Credit Crisis Effects on the Diamond Market
Let’s face it—with the collapse of the banks and continuing plummeting share prices in the US market, the general effect is an economic slowdown, which economists and authorities even compare to America’s Great Depression of the late 1920’s.Jewelers say this is a “Wall Street issue”, not a “Main Street issue”, giving a bit of hope that the holiday sales for jewelry are not too pessimistic, at least for the market for mid-to-high-end jewelry and diamonds. Business may slow down or may be bad—but it is not dead.
Problems the Jewelry and Diamond Industry Has to Reckon with
Here are some of the problems the industry has to reckon with: (i) price-points of diamonds are on the down trend, and customers spend less money on jewelry—they would rather buy the small sized-diamonds than the larger ones, that is, if they would ever buy at all; (ii) competition in the malls is so stiff because of the recent liquidation sales of jewelry chain stores like Whitehall. Some companies like Zales sold jewelry at huge discounts, making the customer look for the lowest prices possible when they buy; and (iii) a lot of jewelry stores in the Midwest and South of America are still closed as an aftermath of Hurricane Ike. It is still uncertain when they would re-open.
The retail trade for the American holiday normally begins in November in time for Thanksgiving. Jewelers should be able to display their jewelry and diamonds at the start of November, and go into full swing immediately after. But with no immediate solutions seen with the economic slowdown, manufacturers and retailers are taking a wait and see attitude, as in the past when the economy was not good. Some retailers on the other hand, see better business when the market slows down by borrowing goods for a slightly higher price instead of actually buying them.
Trends in the Diamond and Jewelry Market as Forecasted
High-end Market: A slight slowdown is being experienced and cutbacks are being made in the upscale consumer market because of the current financial crisis. The marked for these goods has peaked during the JCK-Vegas trade show in July when prices were driven up by speculators. Slowly, afterwards, the prices will steadily revert to comfortable levels.
Mid-range Market: A slowdown is also being experienced because of the overall situation of the economy, however, sales are still being
made, but at a more price-conscious level—there are still buyers, but the gross margins are affected. The market is expected to be weaker than this coming Christmas compared to the past, but not at catastrophic levels.
Low-end Market: It is quieter this time because the low-end consumers have as on option to replace diamonds with either inexpensive jewelry or non-jewelry as gift. With tight budgets, the low-end consumer is more bothered by the effects of the increased prices of oil, food, basic commodities, which all result to an increased cost of living.
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