Can U.S. Jewelry Manufacturers Survive?


How are the customer support services that manufacturers provide retailers changing?

Matt Runci With reduction in support services from trade groups, including the Diamond Promotion Service, World Gold Council, and Platinum Guild International, manufacturers will play an increasingly important role in providing much-needed services—like co-op ads, marketing support, and sales training—to independent jewelers.

Torry Hoover At Hoover & Strong, we have the Hoover Family Advantage program that gives jewelers many perks, including expedited shipping, getting special product without extra charges, and becoming an authorized Harmony Metals supplier. Our Harmony brand of recycled precious metals gives them more than just jewelry to sell and helps differentiate them.

Daniel Kirchner Manufacturers need to anticipate last-minute orders. Offering just-in-time delivery will remain critical to the success of retailers and manufacturers.

Matt Stuller U.S. manufacturers must be more customer-friendly, in making jewelry exactly how independent retailers want. Unique quality of stones, karat and color of metal, and styling will be important, as will timely delivery. Independent retailers need to develop niche businesses unique from others, so aligning with domestic manufacturers who can quickly and easily supply pieces for that will be very important.

What’s the single biggest issue or problem between U.S. jewelry manufacturers and retail jewelers?

Phyllis Bergman Credit. Most manufacturers borrow from banks and at the same time extend credit to retailers. But there’s no money in the pipeline now in this industry. Another big problem for manufacturers is the expenses of selling, in terms of travel and trade shows.

Kirchner Reduced inventory levels throughout the industry, due to various factors, especially lack of credit available to manufacturers. As an industry, we all became too focused on terms rather than product and too comfortable with easy credit. Now that’s disappeared. To prosper, both retailers and manufacturers will need to control their inventory levels and finance them from their own operations.

Curtis Ley Independent jewelers now require faster delivery, place last-minute orders, and generally aren’t committed to buying inventory. They rely on manufacturers to protect them in the changing market by holding their inventory, and at higher levels, but that’s becoming difficult for manufacturers because of excessive carrying costs. You used to lease gold at 1.5 percent to 2 percent. In the past year, it went to 8 percent, and, led by banks, probably will go higher. So, there has to be a sharing of risk by both retailers and manufacturers.

Frank Fiasconaro Substantially reduced volume at the retail level. Gold’s price tripled in the last four years, while demand has dropped substantially for gold jewelry. Add an unhealthy dose of recession/depression, and the trickle now in volume can’t sustain manufacturing.

Mel Anda Lack of support for jewelers. To make money today, retailers need quick and quality service. Otherwise, you’re not supporting them.

What one or two changes do you expect in how U.S. jewelry manufacturers and jewelers do business with each other?

Bruce Pucciarello There will be fewer but better retailers who’ll communicate directly with those making their product. So, paying a percentage of a sale to a rep, supplying a sales line, and insuring it will be unnecessary expenses for a U.S. manufacturer.

Hoover Retailers will rely much more on vendors for merchandising, inventory, branding, and marketing support.

Anda The Internet is the major change in how they’ll do business. It saves a lot of time, letting the retailer concentrate on customers, rather than phoning the manufacturer. Of course, manufacturers must daily check those e-mails and swiftly send orders.

Ley It’s the Internet’s influence on business, plus manufacturers and retailers sharing the risk and responsibility for inventory. There must be more partnership at the retailer/manufacturer level.


How are the credit and banking crises affecting U.S jewelry manufacturers?

Bergman They’ll be serious issues for the coming years. Available cash will be king. Securing loans will be difficult, repaying loans even more so.

Pucciarello More than ever, a company’s ability to flourish will relate to its financial strength. We’re entering a time when liquidity is power.

Hoover The crises very much affect the jewelry industry, because it’s so capital-intensive. It costs money to maintain inventories of precious metals or diamonds. Highly leveraged companies will struggle or close.

Anda It has a major effect and will for the next couple years. It isn’t easy to get credit, even for those who pay on time. Banks always considered the jewelry business a risk, and more so now. They’ll be more cautious lending, though banks are partners with your company. So, keep good financial records and update your banker often about your plans and financial situation.

Stuller It’s a new game. Bankers are eliminating risky loans. Only strong players can borrow, and there are few of them. Retailers who relied on memo goods, credit terms, or liberal returns can no longer expect manufacturers to offer those and be their banker.

Pat Javaheri Banks are cutting credit lines in half or even taking them away, making it very hard for U.S. manufacturers to produce or purchase goods. Losing the flexibility of always available funds has taken a toll on almost everybody and caused a chain reaction in being paid late, or not at all, by clients.

Kirchner There’s tremendous uncertainty throughout the financial system. Everyone in our industry with a line of credit or bank loan to operate their business will experience intense scrutiny, even top companies.

Ley Availability of credit, banks’ reluctance to issue credit, and the cost of leasing metal—these financial considerations will drive further consolidation in the industry and create opportunities for those seeking to acquire companies. Certainly, the relationship between manufacturers, banks, and other lenders is under stress. Jewelry manufacturing isn’t known for high profitability, and that’s aggravated by stress in the marketplace, unwillingness of retailers to buy, and reluctance of banks to raise—or even maintain—levels of lending. It all makes it harder for manufacturers to carry inventory to service customers. Something has to give. Usually, that’s pricing.

How is the price of gold and other metals and gems affecting U.S. jewelry manufacturers?

Bergman It’s increased the need for just-in-time manufacturing. Inventory reduction is a prerequisite now to do business, and prices must change according to the metal’s fluctuation.

Ley The main impact is on the cost of buying and leasing gold. It’s a liquidity issue. The cost to manufacturers of carrying inventory is increasing, and if these leasing prices prevail, that cost must be passed along the distribution chain.

Stuller The roller-coaster ride of all commodity metals, diamonds, and gemstones has created an interesting phenomenon. Manufacturers worldwide can’t take the chance of buying raw materials and gems when prices are high, or the U.S. dollar cheap, and selling them when prices fall. So, they’re forced to carry no inventory and buy materials only when orders are placed, to ensure current market billing.

Fiasconaro High gold price dictates higher labor costs and reduced volume levels, because gold is falling off consumers’ radar screen. An identical pair of gold earrings a consumer bought four years ago for $99 now retails for $299, but the consumer has less discretionary dollars than four years ago. How can a retailer sell those earrings? So, without needed volume from retail orders and reorders to maintain business, U.S. jewelry manufacturing will keep evaporating.

Kirchner Many retailers have reduced open-to-buy orders, which slows everything else upstream. Manufacturers have to adjust their organizations’ size to match that of incoming orders.

Javaheri The price of gold and the diamond increase has made it very difficult to produce price-point items for U.S. chain stores. Still, I feel metals’ and diamond prices will come down in the next couple of years, making it easier to produce more affordable product for the consumer.

Speaking of gold, what’s the biggest supply issue facing U.S. jewelry manufacturers in the next couple of years?

Runci U.S. jewelry manufacturers must closely examine their supply chains to ensure metals, precious gems, diamonds, and other materials are socially, ethically, and environmentally sourced. Consumers are demanding more accountability and transparency. So, jewelry manufacturers must stay up-to-date on issues that can impact consumer confidence, with regard to the supply chain, including conflict diamonds, Burmese gems, responsible gold, and importing irradiated gemstones.

Hoover Raw materials. Jewelry relies heavily on materials from the earth, and jewelers understand they must be good stewards. That’s why our Harmony Metals and Gems are so popular. Jewelers and consumers know recycled metals save 20 tons of ore per ounce of metal.

Stuller Another issue is large fluctuations of material costs.

Fiasconaro And another problem is fewer raw material fabricators, who control the supply and cost to the market. That’s not healthy.

Kirchner The challenge is managing the peaks and valleys of demand while providing stable employment to long-term, highly skilled employees.


What’s the single biggest challenge facing U.S. jewelry manufacturers in the next few years?

Pucciarello Learning not to resist necessary change. Manufacturers must adjust their technology and electronic commerce systems to the new economy.

Ley Financing and distribution of inventory.

Fiasconaro Doing enough volume to survive.

Stuller It’s retailers not supporting us.

Kirchner The biggest is overcoming uncertainty in the marketplace by offering products and services retailers can’t live without. Some in our industry have figured out how to create this relationship with retail partners and end consumers. The rest will work diligently to become more important to theirs.

Javaheri Survival!

Any final thoughts?

Ley There’s the diminishing number of people with necessary skills to maintain the U.S. jewelry manufacturing industry—like jewelry makers, stone setters, tool designers, or chain machine mechanics. Young people aren’t coming into jewelry making, and people today stay at a company only a few years before moving on. So, it’s very difficult for manufacturers to maintain a base of people with necessary skills. Overall, I think change is healthy and good. I just regret change is resulting in a dramatic decrease in what was a vibrant industry.

Bergman We’re a very dressed-down society today; demand for jewelry has declined. Women are more interested in self-improvement and don’t have time or money to keep changing their jewelry. And, the financial crisis has put a dent in everyone’s pocketbook for some time to come. To appeal to this new generation, we must market our wares differently, and our retail stores must change dramatically.