Who would have thought, two years
after the diamond market endured one of its worst downturns in its history,
that the trade’s biggest problem would be diamond prices rising too fast?
But that is what is happening,
and, in fact, some items are increasing so quickly that one industry veteran told Edahn Golan:
“This reminds me of 1979,” the year of the investment boom. Although, for
those of us in the United States, a better analogy may be 1989.
That’s when the Japanese economy grew
far faster than America’s, and De Beers repeatedly jacked up diamond prices to meet
ever-rising Japanese demand. American jewelers couldn’t keep up.
Now, the Chinese and Indian
markets are leading the way—while the market here is still crawling out of its
recession. And again, jewelers are having a hard time keeping up. In the
aftermath of the downturn, many retailers have been reluctant to buy for stock,
or pay increased prices. Now they may not have a choice.
We are also seeing domestic
jewelers turn ever-so-slightly away from relying on diamonds as the basis of
their business, just as in recent years many embraced silver as opposed to
gold. After all, diamonds can be easily purchased on the Internet; they have
image problems, particularly with younger consumers; and they are no longer
advertised nationally on television. Why not sell gemstone engagement rings? No
one’s comparing them on Blue Nile.
U.S. jewelers have never been
popular among diamond dealers, who complain about how labor-intensive
this market is, and how retailers here demand generous terms and rely heavily on
memo. Yet, those were the rules in America, which for a while was not only the
largest market but the only game in town. The United States
remains the biggest market; however, now there are more enticing games elsewhere.
And so we are seeing a slight but perceptible power shift in the balance of
power between American jewelers and wholesalers. Stores here no longer hold all
the cards, and they are coming to terms with what exactly that means.