Forget the $700 billion bailout, the overnight demise of centuries-old financial stalwarts, or that credit seemed to get swallowed whole by a mortgage-backed python encircling the globe. What jewelry retailers watching the financial collapse of late September saw most vividly was the loss of $1.2 trillion of wealth in less than a half-day’s trading on September 29. Bear in mind that 5 percent of $1.2 trillion equals the global diamond jewelry market.
At the eighth DTC sight, closing September 26, sightholders reportedly left goods on the table—2 to 7 percent, depending on who was circulating the rumor. Were prices, as many have complained, simply too high? Or were diamond banks (like troubled Fortis-owned ABN-AMRO) simply pulling back the credit many sightholders need to pay cash at Charterhouse Street? Not only the commercial goods are less in demand, so are the large goods that have focused the market for a decade now.
Diamantaires and retailers alike long decommoditized and thrived by catering to the 20 percent who enabled significant profits, leaving the 80 percent of small margin customers to the sharks plying the treacherous waters of the big boxes. How much of that $1.2 trillion would have been headed toward carat-plus goods, designer jewelry, or just carat studs for the doctor’s wife in Peoria? And if 2 to 7 percent of the rough still sits on a table somewhere, where will December’s diamonds be coming from, and at how much higher cost?
“First of all,” says IDI’s Eli Avidar, “it’s not the end of the world as we know it. It’s not even as bad, from a pure diamond point-of-view, as the 1980s, when it was a true diamond crisis. This is purely a financial crisis, it’s the U.S. correcting itself. And as far as U.S. diamond consumption is concerned, the signs were clearly there, as early as the beginning of 2007, that historic levels of U.S. diamond consumption were unsustainable. It’s crucial now, with the U.S. in a financial crisis to keep those two unrelated events separate. Is there going to be a short-term effect on the U.S. end of the pipeline? Obviously. But I think it will be short-term. Money’s coming out of the stock market, and it has to go somewhere.”
“I think of it less as the end of the world, and more like a road sign on the value superhighway as it leaves the U.S.,” says a former sightholder who has grown by shifting focus from his U.S. accounts to overseas. “Speed limits just went over 100 mph. But they were already very high, because the big change in the worldwide diamond picture isn’t De Beers cutting down generic U.S. marketing to ramp up Forevermark, Rap going up 2-15 percent a month, gold almost tripling. It’s U.S. diamond exports. This is the first time you guys are net exporters, and, from what my New York office is shipping—to Asia, India, Russia, Australia—it’s everything from 75 point G SI to three carats plus.”
What does this all mean for the U.S. independent? During what might well be the make-or-break season of many jewelers’ careers?
Eric Mor of New York’s Abe Mor has his solution: “Anticipating that retailers will buy fewer diamonds for inventory—and relying more on memo from their suppliers for last minute sales—we are beefing up our inventory of diamond studs, three-stone rings, bracelets and necklaces, eternity rings, pendants, and solitaires. We literally have thousands of pieces for overnight delivery.”