RAPAPORT... The jewelry district in downtown Los Angeles, founded during the early part of the twentieth century, has a long and colorful history.
The downtown Los Angeles jewelry district does an estimated $2.5 billion to $3 billion in wholesale business annually and another $500 million in retail sales, according to the most recent estimates by the Downtown Center Business Improvement District (BID). Peklar Pilavjian, past chair of BID and an L.A. diamond dealer, said the district consists of approximately 2,000 companies and 15,000 jobs.
The jewelry district is bordered by 5th Street on the north, 8th Street on the south, Broadway on the east and Olive Street on the west. The former industrial area is enjoying a renaissance, thanks in part to the opening of the Staples Center on October 17, 1999, which is home to numerous sports teams and offers a full schedule of music and entertainment events. Also within walking distance are the Performing Arts Center and Museum of Contemporary Art. Formerly seedy parks have been rejuvenated, shopping plazas have opened and new and renovated hotels, restaurants and shops are opening branches in this downtown location.
The reason for having a location in Los Angeles is simple for Jay Gilbert, president and owner of Coast Diamond Distributors. “Home is home,” he says. During his years in the business, Gilbert has noted a lot of changes in the marketplace, both favorable and unfavorable. First, there’s the question of labor. Overall, there is a greater availability of workers today, he notes, because many have been let go from other companies that have either closed down or moved their production overseas. He pledges to do neither.
Coast maintains a 23-person shop that does all the setting, polishing and assembling of jewelry. Casting must be done outside of the building. Though Gilbert says he is personally “green-minded,” environmental regulation agencies have been getting increasingly tougher in Los Angeles, limiting the amount of manufacturing that can be done. The solution for some companies has been to move outside of the downtown area or out of the city entirely, where they can buy an entire building for their production. The only problem is that such moves are not as convenient for workers.
QUALITY IS KEYGilbert says he prefers to expand domestic manufacturing because it allows him to maintain better quality and customer service, which, he says, are key elements today. There’s also the quick turnaround time for production, which can’t be achieved so readily with offshore production.
Ali Faraj, production manager at Azar Jewelers, says his company opened its operation in Los Angeles because that’s where most of its customers were at the time they established their U.S. company in the mid-1990s. “We are one of the very few who manufacture 100 percent in-house,” he says, “We do no overseas work.” According to Faraj, the company prefers to keep all its operations in the U.S. for quality control and the “comfort factor” of its clients, who can expect special orders to be shipped in a matter of days.
The challenge today, notes Faraj, is finding qualified labor, due to “strong overseas competition.” There are not as many skilled workers, he says, because lots of manufacturers have moved their operations and many of the highest-skilled people have left the business. He considers himself lucky because some of his regular workers have been with the company for ten years.
The labor pool is fairly broad, manufacturers agree, made up chiefly of Armenians and Hispanics from as far away as Mexico, Ecuador and El Salvador. Other local ethnic communities include Filipino, Vietnamese and Indian.
Edwin Seidman, chief operating officer (COO), Norman Silverman Diamonds Inc., says the labor force in the Los Angeles region is abundant, but it’s still hard to find good people. There are lots of bench jewelers, he says, but not a lot who are excellent. The company employs a permanent in-house staff in order to maintain consistency in quality and style.
For this company, specializing in high-end diamond pieces, overhead costs are not a major factor affecting business. In fact, Norman Silverman Diamonds has expanded three times over the past five years and tripled the size of its office staff. “In today’s market,” Seidman observes, “if you don’t invest, you’re at the mercy of the market.” The company has also purchased kilns, new casting machines and CAD/CAM technology. “We want to be in control of every area from design to production,” Seidman says.
CONNECTINGAnother longtime manufacturer who established roots here 25 years ago is Kirk Karaguesian, founder of Kirk Kara Jewelers. When he left his native Lebanon, the third-generation jeweler chose Los Angeles for two reasons: the mild weather and the nearness of friends. At that time, there was an influx of craftsmen from Lebanon and he was able to put together a network of experienced jewelers, some of whom had worked with his father.
Karaguesian says the availability of these craftsmen was critical for his high-end jewelry line, as finding talented, top-level people is always a challenge. Sourcing of materials, he says, is “easy when you have the right network of suppliers.” He also benefits from the proximity to the Gemological Institute of America, (GIA), whose human resources department often helps local manufacturers find qualified students.
Will Kwan, vice president of sales and marketing for the independent retailer division of Nelson Jewellery USA, says rents are more stable in Los Angeles than in other parts of the world where his company maintains offices. For example, he says his New York office is one-fourth the size of the one in Los Angeles and the rent is considerably higher. Rents in Hong Kong are no bargain either, but the company owns a building in the Hung Hom jewelry district, where it does design, model-making and quality control. Like many Chinese companies, it does far less manufacturing in Hong Kong; most production is done on the mainland.
Nelson Jewellery Arts Co. Ltd. was established as a two-man company in 1980 and now boasts 3,000 employees. It has two factories in China, a cutting facility in Thailand, two offices in the U.S., one in Hong Kong and one in Bangkok. The Los Angeles office, opened in 1988, is used primarily for distribution, customer service and wholesale sales. At first, the city was chosen for convenience; it is closer to Hong Kong in distance and time zone, but the location proved so favorable the company subsequently moved to larger office space in the jewelry district.
Zvi Gutentag, president of Galaxy Diamonds, Los Angeles, has a 6,000-square-foot facility in the city. His primary business is selling diamonds to retailers, but the company also manufactures a limited amount of jewelry, for which he outsources production. “To say costs are going up is an understatement; they go up steadily and it’s costly,” he says of running a business here.
Gutentag observes that business today for diamond dealers is exceedingly tough and that channels for selling diamonds are changing rapidly. He sees lots of confusion in the marketplace and problems in the supply pipeline, predicting that there will be “less and less players as we move forward.”
For those companies that choose to remain in L.A.’s downtown jewelry district and adapt to the challenges of rising costs, production, changing environmental regulations and safety codes, there are advantages. Today’s advanced global communications and sourcing make everything accessible. In addition, the district’s renaissance is bringing in more business and improved working conditions. GIA is but a short ride down the coast and daily FedEx deliveries make doing business here as easy as anywhere else — plus, the weather is better.
Article from the Rapaport Magazine - March 2008. To subscribe click here.