We have been trying to figure out the economic trends in the US and worldwide for a few years now, and it is still a mystery. The gurus say that we are in recovery, slow as it might be. They say the US is doing better than many other countries, especially in Europe. They say the BRICS countries are staggering a bit, not booming as they were for years.
All the patter sounds like a clunker. It just does not sound right. So what can wee figure out for ourselves?
We know that the jewelry business is very much the canary in the coal mine. When things are not well, jewelry is one of the first to feel the cold wind. And when the economy is recovering, it is one of the last to feel the warmth of the sun. We have seen this in recent years. By mid-year 2007, many retailers were sensing that there was something amiss. That was an understatement. Neither retailers nor suppliers have recovered, by a good measure, to where they were in 2006, once we adjust for inflation and prices for precious metals and stones. Dollars may be up a bit, but units are down.
Yes, there are some exceptions, and we will get to those in a moment.
What we have seen very clearly is the explosion of fundamentally disruptive technologies. I needn't give too many examples, as everyone knows what is happening, but here are a few obvious, and not so obvious ones that have occurred in the last few years.
- The assembly lines of the past are gone or going, as are hundreds of thousands of jobs, replaced by tireless, highly accurate, robots with no need for unions, health care, or pay. Just some maintenance one in a while.
- Meter maids are gone. We use a credit card to get a parking slip in the street.
- We deposit checks by using our smartphones to photograph them. There go some tellers.
- ATT and Verizon are scrambling to replace their land lines, which are being rapidly abandoned by consumers.
- There are almost no stores selling software or music, or offering movie rentals. Booksellers are becoming a rare breed, and publishing is in dire straits.
- Developments in the use of graphene may radically advance our electronic capabilities, but threatens to destroy huge investments in plants producing silicon based chips and processors.
So, we know all this, and many other changes that are transforming our economic structure. Perhaps we could best compare this to the great destruction and dislocation caused by the Industrial Revolution. Then too, those who could not adapt to the demands of the machine age were left destitute and adrift.
Now too, we see that. 60 Minutes recently replayed a piece about Newton, Iowa, as reported by Scott Pelley, that described the precipitous decline of that town. This town relied a great deal on the presence of a Maytag factory, which left for cheaper Mexican labor a number of years ago. Then the recession hit, and more businesses failed. And a cascade of problems followed, as a spiraling decline caused more layoffs, which in turn caused more declines. [This is an example of that most feared of economic events, a deflationary economy like the one that Japan has now been fighting for 20 years.]
Part of the story covered the closing of a jewelry store. The owner had shifted from gold to silver, and from diamonds to beads, in an effort to satisfy the diminished capabilities of the public. To no avail. It was a desperate move that ignored, out of sheer necessity, some basic tenets of the business.
A small town meeting, held by Pelley, showed that few residents believe their children will have a better life then they have had. Many attack Washington for the ineptitude and in-fighting, and for not, somehow, seeing that jobs reappeared in Newton. A nice wish, but short on reality. We are experiencing changes that Washington, at its best, would have little power to blunt.
One one hand, this story, and others about the "emptying" of so many mid-western towns that are suffering comparable disasters, is a painful sign of a fundamental change that has been building for many years, predating the Great Recession by a large measure. We are moving quickly from an industrial society to one based on technology and communication. And we do not even know what, exactly, that means. We are in the midst of roaring stream, and we do not know if we are headed for a waterfall, or a great, calm sea.
As for jewelry retailing, the best advice is "follow the money." At the same time that banks are refusing to lend to new, small ventures in Newton, money is pouring into Silicon Valley in California, where techie startups are easily obtaining hundreds of millions of dollars, often without even seeking the financing. Sometimes the money sits in the coffers unused. Banks and venture capitalists are actively seeking such investments. [At the same time, they are bailing out of the diamond and jewelry business, which are no longer viewed as having profitable growth potential.]
Las Vegas jewelers have long known they have three publics. The rich, who come to Vegas to gamble and splurge. The big winners, who have a really lucky day at the tables. And the residents, who are largely in construction and services. The firs two are the targets. The third are occasional buyers with whom it is hard to make a living. We could apply this all across the country. Those in the top 5%, and those lucky enough to hit Lotto is where it is at.
Who you are, and where you are, is now everything. As we saw last year, retailers with the right image and the right location hit it big. Everyone else struggled. We may be facing a deeply divided public, and market, for a long time.
All the patter sounds like a clunker. It just does not sound right. So what can wee figure out for ourselves?
We know that the jewelry business is very much the canary in the coal mine. When things are not well, jewelry is one of the first to feel the cold wind. And when the economy is recovering, it is one of the last to feel the warmth of the sun. We have seen this in recent years. By mid-year 2007, many retailers were sensing that there was something amiss. That was an understatement. Neither retailers nor suppliers have recovered, by a good measure, to where they were in 2006, once we adjust for inflation and prices for precious metals and stones. Dollars may be up a bit, but units are down.
Yes, there are some exceptions, and we will get to those in a moment.
What we have seen very clearly is the explosion of fundamentally disruptive technologies. I needn't give too many examples, as everyone knows what is happening, but here are a few obvious, and not so obvious ones that have occurred in the last few years.
- The assembly lines of the past are gone or going, as are hundreds of thousands of jobs, replaced by tireless, highly accurate, robots with no need for unions, health care, or pay. Just some maintenance one in a while.
- Meter maids are gone. We use a credit card to get a parking slip in the street.
- We deposit checks by using our smartphones to photograph them. There go some tellers.
- ATT and Verizon are scrambling to replace their land lines, which are being rapidly abandoned by consumers.
- There are almost no stores selling software or music, or offering movie rentals. Booksellers are becoming a rare breed, and publishing is in dire straits.
- Developments in the use of graphene may radically advance our electronic capabilities, but threatens to destroy huge investments in plants producing silicon based chips and processors.
So, we know all this, and many other changes that are transforming our economic structure. Perhaps we could best compare this to the great destruction and dislocation caused by the Industrial Revolution. Then too, those who could not adapt to the demands of the machine age were left destitute and adrift.
Now too, we see that. 60 Minutes recently replayed a piece about Newton, Iowa, as reported by Scott Pelley, that described the precipitous decline of that town. This town relied a great deal on the presence of a Maytag factory, which left for cheaper Mexican labor a number of years ago. Then the recession hit, and more businesses failed. And a cascade of problems followed, as a spiraling decline caused more layoffs, which in turn caused more declines. [This is an example of that most feared of economic events, a deflationary economy like the one that Japan has now been fighting for 20 years.]
Part of the story covered the closing of a jewelry store. The owner had shifted from gold to silver, and from diamonds to beads, in an effort to satisfy the diminished capabilities of the public. To no avail. It was a desperate move that ignored, out of sheer necessity, some basic tenets of the business.
A small town meeting, held by Pelley, showed that few residents believe their children will have a better life then they have had. Many attack Washington for the ineptitude and in-fighting, and for not, somehow, seeing that jobs reappeared in Newton. A nice wish, but short on reality. We are experiencing changes that Washington, at its best, would have little power to blunt.
One one hand, this story, and others about the "emptying" of so many mid-western towns that are suffering comparable disasters, is a painful sign of a fundamental change that has been building for many years, predating the Great Recession by a large measure. We are moving quickly from an industrial society to one based on technology and communication. And we do not even know what, exactly, that means. We are in the midst of roaring stream, and we do not know if we are headed for a waterfall, or a great, calm sea.
As for jewelry retailing, the best advice is "follow the money." At the same time that banks are refusing to lend to new, small ventures in Newton, money is pouring into Silicon Valley in California, where techie startups are easily obtaining hundreds of millions of dollars, often without even seeking the financing. Sometimes the money sits in the coffers unused. Banks and venture capitalists are actively seeking such investments. [At the same time, they are bailing out of the diamond and jewelry business, which are no longer viewed as having profitable growth potential.]
Las Vegas jewelers have long known they have three publics. The rich, who come to Vegas to gamble and splurge. The big winners, who have a really lucky day at the tables. And the residents, who are largely in construction and services. The firs two are the targets. The third are occasional buyers with whom it is hard to make a living. We could apply this all across the country. Those in the top 5%, and those lucky enough to hit Lotto is where it is at.
Who you are, and where you are, is now everything. As we saw last year, retailers with the right image and the right location hit it big. Everyone else struggled. We may be facing a deeply divided public, and market, for a long time.
Comments
When the recession hit we raised our prices and focused on custom work for very high end customers. Many of my friends in the trade freaked out and lowered their prices and started using silver instead of gold. They are still struggling. We've had our best years ever since. Jim Tuttle of Green Lake Jewelers did the same. His business is booming.
We live in Portland Or but sell most of our goods in high income places around the US thanks to Fed Ex and the internet.