RAPAPORT... Israeli diamantaires seem to have come to terms with market conditions and are starting to sell their goods again, despite continued uncertainty about price movements. “Since mid-February, we have seen that there’s a market again, a very low market, but there are orders coming in,” said Raanan Kessel, a partner at Kessel Diamond Manufacturers, which specializes in high-end diamonds, 1 to 15 carats, VVS and VS, G color and up. “People are buying, but you have to sell at very low prices.”
This trend was evident at the March Hong Kong International Jewellery Show, where Israelis noted that buyers had enough “chutzpah” to feel they could ask for highly discounted prices.
Decision-Making TimeMost diamantaires noted the “catch 22” situation in which they still find themselves, as Itzchak Yakubov, chairman of Yakubov Group, explained, “to make the difficult decision whether to hold on to stock or sell, because you don’t know what prices will do.” Still, most people interviewed by
RDR agreed with Kessel, who maintained that the most important thing at the moment is to “try and sell your goods.”
Kessel noted movement in 1-carat stones, where the market is starting to see a shortage because there has been no recent production, as well as some movement, though much slower, in 2- to 5-caraters. Noting that there is no demand at all for diamonds above 5 carats, Kessel said, “Even if you get orders, people are not selling these larger stones because the asking prices are too low.”
The stronger demand is in the smaller to medium-range goods, of 30- to 70-pointers, VS, SI1 clarities, H to J colors. Israeli businesses that previously may have focused on higher-end goods are restocking in these categories. While these stones have always been popular in the U.S., there is a new demand for them in Israel and Hong Kong, Yakubov observed.
Bypassing the Middle Man
Yakubov reported that the ongoing economic crisis has diminished the amount of intertrade buying and selling of diamonds. He said that trend contributed to the company’s decision to open a jewelry store recently in the Ramat Gan bourse, giving it an avenue to “bypass the trade and brokers, and sell direct to the end consumer.” While the initial decision to move into the retail space was made about two years ago when Yakubov started manufacturing a jewelry collection and marketing it to jewelry retailers in Europe, the new store, together with its new line of diamond jewelry, came at an opportune time for the company. “As a diamond company, we see the jewelry as a way to highlight our stones,” explained Yakubov. “We felt we could offer the consumer an important advantage. By buying jewelry from the diamond manufacturer, there is a significant price benefit.”
Yakubov added that the move into retail also has helped the company build its brand and enter retail areas that others have exited due to the economic downturn. “The weak market has created opportunities that we hope we can take advantage of,” he said.
Strong Online TrendsThe idea to concentrate on selling directly to the end user has also paid off for companies focused on internet selling. Israel-Diamonds.com a subsidiary of I. Berman that sells diamond jewelry to consumers on its website, noted that its business has been relatively less affected by the economic downturn than others. “We’ve maintained the same number of sales per day, but the sales amounts have been lower,” said Brad Freiden, vice president of sales at the online company. “Like everyone, we are tightening our belts and keeping expenses down, but we’re relatively less affected.”
Freiden noted that while the stones being sold may be going down in size, consumers are not necessarily compromising on quality, particularly when shopping for diamonds online. “On the internet, people are much more careful and smarter about the quality of their purchases and tend to be more informed and smarter about their diamond buying,” he explained.
The bridal market, which represents about 50 percent of the site’s sales, also has demonstrated some changing trends recently. Freiden observed that there is a definite movement toward colored gemstones in bridal, a trend that started two to three years ago and has continued through the recent six months of economic crisis. He nevertheless stressed the continuing dominance of diamonds in the bridal market. “When people get engaged, they buy diamonds; that’s our industry,” he said.
The Marketplace• Buyers are able to demand large discounts on goods.
• 30- to 70-pointers, VS, SI goods in H-J colors are in good demand.
• 1-caraters are moving well, with some shortages in particular colors and clarities due to lack of production.
• There is little movement reported in 2- to 5-caraters and very little demand for diamonds above 5 carats.
• People are starting to see opportunities in buying rough at low prices to manufacture.
• Industry credit fell 21 percent to $1.9 billion in the four months ending January 31, due to low buying levels and tighter bank lending to the industry.
Article from the Rapaport Magazine - April 2009. To subscribe click here.