Tough Love

I love this business. There is something magical and deeply gratifying in seeing innovative and talented artists create objects with tactile and visual beauty from metal and gems. While I could bemoan the fact that I sense this magic all too infrequently, I should not be surprised. As in all the arts, true talents emerge rarely.

This thought came to mind recently as I listened to Beryl Raff, executive vice president of J.C. Penney, at the recent Plumb Club Forum. Granted that Penney is a mass-market chain, where we would not expect to see the most innovative jewelry. Still, Raff grew a bit nostalgic for the days when she saw well-made 2.00 ct. t.w. rings—using SI goods and hefty shanks—for $1,000 retail. Since then, it has been a fight to hold on to good retail price points while still offering good perceived value. Along came Argyle browns, and mall-based chains expanded rapidly as diamonds became a mass-market product. But in the end, in the struggle to fight off rising prices for metal, diamonds, and labor, we have ended up with too many very light mountings carrying tiny, poor diamonds of little value. There are no more downgrades that can be made. We are at the end of the line in the mass market.

Have we taught the public to accept poor products, or have we, finally, betrayed our industry by not teaching the public to seek quality? Raff, to her credit, relates how hard she is pushing her buyers to upgrade and seek innovative products, and how fearful they all are that the public may not respond. But there may not be a choice. For anyone in the mass market, profitability—perhaps even survival—is at stake.

We face some daunting facts. Inflation has wiped out any real wage gains that were realized last year after many years of no advance. By one estimate, 30 percent of the population is at or near poverty levels. Higher taxes, one way or another, will have to be imposed, regardless of the party in power, to meet the costs of the national debt and entitlement programs. The credit crunch is bound to crimp the use of credit cards. And gold and platinum prices have soared.

We may be seeing the end of the consumer binge that has pumped our economy for most of the last 15 years. We will see consumerism revive, but it will do so in a different world. Diamonds will be scarcer and more expensive as we compete for them with huge, new affluent populations in Asia, Russia, and the Middle East. Asian labor prices will continue to rise, and we may well see gold reach $1,500 per ounce, perhaps $2,000, in the next couple of years.

Right now, much of our industry is in shock. Many of us have deferred action even as we all knew, or should have known, that we would reach this moment. But time is up! Now is the time to act, or quietly walk off into the sunset. Every boom period spawns companies that share in the bounty, and every downturn sees many of them disappear. This time, we can expect some good companies to go as well, because they're paralyzed by this rapidly changing and confusing market.

Some market strata may be irrevocably changed. Vendors of silver, gold-filled, and base-metal jewelry will benefit (and have already) as some of the public is forced to move away from high-price gold, platinum, and gems. Some stylists are promoting mixing of costume and fine jewelry to achieve a good look. The up market is doing very well, especially for those retailers who worked hard over the years to position themselves for just these conditions. Location will mean a great deal for retailers seeking the up market. And anyone who does not have a robust Web site will not capture the Millennials that are critical to our business in the coming years.

Now is the time to act—today, not tomorrow. What worked yesterday will not work tomorrow. Let's find a way out of the stultifying merchandising we have lived with, and come back to real jewelry. All of us need to feel that magical love for jewelry reinvigorated!

benjanow@gmail.com