The Wolf at the Door

Each June, this column looks back over the previous 12 months to see where the jewelry industry has been and tries to figure out where it’s headed.

Last year’s page summarized the 12 months between June 2005 and June 2006 as “interesting” times, and it’s safe to say that remains an accurate description. Last June, GIA was the favorite topic of conversation, and it still is. But last year’s gossip and speculation about what effect the grading scandal might have on the industry’s leading educational and research institution has largely been replaced by favorable reviews of its new president and what seem to be solid plans for its future.

Last June, the industry worried about potential damage from the impending release—scheduled for the Christmas selling season—of the movie Blood Diamond. (See Rob Bates’s exclusive interview with the movie’s director, Ed Zwick, on p. 204.)

It is often said that the anticipation of an event is far greater than the event itself, and in this case it certainly proved true. The film wasn’t especially popular with moviegoers, and it didn’t affect holiday jewelry sales to any measurable degree. What it did, however, was drive home the point that the need to address social issues isn’t going away, and that they can’t be addressed in a once-and-done fashion. The Kimberley Process is a good start where diamonds are concerned, but anyone who thinks that it solves the problem and the issue can be crossed off the to-do list is sorely mistaken. Whether it’s self-appointed, self-righteous nongovernmental organizations wagging fingers at the jewelry industry, or the governments of gem-rich countries asking (rightfully, in my opinion) mine owners to use some of their wealth to benefit the communities where the mines are located, the jewelry industry is in the social-issue spotlight. That spotlight will probably intensify as the scrutiny given to diamonds and, to some degree, gold, spreads to other gem materials, factory labor practices, environmental concerns, and so forth.

I’ve observed a general societal trend—at least among the educated, affluent shoppers this industry wants—toward more socially and environmentally responsible purchasing. Things like locally grown produce, organic baby food, and Fair Trade coffee are suddenly showing up in mainstream supermarkets, not just health-food stores. Crate & Barrel, the design-driven home furnishings store, just introduced a series of “green” furniture, made from sustainable woods and fibers. Product Red, an initiative across a broad spectrum of consumer goods categories including clothing (Gap), cellular telephones (Motorola RAZR), MP3 players (iPod), and others, aims to focus global awareness on the issue of AIDS in Africa. And the list goes on.

We as an industry need to become far more proactive about social responsibility. To date, we’ve been largely reactive, and I can’t help but wonder if we don’t spent a little too much time talking about what we need to do and not enough time diving in and doing it.

This year also has seen the bankruptcies of two major diamond firms, rumors of many more on shaky ground, and the announcement that ABN AMRO—one of the industry’s biggest and most historic lenders—is up for sale. At press time, the buyer was yet to be determined, but it’s a good bet that whoever it is won’t allow the companies in its lending portfolio to run their businesses as informally as many jewelry companies do.

Suppliers that can’t get financing can’t carry their customers, so it’s a good bet that everyone will have to get used to something the rest of the business world already knows: You have to pay your bills on time. “Net never” and memo as a primary means of getting inventory are not sound business practices for the long term, and I think companies that rely on both are in for a rude awakening. The industry will have to reinvent itself in a way that balances the entrepreneurial spirit that characterizes it with the more standardized, formalized business practices that today’s financial institutions demand.

Jewelry sales are still growing, slow and steady, which isn’t a bad thing. But they’re being surpassed by stellar growth in other luxury-goods categories, which means that something needs to change if we’re to keep pace. This column frequently addresses the need to balance tradition and change, how to preserve the principles that made the industry strong while updating old processes that threaten to hamstring it.

Is there really a wolf at the door? Absolutely! Is it going to eat alive whoever answers the knock? Not if we’re smart and look out the window first. But whatever this column reviews next year in June 2008, I’m sure it won’t be boring.