Japan Market Report

RAPAPORT... There is money to be made in the jewelry “Re” business even when the country’s consuming market is not perking. “Re” refers to remodeling, repairing, reforming, restyling and recycling. According to Japan Precious, a Yano Research Institute publication, there are 800 million pieces, or 60 trillion yen — approximately $600 billion — worth of jewelry that has been sold to consumers that is probably still sitting in their jewelry boxes.

Shuzo Takamura believes in the prosperity of the Re business and inaugurated the Jewel Re Club more than ten years ago. Today there are 85 jewelers, 250 stores and more than 20 manufacturers listed as club members.

In remodeling, where consumers bring in old, outdated jewelry for a modern, updated look, jewelers often offer ready-made cast frames, or mountings, for easy transformation. “An average 18-karat gold cast frame would cost approximately 50,000 yen — approximately $500. After setting stones into the new cast frame, jewelers typically charge 100,000 yen — approximately $1,000, a gross profit of 100 percent,” said Takamura.

Repairs
Repairing jewelry has been an important part of the business since the beginning of time, said Masahiko Akaike of Orient 4Cs, a jewelry and gem stone wholesaler, but his company is expanding rapidly in the remodeling business by providing these cast frames to jewelers. “Thanks to technology, we are now listing more than 20,000 cast frame styles on our web pages, which our client jewelers can show to their customers as their own,” said Akaike. Once the new frame style is selected by the customer, jewelers simply pass the order to Orient 4Cs, whose own factory processes it. The company’s website lists diamonds that can be ordered as well, with grades and critical information, so “our clients can run jewelry stores without holding inventories,” said Akaike.

ADCT specializes exclusively in the reform segment of the jewelry business from its four Tokyo stores. The store’s interiors reflect the luxurious ambience of any high-end jeweler, but not a single piece of merchandise is stocked. The stores are staffed by professional designers who listen carefully to their customers. “Some customers are deeply attached to their pieces. We try not to hurt the sentiment they have for the piece,” said Masakazu Hattori, the director of the company.

In order to avoid mistakes and misunderstandings, the pieces the customers bring in are photographed by high-definition cameras, so that even the inclusions in the stones are captured by lenses. The photos are of sufficient detail and quality that they can be used for identification.

Recycling
Taking advantage of the soaring increases in the market value of metals in recent years, recycling of jewelry has grown to be a big business. In the jewelry trade, gold dealers have long recycled the metal. But today, they are getting competition from not-so-professional players, including rice vendors and dry cleaners, who contact consumers on a daily basis. “It is an easy business,” said Takamura. “The gold prices are quoted daily, and jewelry pieces are stamped with their gold content, for example, 18K. If it is an 18-karat piece, the content of the gold is 75 percent. So take the gram weight of the piece, multiply by 0.75 and multiply again by 0.70, leaving 0.30 to cover the handling fee for cleaners.” The acquired gold is then sold to professional dealers at the daily quoted prices, minus a 1.5 percent commission. Since gold is traded daily, it is a sure, profitable business.

“That practice is diminishing,” said Akaike. “I estimate that in two years, buying gold back from privates will probably die down.”

“We can then move on to diamond buying from privates,” said Takamura, who has compiled import figures for diamonds. Official data are only available from 1965 to 2007, during which time 74 million carats of diamonds were imported into the country. Considering the volume imported prior to 1965, Takamura estimates that there are nearly 100 million carats of diamonds held privately in Japan. Diamond buying for laymen will not be as easy as gold buying, admitted Takamura, “but I am recommending to people that they study a little about diamonds, as there are huge opportunities there, too.”

“Pawn shops have long been buying diamonds from privates. Such stones are circulated back into the dealer market,” said Akaike. Also, in Japan, there are private auctions called “Kai,” where all kinds of jewelry, finished and loose stones are traded on a cash basis. Today, there are more than 20 Kais held monthly, each trading somewhere between 30 million yen — approximately $300,000 — to 100 million yen — approximately $1 million. While everyone in the trade is aware of rising diamond prices overseas, the prices at Kais are lower and do not reflect overseas prices. One must deduce that these stones are recirculated diamonds from private holdings.

The Marketplace
• Pointers smaller than 1 carat have started to move because department stores are running spring advertising campaigns.
• The market for well-made 4/4 grainers is strong.
• Dealers have more room to negotiate prices and make profits on fancy shapes and capes, where prices are not tied to set grades.
• Demand is weak for 30- and 50-pointers and 4/4 grainers in SI qualities. Price deterioration is blamed on grade discrepancies between the overseas and Japanese markets.
• Demand is strong for melees and smalls of good makes, while weaker makes are dropping in price.

Article from the Rapaport Magazine - May 2008. To subscribe click here.