RAPAPORT... Flat is the new black these days, as jewelry stores struggle to maintain an even keel during the recession. Stores are selling existing inventory and few are looking to buy. Additionally, luxury market consumers continue to shy away from ostentatious displays of wealth. However, with warmer weather right around the corner and President Obama reportedly seeing a “glimmer of hope” in the economic forecast, it is possible that better days are indeed ahead for those who can weather this storm.
Trade off?As retailers look for ways to cut back on expenses and widen their profit margins, most are slashing travel-related expenses. “We cut back on trade show attendance this year,” said Steve Tapper, vice president and general manager of Tapper’s, with two stores in Michigan. “We’re cutting back on inventory and we’re working on the 20 percent of the merchandise that sells 80 percent of the time. We’re not searching for product right now just to build the inventory.”
Sherman Brock, owner of Brock’s Jewelers in Madison, Alabama, is seeing things much the same way. “I was going to try to go to the Vegas show this year, but I’m trying to avoid loading up on inventory,” he said. “Usually, this time of year, I’m adding heavy, but this year, I’m cutting, and I’m afraid if I go, I’ll buy something. So most likely, I’m not going.”
Even those buyers who do plan to attend the shows do not plan to buy there. “This year, we’re selling what we own,” said John Profit, general manager at E.E. Robbins, with three stores in Washington State. “We haven’t bought much. Our jewelry buyer will go to JCK, but just to stay in touch with the vendors. We’re not looking to buy much and we’re not looking at any new lines. We’re looking at other options and trying to build our own line.”
Some retailers are simply being pickier about which shows they attend. “I didn’t feel the need to go to Basel,” said Bruce Yamron, owner of Yamron Jewelers, with two stores in Naples, Florida. “Everyone in Basel is in Las Vegas now.” That said, Yamron also wants to curb his buying through 2010. “We bought a bit in 2008, and we’ll cut down on our spending in 2009. We’ll buy much, much less this year.”
Still other retailers are viewing the shows they do attend as holidays rather than business trips. “We’ve already been to the Tampa IJO show, which was well-attended, but everyone was using it as a vacation,” said Rick Beaulieu, president of Springer’s Jewelers, with two stores in Maine and one in New Hampshire. Beaulieu said that while his store is only “50 to 60 percent likely to go to Vegas,” some of his employees are so eager to go that they’re offering to pay their own way there. Still, he said, “We’ll buy more estate pieces from customers and probably not do as much shopping at the shows.”
Attitude changesObviously, one reason so many stores are not planning to buy at the shows is that the retail consumer is simply not buying much right now and the ones who are spending are trying to do so discreetly. Some storeowners blame the media for causing a panic. “The economy is slow, but even the people who aren’t affected by the economy are affected by the media,” said Brock. “The media has scared people and the ones who would have spent money are afraid to.”
Tapper also feels the media have made things worse. “There is fear in the marketplace, and some of it is reality and some of it is driven by the news,” he said. “If there’s 10 percent unemployment, then 90 percent of the people are still employed.”
For Yamron, this change may be long lasting. “The business agenda for luxury jewelers has changed. The luxury consumer won’t be spending as much and it doesn’t matter whether the economy comes back. I think the way people spend has changed.”
Things could be worse. Gold buying and bridal remain strong, and those whose profits are even with 2008 feel ahead right now. “We’re not worried, because people will always get married,” said Profit. “I expect to be flat this year. I’m not planning for an increase, but also not for a decrease.”
The big question right now is, what happens next? “The people who do survive this recession will be substantially stronger, but there’s too much retail out there right now for what the population needs,” said Beaulieu. “The future depends, though, on what the Echo Generation wants in terms of a branded item. They’re much more positive about the future. But do they continue to shop? How are they affected?”
The Marketplace• Round continues to be the best-selling shape.
• The most popular carat weight has dropped to below 1 carat, with ¾-carat and ½- carat stones doing very well.
• SI1 is the top-selling clarity.
• Currently, H is the preferred color.
• While both 18-karat and 14-karat white gold are selling, palladium is gaining more and more ground as customers begin to warm to its price point and value.
• The average price for an engagement ring, including stone and setting, is $4,000.
Article from the Rapaport Magazine - May 2009. To subscribe click here.