BusinessReport

Diamond Supply Forecast Is Mixed

Jewelers will probably see few shortages in diamonds under 1.5 cts. this holiday season, but high-quality diamonds in larger sizes may be harder to obtain.

That’s the likely scenario, given the record low allocations to sightholders by De Beers’ Central Selling Organisation (CSO). CSO sales totaled $1.7 billion for the first half of the year, the lowest figure in more than a decade and a 41% drop from the previous year’s first-half sales.

Dealer inventories of diamonds under 1.5 cts. are expected to ensure sufficient supply of smaller stones for the holiday season.

Some manufacturers in the United States and elsewhere are starting to worry that the Draconian cuts in rough supplies are making it difficult to keep their factories open, but there have been few outward calls for the CSO to open its vaults once again.

“There’s still a great deal of concern over the Japanese and Asian markets, so it’s certain the CSO will continue its conservative, cautious approach,” says Mark Boston of H. Goldie & Co., a New York diamond firm.

Full-Moon Customers – The 25-Hour Sale

It’s a running joke in some jewelry stores that the most challenging, unusual customers show up when the moon is full. Sometimes, though, the toughest sale to make can be the most satisfying of a career.

That’s how Kim Smith, manager of Fox’s Gem Shop in Seattle, feels about the couple who spent more than 25 hours over 10 visits to purchase a $24,000 engagement ring.

Though his colleagues continually razzed him about not being able to close the sale, he describes the experience as his premier sales accomplishment in terms of the relationships he made and the challenges he faced and overcame. “I had to draw upon everything I had ever learned in this business for this sale,” Smith says.

“It all started innocently enough,” he says, recalling how a nice couple visited Fox’s one hour before closing time. They asked Smith to teach them all about diamonds, and so he did, explaining the finer points of cut, clarity, and color. They stayed well beyond closing time, unfazed by the 15 salespeople pulling jewelry from the showcases as they talked.

During the second visit, which lasted four hours, they asked Smith to teach them about settings. Again, they wanted to delve deep into the topic. The man wanted Smith’s views on the theories of design and structure that go into ring settings.

On their third visit (four hours), the couple mulled over the merits of three stones, including a 1.75-ct. diamond with hearts-and-arrows symmetry and F color. “We were 10 hours into the sales presentation, and no decisions had been made except that they were comfortable with me and Fox’s Gem Shop,” recalls Smith. They still hadn’t even chosen between platinum or gold. At that point he suspected that the man was trying to find a reason not to buy something, “but I wasn’t ready to throw in the towel.”

During the fourth visit (three hours), he surprised them with a wax model for a ring. He hoped this would spark their interest, but the opposite was true. It wasn’t what she wanted. He was undeterred. “In a sales presentation, when you hit that wall and there’s that modest disappointment, you have to turn that negative into a positive to get back on track.” Smith told them he would work to meet their needs.

His memory of the next six visits is a bit of a blur. Smith struggled to come up with their very precise request: a 1.25-ct. diamond with D color, hearts-and-arrows symmetry, and no fluorescence.

After an extensive search, he finally found such a stone and made an appointment to present it to them. But they said it wasn’t good enough because it didn’t have the same quality of cut as the 1.75-ct. diamond they’d seen earlier. And that one wasn’t good enough either: It had F color and was too big.

At that point, 20 hours into the relationship, “I told them, ‘I’ve done the best I can do.’ I thanked them for visiting Fox’s, and said maybe in the future our paths will cross again,” says Smith. “He was a bit taken aback that I was dismissing them, but it had reached the point where I had to take charge.”

A strange twist of fate brought them back in again. Two days later, he found another 1.25-ct. stone that met their specifications. He asked them to come in. Again, the quality of the cut wasn’t as good as that of the 1.75-ct. stone. At last, the customer settled on the larger stone – even though it was F color.

That’s when the last chapter of the long saga began. The final appointment was about price. The customer proposed a price well below what Smith would accept and wouldn’t consider paying more.

At that point, Smith turned him away for the second time. “I thanked him for visiting me, said I was sorry we weren’t able to work out anything. He just sat in his chair dumbfounded as I got busy putting things away in cases.”

Strangely enough, that’s what clinched the deal: “I had to make a break to bring emotion back into the transaction. As a salesperson you have to be the one who’s controlling the situation, and that put me in control instantly.”

At 2 p.m. that very day, the customer purchased the 1.75-ct. stone. He choose a setting (a simple gold solitaire), his fiancée okayed the selection, the store set the stone and sized the ring, and the couple picked it up.

Was it a maddening situation? “No. We became friends. I discovered he made a great deal of money in real estate in California and never has to work again. He’s in his late 40s, and the potential for future purchases is great: I think he’ll treat her with wonderful things over the years, and she him, as well.”

When all was said and done, the man told Smith: “Fox’s is my store, and you are my jeweler for life.”

Please share your “Full-Moon” tales of mirth, woe, and unusual sales with JCK readers. Call or e-mail Jessica Stein Diamond at (610) 964-5570 or jdiamond@chilton.net.

Who’s Buying Jewelry?

Jewelry shopping is similar to overall retail trends – with minorities shopping more and older people shopping less, according to new data from Chilton Research Services.

While only 11% of Caucasians surveyed said they’d purchased fine jewelry in the first half of 1998, 27.1% of those who identified themselves as black reported they had. The figure for people who said they belonged to other racial groups was 14.6%.

The Chilton survey found the lowest shopping activity among senior citizens. Only 7.8% of people age 55 and older said they had purchased jewelry in the first half of 1998 – compared with 16.5% of 18-to-34-year-olds, 17.6% of people between ages 35 and 44, and 13.7% of those between 45 and 54.

The data supported the conclusions of WSL Strategic, a New York marketing consulting firm whose findings were reported in the August issue of JCK. That firm found that increased shopping among minorities and declines in shopping among senior citizens were skewing overall consumer spending data among all retail categories.

Of the more than 1,000 people surveyed by Chilton, nearly two-thirds spent less than $300 on their purchase.

Sticky-Fingered Sales Associates

The register’s stocked with cash. Your displays contain high-value merchandise. One out of four prospective salespeople feel they would be tempted to steal from you.

That’s the disturbing conclusion drawn by HReasy Inc., a Charlotte, N.C., firm that does pre-employment screening. The firm recently conducted a random sampling of 1,500 retail job applicants in which 25% of respondents said they were uncomfortable with the temptation of working around cash and valuable merchandise.

Other findings that eaise red flags:

  • 15% of applicants said there are times when it is acceptable to stray from company rules.

  • 22% said that an otherwise-good employee who steals less than $5 from a company should be given a second chance instead of being fired immediately.

  • 21% said a company should not terminate an employee who steals $1.

“These results point to a lenient attitude toward theft and other integrity issues among applicants,” says Rex Backes, an industrial psychologist with the firm. He recommends that employers screen prospective hires carefully, and, of course, maintain effective inventory, cash, and other controls.

How the Good Times Are Rolling

Consumer spending has been making healthy gains for years, and 1998 is already looking like another winner.

Spending in the first quarter jumped 6.1% over that during the final quarter of 1997, and second quarter spending should be 4% higher than the first, according to Michael P. Niemira of the Bank of Tokyo-Mitsubishi Ltd. in New York.

In that first quarter, Niemira reports that the biggest spending increase – 6.8% – was among the lower-middle income group and the smallest – 4.8% – was by the lowest-income group. In between: a 5.5% increase among the highest-income earners, a 6.4% increase among upper-middle income earners, and a 6.1% increase among middle-income earners.

Key Stats

59%: Of all gold jewelry sold in the United States is bought by women for themselves.

3.4 – Average number of pieces of gold jewelry purchased per year by a woman.

85% – Of consumers in United States say they have no knowledge of the daily market price of gold.

92% – Of women, who make the majority of gold jewelry purchases, know nothing about the daily market price of gold.

125,000 – Metric tons of gold in total world supply.

35,623 – Metric tons of that supply are held by central banks around the world, according to International Monetary Fund estimates.

2,400 – Metric tons of gold are mined each year.

2.4% – Annual growth in number of households with credit cards between 1992 and 1995 (nearly twice the growth rate of the number of all households).

9.6% – Growth in the average credit card balance during that period (compared with a 4.9% annual increase in household income during that time).

3.7% – Of a household’s total indebtedness came from credit card debt in 1995 – up from 2.3% in 1989.

7.1% – Current unemployment rate among those who did not finish high school.

1.9% – Unemployment rate among college graduates.

13,291 and 13,581; 9,143 and 60,320 – Number of U.S. banks and branch offices, respectively, in 1997.

SOURCES

(Numbers represent order of data presented)

1,2,3,4, Gold Acquisition Study 1997 conducted by Research International for World Gold Council; 5,6,7, Federal Reserve Bank of Cleveland; 8,9,10,11,12, Federal Reserve Bank of St. Louis; 13,14, Federal Reserve Bank of New York.

Gem Pricing Update from the Guide

Market in brief: Aug. 1, 1998 … Tanzanite prices remain in disarray as the cleanup of the tanzanite mine disaster continues. Some dealers are predicting price increases of 30%. Others are being watchful, realizing that the price will still be determined by supply and demand.

Last month we reported that big diamonds were in demand. Sizes of 2 cts. up to 5 cts. have been strong. De Beers’ Central Selling Organisation responded to the shortage and increased the last sight allocation of large rough. Also of note is that premiums on boxes are returning, showing a boost in confidence and perhaps paving the way for a price increase. Although prices have fluctuated slightly, the last official hike by De Beers was in July 1996. With the Asian economic crisis, De Beers has been reluctant to raise prices.

Diamond: 1/4-carat round

VS1 VS2 SI1 SI2
G $1,500 $1,375 $1,125 $1,000
H $1,400 $1,250 $1,050 $925
I $1,150 $1,025 $950 $875
J $1,000 $900 $875 $775

Diamond: 1/2-carat round

VS1 VS2 SI1 SI2
G $3,400 $3,000 $2,500 $2,100
H $3,000 $2,700 $2,400 $2,000
I $2,500 $2,300 $2,100 $1,900
J $2,200 $2,000 $1,800 $1,600

Diamond: 3/4-carat round

VS1 VS2 SI1 SI2
G $3,800 $3,600 $3,300 $2,900
H $3,650 $3,450 $3,100 $2,800
I $3,200 $3,100 $2,900 $2,600
J $2,900 $2,700 $2,550 $2,400

Diamond: 1-carat round

VS1 VS2 SI1 SI2
G $5,500 $5,200 $4,700 $4,000
H $5,100 $4,900 $4,500 $3,900
I $4,600 $4,500 $4,100 $3,600
J $4,200 $3,900 $3,700 $3,300

Ruby

Good Fine
1 to under 1 1/2 cts. $500-1,800 $1,800-$2,900
1 1/2 to under 2 cts. $700-$2,000 $2,000-$3,100

Emerald

Good Fine
1 to under 1 1/2 cts. $350-$750 $750-$1,900
1 1/2 to under 2 cts. $400-$900 $900-$2,500

Sapphire

Good Fine
1 to under 1 1/2 cts. $300-$800 $800-$1,800
1 1/2 to under 2 cts. $300-$900 $900-$2,150

Amethyst

Good Fine
1 to under 3 cts. $3-$7 $7-$16
3 to under 5 cts. $4-$9 $9-$18

Aquamarine

Good Fine
1 to under 3 cts. $25-$75 $75-$190
3 to under 5 cts. $50-$150 $150-$275

Rhodolite

Good Fine
1 to under 3 cts. $10-$20 $20-$30
3 to under 5 cts. $20-$30 $30-$45

Tanzanite

Good Fine
1 to under 2 cts. $45-$150 $150-$225
2 to under 3 cts. $60-$175 $175-$275

Tsavorite

Good Fine
1 to under 2 cts. $300-$600 $600-$900
2 to under 3 cts. $500-$900 $900-$1,500

Cultured pearls, 16-in. strands

Good Fine
5 1/2mm-6 mm $200-$350 $350-$550
6 mm-6 1/2 mm $250-$450 $450-$725

Prices shown represent actual wholesale memorandum prices paid by retail jewelers on a per-stone basis. All prices are per carat except for cultured pearls, which are per strand. No responsibility or liability is assumed for the consequences of the use of any information in this report, nor for errors or omissions.

A one-year subscription to The Guide includes six diamond issues (bimonthly), six newsletters (bimonthly), two colored stone issues including pearls, opals and jade (biannual) and The Guide Reference Manual. For more information, contact Gemworld International Inc., 650 Dundee Rd., Suite 465, Northbrook, IL 60062; (888) GEMGUIDE or (847) 564-0555, fax (847) 564-0557. U.S., Canada, Mexico, $180 complete per year. Elsewhere $250 complete per year.