U.S. Retail Market Report

RAPAPORT... With Basel over and JCK on the horizon, retailers are taking stock of trends both aesthetic and economic. The rising price of platinum is pushing some customers into other metals, and the coming elections — coupled with the threat of recession — may mean that some belt-tightening is in order. Still, even in tough times, something will sell, and the current challenge for retailers is to figure out what that will be.

Vintage Styles Peaking
Right now, micropavé and estate reproduction styles are hot. Rick Velayo, the immediate past president of the California Jewelers Association and manager at Gleim the Jeweler in Palo Alto, California, said, “Heading into JCK, micropavé styles are doing very well. We are looking to increase our inventory in the area, primarily in bridal.”

Micropavé is also doing well for Joseph Villarreal, president of Whitefire Diamonds & Fine Jewelry in Austin, Texas. “Right now, what’s popular are the antique looks,” he said. “It’s getting a little tired for me. There’s nothing else, and I’m glad that’s selling, but after a while, we want to see something new.”

Scott Engle, owner of Lynn Jewelers in downtown Washington, D.C., agreed withVillarreal that these looks are becoming a little too common. “I see all the manufacturers rolling out vintage reproductions with micropavé, and I’m getting tired of it,” Engle said. “I like clean.”

He’s not the only one. Steven Tapper, vice president at Tapper’s in West Bloomfield, Michigan, thinks the market also may be getting tired of micropavé and suggested that vintage styles may be on the way out. “Customers are looking for something different in engagement rings, and getting away from the estate reproduction look,” he said. “They want something cleaner.”

Alternative Metals Gaining Ground
Customers also want options in their jewelry settings. “The number one issue that has affected us all is the meteoric increase in precious metals prices,” said Velayo. “While platinum is a preferred metal to use, its cost has now become astronomic. The biggest beneficiary is the gold market, as white gold is now requested much more, simply due to price, even though gold is up.”

Ronald Leitzel, president of Mountz Jewelers in Camp Hill, Pennsylvania, agreed. “Platinum has tailed off because of the price,” he said. “We still have the same looks and settings, but the price has escalated considerably. The setting ends up costing almost as much as the diamond, so we’ve been buying more 18-karat white gold.” He also noted that younger customers are becoming interested in palladium.

“We have decided to show more palladium,” Engle said. “The younger people are talking about it.” However, he added, “knowing whether they’re really interested or not may have to wait until platinum gets to $3,000 an ounce.”

Palladium isn’t the only alternative metal taking hold. “Interestingly enough, an area that is doing well is the tungsten/titanium alternative metal market,” said Velayo. “We gave it a try in November 2007 and did surprisingly well. It just took us a while to get over the fact that it wasn’t a traditional precious metal. But it sells itself, and clients love it.”

In addition, sterling may be coming back. “People are getting away from white gold,” said Tapper. “They’re saying it looks like sterling silver, so why not buy sterling silver? I think people are unsure of the times.”

Election Jitters
Most retailers agree that one of the reasons consumers are looking for alternative metals is that consumers are feeling a little more conservative now. “In the U.S., people are beginning to tighten up,” said Tapper. “They’re being told that things are rough. And people always say, ‘Let’s see what happens when the new president comes into office.’”

Some of these feelings of uncertainty are more emotional than fiscal. According to Leitzel, “People aren’t making less money in central Pennsylvania, but they’re tending to buy a lower price because they don’t feel as wealthy.”

In Washington, D.C., it’s the coming changeover that’s most affecting customers. “There’ll be a degree of uncertainty,” said Engle, “until people know who’s coming and who’s going.”

However, even in tough times, there are bright spots. “Statistically speaking, when the economy is down, more people get married,” said Villarreal. “And now you have dual incomes. That’s a big deal for people, and they’re secure and they have more discretionary income. In tough times, the diamonds are a little smaller, but the people who can afford those larger stones are still buying them.”

The Marketplace
• Hearts on Fire cuts continue to be top sellers.
• The most popular shape is round, followed by princess.
• Best-selling clarity ranges from SI1 to VS1, best-selling weight is currently around 1 carat and best-selling color is either F or G.
• Platinum is strong but slowing, and alternative metals such as white gold and palladium are getting stronger.
• The most popular price point for a diamond ring is $5,500.

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