RAPAPORT… Assessing the current state of the diamond and jewelry industry, Karen Raz, co-owner of S.F.D. Trading Inc., a loose diamond manufacturer in San Francisco, was cautiously optimistic: “I’m not sure whether the recession is over or not, but I do feel a positive turn in our business. But obviously, we are more suspicious because we don’t know if the prices are going to stay or go up.” Like Raz, suppliers across the nation are tempering their sales expectations in light of recent price increases, hoping first to gauge how the industry is reacting to an ultimately uncertain market.
The New Reality
Manufacturers and suppliers are continuing to adapt to the ongoing rise of diamond and precious metals prices, but note that the market’s new status quo has not fully settled in with retailers and consumers. “Clearly, it is a challenge that the American public is not aware of the increase — they are not completely able to absorb it,” observed Dan Moran, vice president of sales in the Los Angeles–based MS Diamonds and Jewelry. “It is difficult to convince the public that this is not a bubble, but a new reality.”
Moshe Salem, president of MS, described situations where retail buyers will come in looking for a diamond they thought would cost around $10,000 to $12,000, but “all of a sudden, they realize the diamond they just described is a $16,000 or $17,000 item, which means to the end user, it will be a $20,000 diamond.”
Prices are so volatile that retailers are having trouble keeping pace — an issue that has made some manufacturers more vigilant in their repricing. “Every time you sneeze, something has gone up,” said Ann S. Arnold, vice president of Lieberfarb Inc., a manufacturer and designer of bridal jewelry in Orange County, New Jersey. “Every week or two, my suppliers are changing my prices, so we call our retailers just to make sure they have the current pricing for reorders. It’s a bit ridiculous; you can’t reprice your line every day.”
While prices are always subject to fluctuation, overall, they have remained relatively high in 2011, creating a market for smaller and less luxurious jewelry. “The mid-to-higher-end retailers are looking at some lower-quality diamonds in order not to isolate the middle-of-the-road customer who is still on a budget for the basics,” said Ed Eleasian, vice president of Elie International, a New York manufacturer of colored stone and diamond jewelry.
Eleasian added that smaller diamonds ranging from 1 carat to 2 carats are the most popular and best-selling items. He noted, however, that the past few months have also seen “a surge in 3-carat to 6-carat items as well,” which he attributed to the overall rise in luxury spending.
Bridal Stays Strong
The bridal market has remained resilient. “Simple bridal, like engagement rings, nothing fancy, is selling well right now,” observed Varun Nanbania, spokesman for the New York–based DiaCreations.
The strength of bridal sales has reassured suppliers that the niche market can weather price increases and a stagnant economy. Todd Ingwer, executive vice president of sales and marketing at Leo Ingwer Inc., a manufacturer of custom-designed jewelry and diamond rings, has seen a slight decrease in his overall sales due to prices recently, but doesn’t worry because the company’s bridal division remains robust. “The majority of our business is bridal, so that market will always be steady. They may spend a little less at the end of the day, but I expect a full rebound.”
In comparison to bridal’s strength, there has been a downturn in sales of more indulgent items. “The self-buy jewelry — something a woman would buy for herself — and fashion jewelry have slowed down significantly,” said Eleasian, adding that “no matter where the economy is, birthdays, anniversaries, Valentine’s Day, Christmas and other occasions will always be there. And we all know diamonds are a girl’s best friend.”
Precious Inventory
Inventory has remained at low levels for the majority of manufacturers, while the few who are well stocked are being cautious with their increasingly valuable merchandise. “We have noticed a lot of dealers with low inventories, as well as some who are hoarding the goods and asking for exorbitant premiums,” said Eleasian.
Ami Koret, vice president at Davidoff Diamond Corp. in Houston, Texas, reasoned that the new inventory dynamics are a sign of the higher value of goods on the market. “We are stocked pretty well. However, the rising prices make it difficult to replace what you sell. If you are willing to pay the prices, most of the goods are there.”
Many wholesalers are anticipating that companies with low inventories will spur a rush of buying down the road. “A lot of stores have been very conservative in their buying and their inventory is dwindling, so they will be looking to buy products. You can’t sell what you don’t have,” noted Eleasian.
The Marketplace
- Simpler designs and bridal items are selling steadily in the market, while fashion jewelry is experiencing a downturn.
- 1 carat to 2 carats are moving well, and 3 carats to 6 carats are experiencing an increase in demand due to higher luxury spending.
- Round and cushion cuts are the most popular shapes.
- Customers are going for silver items in lieu of gold as their budgets are stretched by record gold prices.
