47th Street Looks To Finished Jewelry For Profits

The diamond centers in Belgium and Israel have spent millions of dollars promoting their industries around the world in recent years. New York City’s 47th St. has been quiet by comparison, but that’s not to say there haven’t been changes.

A majority of the big diamond houses in New York City have gone into finished jewelry lines in a big way, and now many smaller colleagues are following suit. Their products range from the mass market jewelry of M. Fabrikant & Sons Inc. to the specialty lines of Lazare Kaplan International to the one-of-a-kind, six-figure necklaces of William Goldberg Diamond Corp.

The reason for this shift is basic 1990s diamond economics: finished jewelry usually has a higher markup because price competition has cut loose diamond profits to the bone.

“Diamonds have been trading as commodities because of certificates and price competition,” says Alan Kleinberg of Michael Werdiger Inc., which produces its own mounted diamond line. “Finished jewelry is a logical step away from that competition because it adds value to loose goods and creates a differentiated product.”

Many New York diamond companies have sales of more than $100 million a year, and the majority of them sell mounted lines, says Kleinberg. “That kind of sales volume was unheard of for diamond companies even a few years ago,” he says.

Consider London Star. The company foresaw the growth potential in finished jewelry and set up a sister company, Star Diamond Trading, to take advantage. “About seven years ago, we identified regional jewelry chains as high-growth companies that hadn’t been saturated by major manufacturers,” says Larry Hirsch, executive vice president of London Star. The company developed fresh designs and inventive product categories (such as baby baguettes), which propelled its growth through the 1990s.

Competition, solution: New Yorkers say competition has become increasingly cutthroat. Many overseas diamond companies have set up offices in the U.S. And many, especially Israelis, have targeted New York’s specialty: larger, high-quality diamonds. “The Israelis believed the larger stone market was more profitable so they started getting ‘our’ goods from [De Beers’] Central Selling Organisation,” says Hertz Hasenfeld of Hasenfeld & Stein. “However, they found out that market was no free lunch.”

In the lower end, Indian companies offered extended memo terms to maintain the high level of diamond exports required of them.

The Americans couldn’t respond with lower prices because they were already close to just breaking even. Neither could they match India’s memo terms because their banks were too strict. Some also concede they haven’t played the home court advantage as well as they could. “We have been quiet,” say Kleinberg. “Israeli and Antwerp companies make their import/export figures public. We don’t do that here, so the perception is that the big players are over there.”

The solution, they figured, was to offer finished jewelry lines. But this can create another problem: a company that sells loose diamonds to a jewelry manufacturer can end up competing with that manufacturer by also selling finished jewelry to retailers.

That problem isn’t new. Some diamond companies have had jewelry lines for years, but were discreet to prevent conflicts with manufacturers. That veil of discretion dissipated in the early ’90s when recession and high interest rates left manufacturers unable to pay their bills, causing many New York diamond houses to lose millions of dollars.

The problems of wholesalers and manufacturers actually created opportunities, says Larry Hirsch of London Star and Star Diamonds. “As some of these companies weakened, it created opportunities for others to take their place.” When several large bridal jewelry manufacturers ran into trouble, for example, London Star moved into the market in a big way.

The decade brought another reality: lines of distribution shortened dramatically, cutting out as many intermediaries as possible. Some in the diamond community saw jewelry manufacturing as a natural evolution in this process. “You’ve got to always be open to new things to survive in today’s world,” says one diamond manufacturer. “It’s really no fun out there.”

Results: Larger players in New York’s diamond community are holding their own. Well-connected dealers without finished jewelry lines also still do solid business, though profits are low. But the jury is still out on newer and smaller players. The combination of scarce goods, highly selective banks and weak profits has taken a toll.

The most-sought-after goods (better qualities over 1.5 cts.) are concentrated in a few hands. Many New York dealers say the 20 or so CSO sightholders have monopolized much of the industry’s profits for themselves, even charging a premium because they’re the only ones who can get the stones.

But one sightholder says, “People don’t realize there’s a fundamental shift going on in the market. Everyone wants to go direct without middlemen. Unfortunately, this cuts out the diamond wholesaler and broker.”

Hardest hit by this buy-direct trend are the bourses where brokers assemble to buy and sell diamonds on behalf of clients. New York’s Diamond Dealers Club is no exception. Eli Izhakoff, immediate past president of the DDC, says a lot of business is still done in the bourse, but definitely less than in the 1980s. “The trading floor [of the DDC] has lost its place as many buyers try to circumvent brokers because profits are so bad,” he says. “However, they can survive if they go out and seek customers and if they have a niche that attracts customers.”

Izhakoff worries today’s squeeze will affect 47th St.’s future by discouraging people from entering the trade. “We have got to keep new people in our business if we are to grow,” he says. “These people need more support from banks and more access to rough to make their businesses grow.”

That’s one of the purposes of the Diamond Industry Steering Committee, which has lobbied De Beers for more rough diamonds and resumption of a special allocation of goods to nurture younger businesses.

De Beers Director Tim Capon says New York remains “preeminent” in the larger stone market because of its pool of highly skilled labor. But he stresses that 47th St. must deal with the free market like everyone else. “Over the years, we’ve seen some old firms thrive and others decline, but we have always seen new ones coming in,” he says. “There are things we can do to help newer companies. But in the end, we have to let the free market winnow down to those who are truly committed to the diamond industry.”

De Beers meets regularly with banks to keep them informed about the diamond business and to encourage their support. “However, we don’t tell them what to do and we don’t ask them to overlend,” he says.

Capon is confident about 47th St.’s future: “There will always be those with the business and cutting skills and commitment to stay in for the long haul. There’s no doubt that New York will be able to keep its position as the large stone center.”


Today’s New York City diamond industry is a unified group that can present its case effectively to everyone from City Hall to De Beers.

It’s competitive in a world market where tough competition is the order of the day.

And it’s located in an environment that is safer and more pleasant than it was just a few years ago.

This is the legacy of the four-year tenure of Eli Izhakoff as president of New York’s Diamond Dealers Club. Izhakoff completed the two two-year terms allowed under DDC rules and was succeeded this summer by Eli Haas.

“When I took over as DDC president, it was my dream to unite our industry to get things done that we needed to have done,” says Izhakoff. “The member organizations [DDC, Diamond Trade and Precious Stone Association, Indian Diamond and Colorstone Association and the Diamond Manufacturers and Importers Association] were all working for their own members, but not for the New York or American diamond industry as a whole.”

His first order of business was to set up the Diamond Industry Steering Committee, an umbrella organization to represent the entire community. Izhakoff is quick to admit that DISC wasn’t an original idea. His friend and mentor, Moshe Schnitzer, had done the same thing as dean of the Israeli diamond industry. “The Israeli industry presents a strong united force to remind government officials that diamonds are an important part of the economy,” says Izhakoff. “If it were just a bunch of individual dealers talking to the government, they wouldn’t have the clout.”

Up and running: DISC’s coming-out party, a 1990 event honoring Japanese clients, showed the world that New York was a united force, a diamond center to be reckoned with, says Izhakoff.

The next step was to lobby the New York City government for better services and protection, and the timing couldn’t have been better. The city had just commissioned a study that showed the diamond and jewelry trade was a multibillion dollar industry employing thousands of people that was almost ignored in City Hall. “We established strong ties with Mayor David Dinkins and the police department,” says Izhakoff. The city contributed money to beautify 47 St. Police set up a kiosk and increased patrols to deter Colombian thieves who had been plaguing the trade.

Then Izhakoff worked to attract the large dealers who traditionally stayed out of DDC politics. “DISC gave them something to work with that could help their businesses as well as the community,” he says. He also tried to bring 47 St. closer to other industry organizations, including Jewelers of America and the Jewelers Vigilance Committee, and to bring Russian, Thai and Chinese officials to the city.

In his haste to get things done, Izhakoff ruffled some feathers. Critics say he can be abrasive and high-handed, but even they acknowledge he has been effective. Izhakoff realizes he couldn’t please everybody, but says the benefits of a united industry speak for themselves. “In 1990, New York was losing a lot of business to Israel, especially diamond manufacturing. When the world diamond community talked about major diamond centers, New York wasn’t even mentioned,” he says. “We’ve been able to stop the manufacturing exodus and have been able to hold our own.

“DISC also began to meet with representatives of De Beers to plead our case the same way that Antwerp’s Diamond High Council and the Israeli Diamond Manufacturers Association do. We have respect as a major diamond center again. Why? Unity.”

Future: Izhakoff remains chairman of DISC. He calls that a challenging job, especially since he also has to spend more time in the family business, J. Izhakoff & Sons, where he is now chairman of the business development committee. “I was nominated by my father, who really wants me to get back to work in the business,” he says.

He says the DDC is in capable hands with Eli Haas at the helm. “He’s one of the best-respected, articulate people in the diamond world and will be a very strong president,” says Izhakoff.

As chairman of DISC, he still has one dream: to bring more diamond manufacturing to New York City. “If we automate our industry here, we can compete with anyone,” he says. “We’ve got the skills, the marketing know-how and the world’s largest consumer market in our midst. No other diamond center can say that.

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