore,” said Salem. “I see a steady bridal business and a steady consumption on some level, but it’s sporadic and not strong enough — certainly not strong enough to support the many outlets we have in this country.”


The Marketplace

  • Stones ranging from 1.5 carats to 3 carats and fancy color and white diamonds are in demand.

  • Princess, cushion and radiant cuts are popular, especially in G-H color and SI quality. 

  • Wholesalers are reporting a shortage in princess cuts ranging from .5 carats to 2 carats.

  • Prices on fancy shapes are rising faster than those on rounds, while prices on VVS stones over 3 carats are dropping.

Article from the Rapaport Magazine - April 2012. To subscribe click here.

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