Industry forecast 2009: Diamonds
Author:bea Date:2/20/2009 12:18:29 AM Read:9522
There is both good news and bad news for retailers looking to dazzle with diamonds in 2009.
The good news: The supply pipeline is stuffed with goods, and industry experts say that retail jewelers should have no problem laying their hands on diamond jewelry and loose diamonds of all sizes.
The bad news: The worldwide financial crisis will continue to shake out weaker players all along the pipeline, including producers, manufacturers and retailers.
Retailers who had the fortitude to make it through 2008 will have to work harder this year to convince consumers--even the more high-end shoppers--to part with their dollars and buy diamonds.
Although the financial climate heading into 2009 is a unique one, industry analyst Ben Janowski says the diamond game at retail hasnt changed much: Retailers should limit their debt, stock diamond jewelry at price points that will attract wallet-conscious consumers and promote diamonds through special events.
"Retailers need to make sure that theyve got a good diversity of products in the more attainable price levels," he says. "People will be buying, but people will be aiming lower."
Rough and tumble
Charles Wyndham, the co-founder of WWW International Diamond Consultants and founder of PolishedPrices.com, says 2009 will continue to be a rocky road for rough prices--which plummeted in late 2008 amid the global financial meltdown and subsequent liquidity crunch. He predicts that polished prices will remain flat throughout 2009, with the first signs of recovery not expected until 2010.
That said, Wyndham points out that diamond industry prognostication is difficult given the markets volatility.
"It has been quite a roller coaster, but so far, only on the down side," he says. "We must remember that roller coasters also go up and, until summer, were going up at a ridiculous rate."
Wyndham says while diamonds as a commodity have held up fairly well as compared with other commodities, drooping consumer confidence has hurt demand worldwide.
"Recovery will depend on when the economy picks up and this regenerates consumer confidence," he says.
Similarly, Janowski says it is difficult to say what will happen to diamond supply in 2009 because certain factors, like the fate of ABN Amro bank, the diamond industrys major lender, remain up in the air.
At press time, ABN Amro bank and its parent company, Fortis, were under the control of the Dutch government after a bailout attributed to Fortis financial struggles stemming from the purchase of ABN Amro in 2007. Janowski says if ABN Amro disappears from the scene, the supply pipeline will tighten up.
However, experts anticipate that jewelers will not have any problems obtaining diamonds in all sizes this year, including the larger stones that were in short supply in 2008.
Janowski says plummeting prices for large diamonds will prompt some who had been holding onto the stones to sell.
"The idea is to turn," he says. "Sitting on merchandise just doesnt do it."
At the end of 2008, De Beers surprised with a last-minute holiday push promoting diamonds as an "icon of enduring value" in uncertain times.
This is the message that will carry into 2009, based on recent research indicating that 80 percent of consumers who had been planning to make diamond jewelry purchases were sticking with their plans, despite the economy, according to Diamond Promotion Service Director Claudia Rose.
Plus, Rose can sum up what those diamond jewelry stalwarts are after in three words: "diamond stud earrings."
Studs are a quintessential part of any diamond jewelry wardrobe and can be passed down through generations without losing their value, she says.
"As the economy has gotten more and more depressed, people are looking for purchases they are confident will hold their value," Rose says. "I think [diamond stud earrings] are the most timeless piece of all."
Greg Kwiat, chief financial officer for Kwiat Diamonds, also sees the coming year as one in which consumers will be sticking with classic diamond jewelry styles that offer "long-term enduring value."
He says high-fashion diamond jewelry will be susceptible to a slowdown in sales.
Kwiat, whose company opened its first flagship boutique in 2008 on Madison Avenue in New York, says hot sellers will include stud earrings, straight-line diamond necklaces and tennis bracelets.
"That is what will get consumers comfortable with spending money in this environment," he says. "Customers that are spending [money] on high-fashion pieces might fear that theres a possibility that they will become dated. People are looking for a lot of longtime value in their purchasing."
Diamond points for 2009
--Price/supply: Prices for rough diamonds are expected to continue to plummet, while polished will flatline in 2009. Supply wont be a problem for retailers.
--Marketing message: Heading into the new year, De Beers plans to continue emphasizing diamonds as a store of value, a mantra that many in the industry have echoed.
--Merchandise mix: Retailers say diamond stud earrings, simple necklaces and classic bracelets will move in a tough economy, as consumers seek out items they believe will hold their value.