RAPAPORT... August was a period of watchful waiting, as wholesalers kept a patient vigil for signs that the market might be awakening from its economically induced stupor. Florida and the Midwest were particularly quiet, with markets in Michigan, Ohio and Indiana increasingly affected by the struggling U.S. auto industry. Business was slow but steady in major cities on the East Coast, West Coast and in the South.
High prices were keenly felt in some markets. “If we had these price increases from DeBeers, ALROSA and the Rapaport price list when the economy was booming, I don’t think the impact would be as severe. But because of the bearish market we are seeing in the U.S., the price increases are affecting the market much more,” commented Nader Kash, vice president of operations at Finesse Diamonds Corp. in New York City.
Many high-end businesses, however, barely flinched. Ami Koret, vice president, Davidoff Diamond Corp. in Houston, Texas, declared that prices aren’t affecting his sales. “I can’t say people are happy about it, but if they want it, they will buy.” He conceded that occasional compromises are being made. “Lower colors are more popular than they used to be. It’s a factor of cost.”
Memo FatigueJigar “Jay” Mehta, partner and director of operations at Varsha Diamonds Inc. in Los Angeles, California, has changed his buying habits, but believes holding out for lower prices is unwise. “I can see that it is starting to have an impact. I’m being a little picky in what I’m going to hold and stock in my inventory. Retailers are stocking less or making fewer commitments and trying to keep memo on their end. But this industry doesn’t work on memo and people need to start making commitments. Prices are only increasing and will be higher a year from now. The sooner retailers start making commitments, the better off they will be down the line.”
Sam Frank, president of Leo Frank and Sons in Troy, Michigan, concurred that for now, “It’s memo calls most of the time.” Mehta believes keeping diamonds in stock is a bread-and-butter issue for retailers. “People who are suffering in this drought in the economy should cut back on expenses. But they shouldn’t cut back on inventory.”
Better supplies remain tight, but no one who spoke to RDR considered this a major barrier to sales. Jay Moskovitz, vice president, Robert Moskovitz Co. in New York City, summed it up by saying, “The bigger stones in better-quality colors are hard to find, but if you can find them, you can make money.”
Planning Under WayWithout much happening, at least there is time for holiday planning. “I don’t think we are preparing much differently this year than we have any other year. We buy early enough so that we don’t get stuck with the Christmas bump in prices. If we buy now, we can hold our prices through the holidays,” explained Frank. Kash stated, “We added a lot of shows — the Los Angeles Centurion, the Miami Centurion and the Hong Kong Jewellery & Watch Fair in September. We are stocking more goods and plan on stocking up further.” Ali Faraj, production manager at Azar Jewelers in Los Angeles, California, is ensuring he has a wide variety of items on hand. He stressed, “You can never predict this kind of market.”
Retailers Still HesitantKash observed that his customers aren’t ready to gear themselves up quite yet. “It’s still too early. I think retailers are not in the mood and are not seeing the mood in their clientele to motivate them to prepare for the holidays. I think we’ll see a later start to the season than usual.” Frank was more optimistic, predicting, “We’re maybe a month away from people starting to stock.”
Mehta is seeing sales begin to trickle in. “Maybe 10 to 20 percent of my retail clientele are stocking up for the holidays right now. And by this I mean buying outright, not on memo. Christmas may not show up until the second week in December but, when it does, it will benefit those who are ready and have inventory in stock. I am only hoping that it comes faster than I think it will.”
For many, the season is no longer the boon it used to be. “The holidays are not a big deal for us. We’re a year-round business. It’s a little bit extra, and that’s about it,” remarked Koret. Moskovitz noted the same, proclaiming, “As the years go by, there’s almost no holiday, so I am not expecting anything huge.”
The Marketplace• Better-quality diamonds under 2 carats, especially in premium sizes, are very much in demand and are more difficult to find.
• In some cases, buyers are willing to sacrifice some clarity or color in the face of high prices.
• Round continues to be the most popular shape, with Asschers decreasing in popularity.
• Sales of large stones have slowed slightly.
Article from the Rapaport Magazine - September 2008. To subscribe click here.