Diamonds sales down, right?
4.5 k views | By Naomi Levin
Perhaps someone forgot to tell to tell all those young couples about the global financial crisis. NAOMI LEVIN reports on the buoyant sales of engagement rings.
Trends come and go but the appeal of the diamond endures above all other gemstones. The buoyant sales of engagement rings even in times of downturn remain testament to that. It seems somebody forgot to tell all those young couples out there about the global financial crisis, and men are continuing to propose as normal.
This should mean that retailers with the right pieces for the right prices will have no shortage of customers. But what’s that we hear? Sales figures are down? While it’s true that there has been some softening of diamond jewellery retail in recent months, there is doubt as to whether this is actually because of fewer sales or a lower average sale price.
“The figure that gets bandied around is 20 per cent,” Rami Baron, president of the Diamond Dealers Club of Australia (DDCA), says of the drop in sales figures since the downturn, before adding, “I don’t think it necessarily means people are doing fewer sales; I think that what they are doing is selling less expensive items and the average figure is 20 per cent, that is 20 per cent on the bottom line.”
To illustrate his point, Baron says a soon-to-wed couple would have previously spent $5,000 on an engagement ring; however, in these past few months, they may prefer to spend $4,000.
“The predominance of diamond sales is always done through the engagement ring market. Of all the jewellery markets, engagement rings tend to be the most resilient,” he says.
Kathryn Wyatt, public relations officer for the Gemmological Association of Australia (GAA) and a jeweller herself, believes those who have a loyal customer-base have been rewarded in lean times, and this trend will continue.
“People are still spending for birthdays and anniversaries,” Wyatt says, conceding though, that she is probably selling a few more coloured gemstones than before, because customers are after the stone size without having to fork-out too much money for a large diamond.
The story is not as good around the world. Diamond bourses in other countries have resorted to serious measures in an attempt to boost sales. In Thailand, the Bangkok Diamonds and Precious Stones Exchange launched a trade drive aimed at the Russian market.
While in China, the diamond market has been boosted by the government’s stimulus package, which promoted domestic consumption. As with other industries, the key to future diamond sales in China is to create domestic demand among that country’s burgeoning middle class.
Nevertheless, at June’s Diamond Town Hall Meeting, organised by the Antwerp Diamond Centre, De Beers managing director Gareth Penny told audience members that demand for rough diamonds is picking-up around the globe, and encouraging an increase in production.
“De Beers’ production is increasing to keep pace with demand. Retail sales have also shown an improvement,” Penny said in Belgium. He added that he expects Christmas 2009 to be better than Christmas 2008.
Olivar Musson is the general manager of highly-reputable, family business Musson Jewellers in Sydney. He is also a spokesperson for the Diamond Guild of Australia and he has a couple of picks for upcoming diamond trends.
For the bride-to-be, Musson believes the classic round brilliant solitaire ring is making-way for multiple diamond settings.
“Three-stone diamond rings and innovative clusters are now the hot picks,” he says, also flagging unique, single and twin-row eternities as hot trends. “This may be a result of the current economic climate, or simply the fact that Australians like constant innovation.”
Jaclyn Schoenmaker, jewellery manager at Queensland supplier, Bolton Gems agrees: “Although classically simple designs will forever be popular, it is clear there has been a shift towards multi-stone, intricate styles,” she says. “The ‘bling factor’ is clearly a dominant choice for women in today’s society.”
For older customers, Musson believes that coloured diamonds are all the rage.
“Usually they have had their classic, white diamond rings,” he says. “Now they want something their friends can’t or don’t have.”
Having a pink diamond these days is an investment, Musson adds: “They are buying these not only to satisfy their lust for beauty, but to buy into a Picasso-like investment. Buying an Argyle pink today is like buying a Picasso in 1975 – wouldn’t it be nice to own one today?”
Schoenmaker, on the other hand, believes older customers go one of two ways – some will follow the trends, while other, more conservative customers will simply stick to the safe side and “go with what they know”.
Trends, she says, depend on a number of factors. These include fashion; what celebrities are wearing; and the colours of the moment. The availability of computer-assisted design (CAD), however, means the sky is the limit in terms of new diamond jewellery designs.
“Consumers have so much more scope in designing their jewellery,” Schoenmaker says. “To be able to create a life-like image of a design, straight from the imagination leaves the world of jewellery design wide-open.”
Musson believes Australian jewellers are among the world’s most creative, but are hampered by a smaller market.
“In boom times, we are confident and go out on limbs and it pays off,” he says. “In tough times, we crawl back in our shells and put out classic jewellery, thinking we are being safe.”
It’s an industry strategy Musson believes is poor, considering how crucial innovation is to capturing the interest of the consumer.
Musson is involved with the Diamond Guild of Australia-Harper’s Bazaar Design Awards for 2009. The finalists were announced in September and their pieces on display at the International Jewellery Fair (IJF), Sydney. Winners of will be revealed this month.
He compares the annual awards to Formula One motor racing in that it shows the real achievements of the industry. This year, he had high hopes for entrants and was pleasantly surprised with the calibre of the designs.
“I saw a lot more movement in sculpted pieces and innovative setting techniques,” he says. “Elements of the more outrageous designs filter down into pieces we wear every day.”
Despite not seeing a huge downturn among diamond sales, industry insiders have plenty of tips to build up bottom lines. Baron from the DDCA has two recommendations: retailers should use the internet more and should stop worrying about others are doing.
“The web is another tool and we’ve seen that the most successful diamond retailers are actually the ones that don’t sell exclusively through the web, but use the web to bring people into their environment,” Baron says.
He cites Diamond Exchange (www.diamondexchange.com.au) as a good example of this. Established in 2000 and based in Australia – with showrooms in Sydney, Melbourne and Brisbane – Diamond Exchange has a comprehensive website offering a large range of diamonds at a lower rate.
“If you jump on the web, the merchant will ask, ‘Do you want to come and see the stone?’,” Baron describes. “I truly believe that this will always be the way the majority of diamond sales, are made. No matter how big the web gets; no matter how strong the web gets.”
The other advantage for diamond wholesalers and retailers who use the web is its marketing value – surveys and market research have suggested up to 80 per cent of consumers buying a substantial stone will have done research on the net beforehand.
Baron also recommends retailers stop “whinging” when their wholesaler sells diamonds direct to the public.
“What do they expect when they owe their wholesaler a significant sum of money, which they ask for extended periods of time to pay and someone is referred to them who wants a diamond, who knocks on their door and puts money on the table?” he asks. “Why are they so shocked and surprised?”
It is an issue that president Avi Paz addressed in a recent World Federation of Diamond Bourses newsletter.
“For the first time in many years, we have a golden chance of correcting two standard operating procedures in our industry, which individually have placed a tremendous burden on our members and together have had a devastating effect on profitability,” Paz writes. “I am referring to memo sales and the practice of extending inordinately lengthy payment terms to our clients.”
Memo sales, he writes, have become the norm, rather than the exception, with around 50 per cent of polished diamonds imported into the US, eventually returned to suppliers unsold.
Wyatt from the GAA has a slightly different take on how to make the most of troubled times: “When the going gets tough, the tough get educated,” she says.
The GAA offers a number of beginners and advanced courses on gem and diamond theory and grading and Wyatt believes the more educated retailers are, the better customers will respond. She says other jewellers who have completed the courses have reported back to her the benefits of training-up to “stand out from the crowd”.
And like Musson, the American Diamond Promotion Service (www.dps.org) has been encouraging innovation as a way of boosting sales with a website that offers comprehensive advice on how to market diamond “right-hand rings”. It recommends ways to encourage couples to purchase diamonds to celebrate wedding anniversaries, and it has plenty of tips on how to get the most out of each sale, including advice on increasing spend on engagement rings.
There may be a downturn, but the advice from those in the diamond industry is to stay positive, train-up, invest in good business practice, innovate, and give the customers what they want. Follow this and, come Christmas, the downturn could be a distant memory.
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Posted October 01, 2009