An Uphill Climb

RAPAPORT… The worst of the recession is over, but unless the economy double dips, most retailers are predicting a slow, rocky climb. At least it’s movement in the right direction, though. Customers who had money throughout the worst of the market’s slump are finally returning to shop, and while not every sale features a big-ticket item, there are more sales each month. Savvy retailers are finding ways to fill holes in their inventories with fresh goods in price points that make everyone feel good about spending again.

Recovery and Change

Most stores are reporting vastly improved numbers over the past few months. “Business has been growing, year on year,” said Tyler Nogai, vice president of sales and marketing at Arthur’s Jewelers in St. Paul, Minnesota. “And we actually had a pretty decent year in 2010. It feels like the economy is coming back. People are feeling more comfortable, and the average amount spent is rising in each category. I just don’t think people are uneasy when you talk to them.”

The story was the same in Oregon. “We have exceeded every month so far, month on month, over 2010,” said Kathy Cary, diamond buyer at Skeie’s Jewelers in Eugene. “We attribute that to an improving economy. Also, there were a lot of people who weren’t really affected by the economy, but who stopped spending because the economy was bad. Those people are bored now.” According to Cary, they want to start shopping again.

Improvement is coming in fits and starts for others. “This year is ahead of last year, and surprisingly, April was a good month,” said Hy Goldberg, owner of Safian & Rudolph Jewelers in Philadelphia, Pennsylvania, and president of the Philadelphia Jewelers’ Row Association. “There were big-ticket sales, and we’ve had some good Saturdays. But May has been horrible.”

In Las Vegas, Nevada, sales are also uneven. “Like 2010, this year has been sporadic,” said John Nichols, sales manager at Huntington Jewelers. “Some months we think we’re turning the corner, and then the next month, we’ll go down. It’s like a big roller coaster.”

According to Ursula Pfahl, Ph.D., chief operating officer of Yamron Jewelers in Naples, Florida, one of the reasons for the rough return to normal is that the recession made consumers reevaluate their spending. “We have recovered from the shock of the 2008 recession, but are finding significantly changed consumer behavior,” said Pfahl. “The economic downturn affected consumers at every level. Even wealthy consumers started to separate ‘wants’ from ‘needs’ in their purchases.”

Middle Ground

What seems to be at the top of many customers’ wish lists now are fairly priced goods that are still impressive enough to thrill. For many buyers, that means moving away from diamonds and gold. “We’ve gotten into more moderately priced designer goods, as opposed to just going for lower-quality goods,” said Cary. “We’ve gone for decent quality in less expensive metal and stones. We’re concerned about inflating commodity prices. So we’re really focusing on alternative jewelry designers. But I can’t stress that enough — designers. We didn’t want lighter-weight or poor-quality diamonds. Instead, we can offer a piece with a big quartz stone in the $100 to $1,000 range. And of course, there’s always pearls.”

Commodity prices are a concern for Goldberg, too. “What is selling is more bridal and fewer finished pieces,” he said. “Customers just aren’t buying jewelry with the price of gold being what it is, at an artificial high. But with bridal, the price of the metal is a smaller percentage of the total package, so it doesn’t affect the ring price as much.”

For Pfahl, finding the right price was as much about working with savvy consumers as it was about working with changing commodity prices. “Because our clients are highly educated, they now tend to come prepared with carefully gathered information on items of interest to them,” she said. “The customer has become price conscious, and while relationships still play a role, the customer expects very competitive pricing. This has an effect on overall margins.”

The Outlook

Overall, retailers are expecting things to continue improving. “I would say that we are on an uphill cycle,” said Cary. “I don’t think we’ll recover particularly quickly, but I don’t think we’ll see the Christmas we had two years ago either.”

Nichols agreed. “I think it’s still going to be a struggle, but I think it’ll be good,” he said. “It’s just a matter of being smart and riding this out. Jewelry has been around for 50,000 years, but it’s the first place things drop off and the last place things pick up when times get tough.”

According to Goldberg, the worst is over. “I think we’ve bottomed,” he said. “After you bottom, you start to move up, and after you move up, you go slow. But we need to get oil under control, because if consumers are paying an extra $10 at the pump, they’re not going to want to spend $10,000 on a piece of jewelry. So much of what we do is about the psychology of the consumer.”

The Marketplace

• Round sells best, with cushion and princess cuts tied for second.
• 1.5-carat to 2-carat stones are doing particularly well right now.
• SI1 is the most popular clarity, with VS2 a popular choice for the more well-heeled.
• G-H is the best-selling color range.
• 14-karat and 18-karat white gold still outsells platinum, with palladium growing in popularity.
• The average price for an engagement ring, including stone and setting, is $5,000.