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A different consumer, a very different jewelry market

 There is no question that manufacturers and retailers have been contending with difficult product decisions for a couple of years.  Foremost has been the price of gold, which has made made some hot products of the past into things of the past.  An Italian gold chain manufacturer pointed that out to me in describing where his business has gone.  At one time he cranked out tons of gold as machine-made chain, but that has essentially disappeared.  Italy now has perhaps six companies left that are making machine-made chain, and most of that is silver - 90% in his case. OK, one might say, that is a reality, but at least consumers are buying silver chain.  Is that all there is to it?  Exchanging gold for silver, or steel, or titanium, or rubber?  I think not.  No doubt that retailers need to fill price points, and some have stated that silver has been a huge help.  But are more profound changes happening?  No doubt. Unity Marketing recently wrote about their survey of cons

Christmas 2012 - good, bad or indifferent?

'Tis the season for taking shots at just how the holiday season will turn out.  Some interesting news items and a look at a few guesses about the season: *  The number of jewelry retailers in the United States continues to decline, by 2.5% last year, according to JBT.  There are now around 22,000 jewelry stores in the US.  (The number of manufacturers and wholesalers has also declined by a few percent.)  At one time a couple of decades ago there were more than 30,000, and further back, 40,000.  Back then, the US population was much smaller, so by rights we should have seen growth - if the business model was viable.  A part of that decline can be attributed to the nature of the business.  Family run, they present very little "cash out" options other than liquidation when owners seek to retire and there is no younger generation stepping in.  Would you pay millions to buy a single store retail business?  And work long hours and long weeks?  So the wheat has gone out with

New broom at De Beers

We read with interest the recent statement by De Beers of structural corporate changes.  Present divisions will disappear, more notably DTC and Diamdel, and operations will be consolidated under the De Beers name.  The release emphasizes that operations continue as before; that the Sightholder designation and its marketing franchise continues; and that operationally everything is the same. But, of course, it is not the same.  The statement does make it clear (or rather unclear in the corporate speak we have heard before) that the market has changed, and that De Beers must refocus its thinking and planning to be based on the consumer.  If I can interpret, it sounds like business will become more demand driven than supply driven.  That has been the reality anyway for a while.  Now it is being institutionalized. But this cannot be all there is to it.  Let's speculate a bit, which is all we can do, about the possible/probable motivations. As for the name changes, we have seen so

Gaping at Gaudi

August, which now recedes quickly into the past, was a good month to slow down, step back, and take some time off.  (I hope you all missed my rambling!)  After all, the business side took a distinct downturn, so why not seek some relief.  In our case, we went off to a country that is seeing enough grief of its own - Spain - but it did not seem that Spaniards were awfully upset.  Maybe we can learn something there ..... We spent a few days in Barcelona, then drove up the coast to Aiguablava, a small town on the Costa Brava.  Then went on for a day visiting the old city of Girona before coming home.  We took nearly 800 photos and here is a small sampling, with a few comments as we go along.  I hope you like the impromptu tour! The tour stops at Miro's museum, but I have much more (The Park Guell, the clifftops of the Costa Brava, the 1,000 year old Jewish sector of Girona).  If you want to see more, just comment on this blog, and I will be happy to do it!  (Meanwhile, I will go

Destination Mars

I still hear about retailers who think they can bully and threaten suppliers who dare to post their products, in one way or another, on the Internet.  Not only is that a teaspoon against the tide, but it is an astounding failure to understand retail dynamics and the remarkable transition we are seeing. Looked at narrowly - only in respect to the so-called battle between bricks and clicks - the issue is plain to see.  Even if a supplier does not open their own web site, their customers will post images and information about the products on their sites.  It does not matter if the web site is a pure play web retailer or another traditional jeweler.  The effect is the same - another retailer is "invading" the threatening retailer's territory.  Moreover, every evidence indicates that the more a brand or product is shown, the more everyone selling the brand benefits.  That, as I said, is looking at the issue narrowly.  But traditional jewelers are dealing with

Best Buy, Ask Why

Best Buy has been in the news lately.  Its founder has resigned his position, at least partly because business has been steadily declining over the last few years and a solution has not been found.  It survived the collapse of two big rivals - Circuit City and CompUSA - and the street thought it would benefit greatly as the sole big electronics store. Apparently, that may not be the case.  The Internet has hurt, and comparisons are made to software vendors, bookstores, magazines and newspapers.  The reach, speed and low costs of Internet distribution spares nobody.  How about jewelry retailers? The most common reaction we hear is that consumers want to "feel it, and try it on."  Sounds sensible.  But it is too narrow a view.  Here are some angles to consider. Actually, what happens in electronics may the the exact opposite of what happens in jewelry.  In electronics, a consumer goes into a Best Buy to look over a piece of equipment closely.  They will see what the

Las Vegas: nothing, and everything, has changed

I have been going to trade shows for nearly 40 years.  That is a mind-bending long time when I stop to think about it, but it does have its advantages.  It allows some stripping away of artifacts, distractions that can mask reality. We all speak of how much the "world" has changed, and it has.  Over those years we have acquired the PC (and lost secretaries?), cell phones,  hi-def TV, digital photography.  The Internet has revolutionized our lives. We have Amazon, Youtube, Ebay and Facebook.  We have a billion sites offering a trillion products and services.  We have blogs - like this one.  The software selling business is going away, and so are many newspapers.  Privacy is a thing of the past. In our industry, whole channels of distribution have disappeared (think traditional distributors, catalog showrooms); others have shrunk in number to a handful of giants (think mall chains, discounters and department stores).  The Internet has given us countless on-line jewelry stor

Man made diamonds: Are they the future?

In the last week we have been reading about hundreds of man-made diamonds (MMD's) that were submitted to IGI for grading without disclosure.  Various observers tried to delve into the sourcing of the stones.  Rob Bates at JCK considered this a serious problem, as it could affect consumer confidence (rightly so), and expressed the hope that there will be some kind of "black box" solution.  Chaim Even-Zohar went into a full story about the history of Gemesis, which is being mentioned as a possible source of the stones, though they totally deny that presumption. I suggest that the starting point should be a realistic assessment of what has occurred and has been occurring for some time.  And what we need to consider for the future. MMD's (produced by HPHT and CVD processes) and HPHT treated diamonds have been in the market now for years.  In both cases, the essential fact is that the temptation not to disclose is powerful.  The added profits can be huge.  Leon Tempels

The coming storm in regulation

I recently appeared at the first conclave for FJATA (Fashion Jewelry and Accessory Trade Association), which was held at Mohegan Sun in Connecticut.  My presentation was on the blurring lines between fine jewelry and costume jewelry, and maybe that is a subject for another post.  But more important is what I heard as I sat in on the morning's session. The attendees, or most of them, are producers of the kind of products I only see when walking into a toy store or gift shop in a resort.  Cheap, and lacking any intrinsic value.  The presenters and listeners were all on the tech side, with a few principals sitting in.  The organization is only a few years old and its mission is to deal with the flood of governmental regulations confronting all manufacturers. From the jewelry point of view, the outlook is very tough, and I am guessing that we on the "fine jewelry" side have only a faint idea of what is going on - and what we are going to have to deal with. All heavy met

The big mid-year benchmark

We are coming up to the mid-year jewelry shows, and we will be using those events to measure the state of the industry.  At this point, there are enough signs to make us a bit ambivalent on how the rest of the year will go. One one side, the top end seems to be holding up well.  It appears that the affluent (and even the super-affluent) are continuing to buy, though at lower average price points.  Some reports from guild stores say that sales are good, though dollars are down.  That sense of caution seems to be supported by the stock markets, which continue to have declining numbers of trades, leading us to believe that people are sitting on the sidelines and holding on to cash.  Charlie Munger, Warren Buffett's partner at Berkshire Hathaway, says that is a bad idea.  The value of cash, he says, is being steadily eroded by inflation, and that will only get worse. That may be easy for him to say, as he hold billions in assets, but squirreling away cash only illustrates the conce

Diamonds on the block - anybody buying?

The diamond world now feels otherworldly.  We got a big hint when the Oppenheimer family decided to sell out, then BHP starts looking to sell their mining operations, and now Rio Tinto jumps in as well.  As a major supplier, Russia holds out.  Does anyone think that we are seeing "business as usual?" A few added points.  Rio Tinto's plan to go underground at the Argyle mine has incurred big overruns. BHP's Ekati mine (its only one) is declining in output.  Both companies see little future in diamonds, and present output contributes little to their overall profits.  De Beers (now an Anglo-American branch, in essence), in its current round of selecting sightholders, has opened the door much wider for tenders and allowing others to buy diamonds.  Then, on Rapaport's reports, we see that about 900,000 diamonds, worth about $6 billion, are listed for sale.  And these diamonds average just over one carat in size.  That alone is enough for every bridal store in the US

Hong Kong Show - mega-business or mega-bust?

The Hong Kong Show had more energy than any show we visited this year.  The crowds were big, though mostly Asian.  The show is bigger than ever, now probably the biggest in the world, and it has expanded to occupy odd spaces and ballrooms.  The early impression was that the show was a hit. A dramatic building, in a beautiful waterfront setting Then again, maybe it wasn't for many vendors. Traffic in many aisles was heavy, but many vendors were not happy - "lookers, not buyers."  I had no problem stopping almost anywhere for a chat or to work, with few other buyers coming in to the booths.  Among the hundreds of loose diamond vendors and stone dealers, for example, the business seemed more about selling each other than to retailers or manufacturers. Yes, there were some good stories.  One Hong Kong jewelry manufacturer related that business in the very high end was reasonable, but business in middle-priced 18 karat and diamond jewelry was "totally dead.&quo

Industry on its head

Sorry to have been absent for quite so long, but this is show season, and I have been traveling the world to "see what's new." It has been a difficult, perhaps strange, tour that ends with the Hong Kong show that begins tomorrow. Thus far I have been to Vicenza Fair, the JA Show, the New York International Gift Fair, and the Bangkok Fair. I walked every hall of every show.  I say difficult because the shows were not very productive from my point of view (I am working on merchandising fashion jewelry for a client). It has been strange because too much of the industry seems stranded in no-man's land. At every show I saw similar patterns. In a nutshell: Many vendors have shifted entirely out of gold, no surprise, and mostly went into silver, though bronze and steel are no longer unusual. Most of these companies have not made the transition well, essentially translating their gold designs into new materials. They probably know it since they appear a bit in s

Seven billion and counting - part 3

My wishes to everyone for a healthy and successful 2012.  This holiday season has been most enjoyable around here, highlighted with the Giants making the playoffs!  Let's see how far they go. And let's see how far we go!  The jewelry industry will continue to see profound changes from mining to retailing.  In parts 1 and 2 of this overview, I offered some thoughts on sourcing and retailing.  We know that the exiting of the Oppenheimer family from De Beers signals big changes to come in distribution; we already see that material costs, advancing consolidation and the boom in online sales have deeply affected all retail channels.  But how might manufacturing fare in all this? We have noted that an explosive population growth, and particularly the expansion of the middle class and affluent classes all over the world, must mean that opportunities to sell luxury products of all sorts are growing.  Judging by early reports from luxury retailers, high end sales seem to suppor