Year Of Uncertainty

By: George Holmes

First reports from jewelers about December business were mixed. Some did very well; some did poorly. Those in between had a ho-hum sort of season. In general, the real winners were stores that concentrate on the upper end of the market.

The jewelry consensus reflects that of retailing as a whole; it wasn’t a great season. There were some fairly obvious reasons. Continuing, ruthless corporate layoffs have scared even those with secure jobs, while playing havoc with the lives and fortunes of thousands of typical jewelry-store customers. Consumer debt is high. And a rebellious Congress, out to have its will at any apparent cost, threw the whole process of government into disarray.

Given this combination of circumstances, it’s not surprising that the U.S. citizenry is in a troubled, almost fearful, mood. Such a mood spells caution in most things, especially in spending on non-essentials such as jewelry. How corporations and the government conduct their business in the coming months will dictate whether or not that mood lightens. Both certainly should act to achieve that end. Not to do so would seem suicidal when you consider that consumer spending is the chief component of the GNP.

The U.S. is not alone with this problem of uncertainty. A recent Far Eastern visit made it very clear that many nations are suffering from a sense of economic uneasiness. Consumers are wary and, as a result, manufacturers are worried. These concerns affect many businesses, jewelry among them.

Just a year ago, for example, consumer demand in the major Chinese coastal cities was booming. Stores were jammed and everything from gold jewelry to hi-fi sets seemed to fly out the doors. But high demand came hand-in-hand with high inflation – an annual rate approaching 30% in such cities as Shanghai and Guangzhou. To control runaway prices, the government clamped down on easy credit which put a damper on consumer spending. Jewelry is a prime victim.

The jailing in December of civil rights activist Wei Jingsheng for alleged treason has raised the possibility of a new U.S.-Chinese rift, another blow to business confidence.

The jewelry industry is challenged by different issues in Thailand. Slackening overseas demand, particularly from the U.S., has forced cut backs in production and local industry leaders are talking about a “repositioning” of their strategies. This likely will result in a new stress on manufacturing for the high-volume, low-end market where price is more important than quality. Those who have dedicated much of their efforts in recent years to upgrading their products are discouraged by this trend.

Other countries are preoccupied with yet other issues. In India, the diamond people fear that world markets are over-saturated with the small stones in which Bombay specializes. They also worry that they’re seen as the diamond world’s Rodney Dangerfield, the people who get no respect, especially from De Beers.

Elsewhere the issues are political. Those who trade in and with Myanmar are delighted that this closed market has been opening up, but late last year a sudden deterioration in the government’s attitude to its chief opposition leader, Aung San Suu Kyi, created a quick chill. Out of the blue, she was branded a “traitor” – an ugly charge that carried unspoken threats.

Politics likewise are souring business activity in Hong Kong. Belligerent talk by the Chinese in advance of their takeover in mid-1997 is unsettling residents who fear their personal and business freedoms will be sharply curtailed.

But the Asian news is not all discouraging. China’s economic engine may be slowing down, but it’s still moving at a brisk pace. The Thais and Indians expect foreign demand for their products to improve and they’re also counting on quickly-developing middle classes of their own to become important jewelry buyers. And the political threats in Myanmar and Hong Kong still are just that, threats. Pragmatic businesspeople, a majority, figure they’ll go on making money no matter who’s running the government.

Just as the Asian news has its good side, so does the American. This remains a very rich country whose people are well able to shop in jewelry stores. The challenge is finding how to tempt them to do just that; it’s called skillful merchandising. The key is a determination to make the most of what looks like an uncertain business year. The rewards are available to all jewelers. When you look elsewhere in the world you realize that the potential for success is greater in the United States than in almost any other market.