Last week, De Beers released a survey of the global diamond market that showed that U.S. diamond sales increased some 7 percent in 2014. That makes it, rather unexpectedly, the best-performing diamond market in the world, outdoing recent champs China and India, where sales rose 6 percent and 1 percent, respectively.
“We were surprised,” says Stephen Lussier, executive vice president of the De Beers group of companies and CEO of Forevermark. “America never ceases to surprise as far as its ability to consume diamonds.”
And yet, many U.S. jewelers have reported mixed business, even if they largely agreed that diamonds remain the backbone of the business. And while sales at the majors mostly rose, they undershot expectations.
According to the Commerce Department, jewelry sales hit a record last year, although sales fell in the crucial months of November and December. And to make it more confusing, SpendingPulse called jewelry one of the best-performing categories last holiday.
So what is right? There are a number of theories.
The recovery has not been felt through all areas of the country.
“It’s not a situation where the rising tide lifts all ships,” Lussier says. “There are regional differences; some regions have recovered better than ever. Those differences are not necessarily reflected in the macro data.”
The recovery has not been felt through all segments.
We hear a lot about the bifurcated economy, but when one looks at the statistics, they are staggering. A recent Pew Research survey found the gap between America’s upper-income and middle-income families the largest ever recorded, with the wealthier families holding a net worth 70 times that of middle-income families. The Federal Reserve found that while income for the top 10 percent of earners increased 2 percent in the last few years, it fell for the bottom 60 percent. As a result, the top 10 percent of earners now account for more than half of the country’s income, while 40 percent of Americans are living paycheck to paycheck.
So it’s not surprising that De Beers found the majority of diamond sales were to high-end customers as well as that old staple, bridal.
“The jewelers who are targeting very affluent consumers have the opportunity to grow higher than the average,” says Lussier. “If you are selling more fashion-oriented gift products to middle-income consumers you had a tougher time.”
People were buying mostly low-end items last year.
This doesn’t necessarily contradict the above theory. Middle-class consumers remain frugal, gravitating to low-end items.
“2013 and 2014 were record years in terms of totals, but the low price per item killed it from a profit standpoint,” says Edahn Golan, author of a recent study on the market. “You needed to make many transactions to make a decent income, so even though the margin on cheaper goods is perhaps larger, the total income is still very low.”
The holiday wasn’t as good as the rest of the year.
The American market showed “softness” in the fourth quarter, De Beers writes, as “there was a trend toward less concentration of Christmas gift shopping immediately before Christmas, driven by early retail promotional activity.”
So there you have it. What do you think?