RAPAPORT... With the U.S. economy in crisis, the wholesale market continued at the same sluggish pace it has maintained for several months, seemingly unaffected by the turmoil on Wall Street. Diamond wholesalers were hesitant to speculate on the situation. One even declined to speak to RDR this month, on the grounds that the market was too uncertain to call. “Among dealers, there’s a wait-and-see mindset. I don’t see people dumping or accumulating,” observed Morris Szklarski, a principal at Kelsol Diamond Co. in New York City. “But who knows what could happen in a few weeks,” cautioned Isaac Davidowits, of the eponymous New York City company.
Texas business paused in the aftermath of Hurricane Ike. “There was a slowdown. We didn’t bother to call them because we wanted to wait and let them get back on their feet,” explained Nilesh Sheth, president of Nice Diamonds in New York.
Conceding that U.S. activity has lagged for a while now, Sheth was glad his business is “very well diversified and has a large number of accounts.” Since his regular clients are buying at the same rate as in previous years, he predicted, “It will be an average Christmas. I don’t see any major pickups in terms of sales.”
Little Holiday Buying
The majority of Sheth’s business is derived from memo calls. Sheth believes that when times are tough for retailers, this gives him an advantage. “If a store wants to buy, they would rather get it on memo and then give us the sale. That has been the trend for the past few years.”
Szklarski contends that memo has put an end to retailers’ preholiday buying. “I don’t think people have been stocking for Christmas for decades — ever since FedEx could bring you a stone the next morning. Retailers will ask us to leave stones with them. To a large part, this is our fault. There’s a feeling almost of entitlement and anger when clients don’t easily find items they received quickly in the past.”
Mike Rabbanian, president of International Diamond Club (IDC) in Los Angeles, credits another cause. “I see tough times for my customers. They are not paying right now because they are not doing well.” Davidowits recognized the upside. “You can make a stronger price with memo,” he stated.
Business As Usual
Davidowits concurred that little has changed in the past few months. “If you’re closer to the Rap list in prices, with discounts, it’s not difficult to sell. If you need to sell 20 or 30 percent above the list, that’s a problem. With average items, a discount helps. Even strong blue fluorescents sell with a discount.”
He was upbeat about the future. “I think November will be a very strong market. I wouldn’t call it a shortage, but there is no oversupply right now. It’s giving sellers a very strong hand,” he asserted.
Shoring UpAlida Harris, office/sales manager at I. Starck in Chicago, remarked, “I’m cautiously optimistic. You don’t want to be in this business and not be optimistic. It’s sort of shooting yourself in the foot. Will it be a booming season? I don’t know. People will be out there looking for bargains. In the past, people were out there looking for certain stock. I think they’ll forfeit certain stock for a good buy more than in the past.” She reported that Starck’s team was relying on what sold well in 2007 in stocking up on pairs of large stones. “We’re ready at this point,” she proclaimed confidently.
Szklarski summarized that “There are reasons to be optimistic and reasons to be pessimistic.” Noting that manufacturers who usually buy parcels from him have not been stocking up, Rabbanian said that “everybody is negative” about the coming holiday season. In response, he is gearing up his marketing and circulating a newsletter. “I give a lot of advice. That has a positive effect. I tell them what to use in the market right now.” Rabbanian recently recommended that retailers create their own designs instead of relying on manufacturers, because of the speed at which today’s styles change.
“I think it’s going to be kind of last minute this year. And the election also takes away some business. Clients think they should wait and see, even if it doesn’t actually affect them,” Rabbanian concluded.
The Marketplace• Demand for D flawless is holding off at the moment.
• Fancies and pear shapes are selling well.
• Better 1- to 1.5-carat diamonds are stronger than in previous months.
• 3- to 4-carat demand has lessened.
• SI and below are extremely weak.
Article from the Rapaport Magazine - October 2008. To subscribe click here.