Tuesday, May 31, 2011

This year in Las Vegas

The JCK Show marks its 20th year in Las Vegas, and things sure have changed!  Las Vegas became the important battleground for jewelry trade shows, and then economic forces beyond anyone's control disarmed the battle.  Yes, there are still changes (JCK moving to the Mandalay, for example) but the reality has not changed.  There are fewer manufacturers extant that can exhibit--and others that have simply dropped out--and there are ever fewer retailers that can come and buy. 
We should set aside the question of whether this is good or bad; whether in some ways we are better off not having the overheated market of the boom years.  But on the supplier side, we know that we have long suffered from too much capacity, a condition that will probably continue for quite a while.  The low barriers of entry into the business assures that.  And on the retail side, we have undergone many years of consolidation and stratification that has forced retailers to adapt or die.  The mass market now belongs to a handful of big chains, and the independent jeweler now accounts for 40% or 45% of the US market, down from 75% about 30 years ago (as I recall).
So maybe we are approaching a homogenized market, as we have seen for books, drugs and hardware.  Amazon, Rite-Aid and Home Depot (never mind WalMart) have been eminently successful in dominating their market segments, so why not Sterling, Macy's and Sam's? 
I can think of many reasons (so can you), but one good one is the very nature of jewelry.  What we love most about it is the ability to produce enormous variety of innovative designs, and not needing to sell it in big quantities to make a business of it.  Creating jewelry is, after all, an art.  And people know that, and seek it, and will always need it.  Big chains need high volume producers (e.g., half-carat studs, and solitaires) but even they are fully recognizing the value of differentiation, good design, and quality.
I hope the shows can successfully promote these values to retailers and bring them here, for the moment the best place for retailers to find and buy good, new products.  And thereby reinforce jewelry's wonderful heritage.
Don't you agree?

Tuesday, May 24, 2011

Whereto diamonds?

A number of years ago, maybe ten or more, I was regularly asked by De Beers to do focused studies on the US diamond market.  In those days, De Beers was still working to keep the monopoly boat afloat and trends in the US market was important.  The US market was, after all, better than half the world market, especially after Japan faded away. 

In the course of one study, I pointed out to them that they were consistently minimizing the recycling of diamonds, especially better ones, in the US.  After many successful years of selling billions of dollars into the US market, and substantially expanding the consumer base, it made sense that a percentage of that was going back upstream as people sold jewelry out of estates or need.  I took a pure guess and said that it could be 5% of publicly held stocks.

Just today, I read a column by Chaim Even-Zohar in which he describes the US consumer as the next "diamond mine", precisely the term I used in a presentation at the JCK Show three years ago.  Even-Zohar speaks of the negative ripple effect on diamond stocking upstream as the recession hit, and the reverse, going back downstream, as the economic recovery kicked in. 

He treats the American "mine" as a newly important phenomenon (which it is not - it has always been there) and growing rapidly, which is correct.  Jewelers are making good money buying gold (and diamonds) off the street, and at prices well below those from suppliers. 

In my view, the recession will end someday, hopefully in the near future.  But retailers will have established a process for buying from the public that have many positive aspects.  I can think of a number of wonderful ways for retailers capture business.  The flow of diamonds from the public to retailers and wholesalers will become a fixed, critical part of diamond distribution.