RAPAPORT…
At the 2011 Gemological Institute of America (GIA) Symposium, held May 29 through 30 at its headquarters in Carlsbad, California, jewelers were forewarned: Adapt to the changing marketplace, or get left behind. During the event’s many lectures and debates, retailers were educated on a handful of predicted trends and ideas that will dominate their future business. In addition, they were offered strategies and advice on how to navigate this new and unstable economic climate.
Luxury Markets on the Move
In the “Where is Luxury in this Brave New World?” forum, speakers dissected current luxury trends and examined markets where luxury spending is most likely to flounder — which, to the surprise of many, did not include the U.S. Ken Royal, senior client service manager for Gallup, cautioned against reading too much into the recent rise in American luxury spending. While affluent American consumers are spending more, “in general, they are not spending more than they did in 2008,” he said, pointing to a Gallup poll reporting that 41 percent of Americans spent less on luxury in 2010 than they did in 2008, while 29 percent spent the same and 30 percent spent more.
As domestic luxury spending remains comparably frail, overseas luxury markets are exploding at an exponential pace. “Since 2008, all the industry’s records have been broken,” said speaker Amit Dhamani, chief executive officer (CEO) and managing director of Dubai-based Dhamani Jewels, adding that burgeoning Eastern markets — which are adding tens of millions of affluent consumers to the global economy each year — are ripe territory for expansion. He warned, however, that jewelers who fail to tap into the Chinese, Indian and Middle Eastern trade will fall behind their colleagues as these markets continue to eclipse the once-dominant U.S. market.
A Future Without Trust?
The shifting global jewelry and diamond markets, however, are a small challenge for retailers when compared to consumer confidence in their products and service. Royal showed audience members a Gallup study that put consumers’ trust of jewelers at a dismal 20 percent, and noted that jewelry buyers rank trust as the second most important factor in jewelry sales, right behind quality. “New people, new customers,” Royal said, “don’t come into your store with a high level of confidence.”
Fighting this inherent lack of trust, Royal advised, is essential to the success of jewelry stores against established department stores and online sellers. The only panaceas against this erosion of trust are top-notch customer service, and appealing to customers’ emotional buying habits. This last point is key, said Royal, who cited Gallup polls indicating that around 70 percent of all purchases are based on emotion. “Are you selling a purchase or a relationship?” he asked retailers.
Estate and Auction Jewelry Take Off
Like the luxury market, the estate and auction jewelry markets represent an area of robust growth and expansion, and are an area that many GIA speakers encouraged audience members to pay more attention to. According to Gary H. Schuler, the senior vice presdent and director of Sotheby’s New York jewelrydepartment,speaking at the “Everything Old Is New Again:TheAppeal of Auctions, Estate and Vintage Markets” forum, demand for this type of jewelry is at an all-time high. “Over 60 percent of items we sell have gone for over high estimates,” he reported. The appeal of these items, Schuler reasoned, was the allure of their history — an idea all retailers should work to talk up. “It’s all about romancing the stone, it’s always about the story — people love the story.”
Though sales of auction and estate jewelry are doing well in the current economy, they only make up a fraction of the industry. “Estate and antique jewelry still only represents
2 percent of the jewelry industry’s sales mix,” said Stephen H. Silver, chairman and CEO of San Francisco–based S. H. Silver Company, adding that while this portion is minuscule, it represents great potential for future growth.
The New Socially Conscious Customer
In a speech entitled “Playing a Bigger Game: Better Business for a Better World,” Dr. Brian Nattrass, managing partner of Sustainability Partners, San Francisco, informed retailers that they will be held accountable for their business practices by a new and growing base of ecofriendly and socially responsible consumers. “We are at a crossroads, and we are the generation who has to face this,” he emphasized, pointing to the start of a new social movement.
The demand for change, Nattrass added, is pervasive, and the jewelry industry should not feel singled out by calls for greater transparency in supply chains. “Every industry is the same, they are sourcing their products in ways that will warrant review,” he said.
Taking on the mantle of social responsibility is pivotal, not only because of ethical demands, but also because of growing profitability. Consumers will respond well to jewelers who are honest about their trade, Nattrass argued, adding that what companies will really be selling is a sense of integrity and self-assuredness. “The idea is that when I go buy a product from you, I am helping the world.”
Gemstones of the Future
While speakers at a discussion on the future of gemstones did not agree on everything, they did find consensus on one crucial point: Like it or not, synthetic and treated gemstones are here to stay. Indeed, Stephen Lux, president and CEO of synthetic stone-producing company Gemesis, based in Sarasota, Florida, declared that synthetic diamond production could hit 1 million carats by 2020. His company, he added, has started producing diamonds that are up to 1 carat in size.
Though most speakers granted that synthetic stones should be differentiated from naturals in the marketplace, many argued on just how much of a threat synthetics are to the diamond industry. Martin Rapaport, chairman of the Rapaport Group, staunchly defended the production of lab-created gems, asserting that “synthetics are a stepping stone to the real thing — synthetics create demand.”
Lux agreed with Rapaport, arguing that while synthetics items do not pose a significant threat to the economic sustainability of the industry, aversion to them could create fractures within the market. “Thousand or even tens of thousands of these stones won’t upset the industry, but fear of them will,” he told the audience.
As synthetics take up a bigger role in the marketplace, Rapaport said, it is important to follow the three Ds: detection, disclosure and documentation. “Just remember to tell the truth — that’s not so hard.”
Pushing Ahead with Fair Trade
Closing out the GIA symposium was a debate on the future of the diamond industry in light of the setbacks the Kimberley Process (KP) and other fair trade organizations have faced in stemming the flow of illicit stones. What should motivate fair trade efforts going ahead was the topic of much discussion, as panelists expounded on the motives for keeping the diamond and jewelry trade free of violence and exploitation.
“Get people to make more money, and they will find a reason to be good, because it will be more sustainable,” said Rapaport, declaring that, realistically, only economic incentives will produce results. “Society will always have the level of ethics it pays for — no more, no less.”
Panelist Susan M. Jacques, president and CEO of Omaha, Nebraska–based Borsheims Fine Jewelry and Gifts, pushed back on Rapaport’s idea. “I don’t believe it’s all about money, I believe that good, honest people want to do the right thing, ” she countered, declaring that there is still a need in the fair trade processes for charitable and nonprofit organizations.
Dr. George Rossman, professor of mineralogy at the California Institute of Technology, noted that one field that cannot help push fair trade efforts at this time is technology. “There is no absolute way to tell where these stones come from — that is, until the science and technology exist, but that is a long way off. For now, we just simply cannot do it.”
The advent of socially conscious consumers, however, may provide the spark that pushes the industry further into the fair trade arena. “Fundamentally, the customer will be okay paying more with a fair trade product, because there is a wave of consumer awareness in the area of social responsibility,” claimed Rapaport.
Richard Drucker, president of Gemworld International in Glenview, Illinois, agreed with Rapaport, but noted that while “everybody in this room will pay a little more,” suppliers who buy in bulk, as well as overseas companies that do not have to deal with socially conscious consumers, will be much more resistant.
While panelists could not offer a sure picture of what the future will hold for fair trade, most agreed that efforts would continue as they deal with new challenges. All were anxious, however, to see exactly how fair trade’s evolution will take shape
