Shell-shocked dealers can’t quell demand for ocean’s gems
Photograph by Greg Sorensen; styling by Brooke Magnaghi
Market Editor: Jennifer Heebner. Makeup by Alexis Williams for the Brooks Agency. Hair by Gusléne Bubak. Manicure by Angela Marinescu. Camisole by Zara.
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When Jack Lynch, owner of Sea Hunt Pearls in San Francisco, sold a strand of bead-nucleated freshwater pearls with a natural intense pinkish-purple color before June’s JCK Las Vegas, the sale was bittersweet. He knew another strand would be hard to assemble, given the pearls’ lack of availability.
“Hopefully, there will be a fresh harvest” this fall, Lynch says.
That wishful thinking is common this year among high-end pearl dealers. Quality goods have been increasingly scarce. On the eve of last month’s Hong Kong Jewellery & Gem Fair, dealers we interviewed were eagerly awaiting the harvests. Prices for cultured pearls—South Sea, akoya, and freshwater (particularly white)—have risen industrywide due to demand from Chinese consumers, despite their economy’s free fall. American dealers are struggling to source inventory and are paying premiums of up to 30 percent for superior-grade pearls.
“Domestic China is consuming more pearls than they export,” says Michael Hakimian, CEO of Yoko London. “We’re expecting a huge price hike as we get closer to the Chinese New Year.”
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Freshwater Prices on the Rise
At February’s Tucson gem shows, prices of white freshwaters were significantly higher than in years past. Pearlers say Asian consumers are the reason. After driving up prices of South Sea and Tahitian pearls, buyers in the Far East began snapping up akoyas and freshwaters, pushing that market to previously unseen heights. “Now prices are pretty crazy here,” says Anil Maloo, founder and president of Baggins in Los Angeles.
Top-quality round white freshwaters are the most expensive and toughest pearls to obtain. Plus, production of bead-nucleated pearls is up, as is demand for bigger sizes. “It costs the same to cultivate large pearls as small ones, and the return on investment is better on bigger pearls,” says Fran Mastoloni, partner in New York City’s Mastoloni Pearls.
The bigger the pearl, however, the tougher it is to source. Lynch sold a one-of-a-kind strand of white freshwater pearls ranging in size from 15.4 mm to 19.3 mm at the AGTA GemFair Tucson in February, and says it will be a long time before a similar strand surfaces.
“This quality of pearl is unusual,” says Stuart Robertson, research director of Gemworld International Inc., in Glenview, Ill., referring to Lynch’s strand. “In the current market, producers appear to be focusing on weight as opposed to fine quality and interesting shapes, colors, and surfaces.”
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The rise of Edison pearls—round- to baroque-shape pearls in lavender-peach colors named for the American inventor—has helped spark demand for natural-color pastel freshwater pearls in general. Edisons and other unusual freshwaters offer “a bigger bang for the buck and perceived value that turns pearl buyers into collectors,” says Lynch. Both Maloo and Mastoloni report strong sales of pink and lavender pearls, especially in larger sizes, and both were eager to check out new inventories at September’s Hong Kong show.
Imperial Pearl in East Providence, R.I., is still investing in price-point Edisons, says chief marketing officer Josh Bazar (they’re known as Windsor pearls in house, due to their regal appearance). But Hakimian prefers to focus on larger, pricier goods. “Instead of trying to match a price, we educate the public on pearls’ high quality and luster,” he says.
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All About Akoyas
Higher demand for akoyas (due to Chinese buyers) has driven up prices 30 percent in the last year alone, say some estimates. “Japanese suppliers were the only ones doing business in the pearl area at the March Hong Kong show,” Lynch notes.
Maloo also attributes soaring akoya prices to an uptick in demand from the Far East. “Akoyas are the hottest I’ve seen since the recession,” he says. “The prices have gone up because of strong demand in Japan and China. It’s hard to get good-quality merchandise at good prices.”
And while top-quality akoyas have no rival when it comes to luster, lower, less expensive qualities compete with white Chinese freshwaters. “The best quality of akoya stands out, but that’s probably not what most people are buying,” Robertson says. “In the lower to mid tier, the Chinese freshwater absolutely grabbed up the marketplace because it’s much less expensive than akoya and in looking at both, most people can’t tell the difference. So they go with the cheaper option—freshwaters.”
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Scarcity in South Sea Pearls
Fine qualities of South Sea pearls are equally difficult to obtain, and a scarcity of fine-color Tahitians is driving up prices for black pearls. Lower availability of all South Sea pearls due to decreased production and oyster shortages are increasing prices by a minimum of 20 percent this year, say dealers.
“The better merchandise is all going into China,” says Mastoloni, adding that a double-digit percent devaluation in the yuan could stunt some sales. Adds Robertson: “The Chinese market is coming way down—the crash in their market will affect the pearl market for the next few years.”
As for possible corrections, however, Robertson believes they’ll be modest. “Pearls are not a saturated market, because they have fewer producers and dealers than other gems.”
Others maintain that the Tahitian category is well positioned for growth. Kingston Springs, Tenn.–designer Vincent Peach has relied heavily on white freshwaters in past collections but is most excited about Tahitians moving forward. “South Sea pearls will remain a better long-term investment,” he says. “And our Tahitian pearls are investment-quality.”
Citing the pearls’ reputation for fine luster and surface quality, as well as bright peacock colors, Robertson insists that a “retailer can invest $5,000 to $7,000 and get a nice strand of Tahitian pearls in the 9 mm–12.5 mm range, while $3,500 to $5,000 will get a bright baroque strand with some minor surface spots. Prices have increased about 25 percent or more in the more popular sizes and qualities during the past year and yet, compared to their historical highs, they still have room to go.”
On the flip side, published reports out of Australia about the country’s white South Sea pearling industry reveal that farmers have struggled with shell-health problems for years, resulting in reduced yields and production. This, coupled with Chinese demand, has led to price hikes at the high end and for larger sizes. Hakimian has resorted to using smaller white South Sea pearls in the 10 mm–12 mm range. “That trend will continue for the next few years,” he speculates.
Chinese demand for goldens has driven up costs to the point that they may have outpriced themselves. “Quite a lot of buyers are refusing to buy goldens because they are too expensive,” Hakimian says. Mastoloni sees prices for golden pearls “up 15 percent at least,” but stresses that scenario could change after the September Hong Kong fair.
Even though prices of goldens remain high, demand typically comes from Asia, not the United States. “It doesn’t go with everyone’s skin tones,” Maloo explains.
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Price challenges aside, it’s important for retailers to remember to position pearls as fashion pieces for a new generation. Modern earring styles such as climbers, studs and jackets, and front-to-backs are also helping chip away at dated images of grandma’s bland white strand. And it’s fashion-forward looks like these, beyond lovely luster and pretty natural colors, that are helping to elevate the pearl’s profile.
“We take all trends and interpret them in pearl,” says Bazar. “We did an X ring in 14 karat gold with diamonds and an akoya on top, and it’s selling like crazy. We take other inspirations and pearlize them, too. People tell us, ‘I didn’t know that you could do that in pearl’ and we show them you can.”
These Chinese freshwater bead-cultured pearls from Jack Lynch of Sea Hunt Pearls were featured in the summer 2015 issue of Gems & Gemology.
Photo: Jian Xin (Jae) Liao/Image courtesy GIA
Prices of white freshwater pearls have escalated this year. Heed these tips to stock the sought-after goods on a budget:
Reduce margins in basics. Merchants are competing in an online world. “Buy more aggressively” or in larger inventories for better pricing, says Baggins’ Anil Maloo.
Offer smaller sizes. Sizes that are 9 mm and down are “still reasonable,” says Sea Hunt Pearls’ Jack Lynch, adding that 8 mm–8.5 mm strands retail for about $1,200 at a triple keystone markup.
Educate buyers. Explain the rarity of the product. “Our pearl jewelry comes from different harvests sourced from 13 different farms at the moment,” says Michael Hakimian of Yoko London. “When you’re dealing with nature, sometimes you just have to wait.” —JH