After A Disappointing Vegas, Indians Look For Salvation At Home

There’s considerable despondency in the Indian gem and jewellery industry after the recently concluded JCK Las Vegas show. Not surprising considering the trends that have emerged from the show. You can read our correspondent’s report here. It’s the same old story. The high end seems to be holding up well despite the economic downturn in the US. Everything else is in trouble.

There’s greater focus now on the upcoming India International Jewellery Show (IIJS), which will run from August 7^th to the 11^th. If anything can be salvaged from the situation, it can only be done in the domestic market. Meanwhile, the government has announced that inflation in India is running at 8.1%. Jewellery manufacturers I spoke to pegged it much higher – in double digits. High inflation is not good news to anyone. It’s disastrous for the luxury industry…

 

Inflation Spoiling The Party In Emerging Markets

This is the big news – and the big worry – in India right now. While the economy has grown at 9 per cent over the past year, inflation is today, raging at 8.1 per cent. Worse, the government concedes it can’t do very much to contain it as it is riding on the back of a consistent rise in global commodity prices.

So while the Indian gem and jewellery export production industry is looking at the domestic market to make up for what it has lost in the way of a market in the United States, global forces have barged in to shatter even those fond hopes.

While there is a substantial Indian contingent at the JCK Vegas show, many say they don’t really have high expectations of the US market and that if a rescue package is going to be formulated, it will have to involve the emerging markets, primarily the Middle East, India and China. The Middle East is still buying strongly, buoyed by high oil prices, but China is also waging a battle against inflation that threatens to run away out of control if tough measures aren’t taken. The Middle East is buying primarily high end goods and even with its strong showing, can’t begin to make up the sales numbers that are needed to shore up the industry. This is going to be a long, tough year for the global gem and jewellery industry…

 

Remember The Diamond Crash of ’82? Look At What’s Happening Today

The huge increases in diamond prices on the Rapaport list is, as the company itself states, not an indication of actual prices but a reflection of the premiums being asked for large goods. The fact is, given the financial turmoil in world markets, large diamonds have distinctly moved out of the sphere of adornment, fashion and romance and into the investor’s portfolio.

This is scary because it only indicates the rush to ’safe haven’ investments all over as energy prices and stock markets fluctuate madly. It does NOT indicate any long-term sustainable demand for these diamonds. These high prices can only exist in these turbulent times. These diamonds won’t appreciate the way they are now when things settle. In fact, when world economies begin climbing back up, there’s going to be a flood of these diamonds coming back onto the market as investors dump them for better prospects. It happened before with catastrophic results. For those of you who don’t know about or don’t remember the diamond crash of ‘82, you can catch up on it here.

Meanwhile, the ‘commercial diamond’ category, which comprises smaller, lower colour and clarity goods, seems headed for battering as demand from the US, the market that soaked them up in huge quantities, continues to fade rapidly. So the ‘bread and butter’ part of the business too is in trouble.

Put everything together and take a good look around at what’s happening in the industry.

 

 

India & The UAE To The Diamond Industry’s Rescue? Better Wait & Watch

Belgiums diamond export statistics reflect the growth in emerging markets while demand from the US fades. It doesn’t come as a surprise to many in the industry that India and the United Arab Emirates are the two biggest polished diamond export destinations for Belgium – actually bringing about a growth in exports. Yippee! So we needn’t worry about the downturn in the US! Or should we?

I would advise caution. Both these markets put together can’t even begin to take up the slack left by the US. Also, given that much of India’s prosperity comes from the export of goods and services to the US, a slowdown in that market is going to have an impact on the Indian economy no matter what the economic pundits say about ‘decoupling’.

Right now, the Indian diamond industry doesn’t have much happening in the way of production. Movement in the market seems to be mainly for better goods in all sizes. This means that even the domestic market is opting for the larger stones, better colours and clarities. The lower colours and purities are languishing in safes. The lower colours and purities also make up the bulk of the diamonds processed in India in terms of the numbers of pieces. They are what keep employment high. If they continue to remain unsold…

 

While The World Heads For Safe Haven, Indians Turn Away From Gold

Whether it’s the high prices or the availability of many other investment avenues that come without any price volatility, something has turned Indians away from being the sure-shot consumers of gold who set the global price with their almost insatiable demand. Today, the price of gold is being determined more by safe-haven investment demand from the US and other developed markets – and is actually inversely related to demand from India.

The Indian festival of Akshaya Tritya was, until five years ago, pretty obscure and restricted only to two states — Tamil Nadu in the south and Maharashtra in the west. But the Indian bullion and jewellery industry realized its huge potential as a sales driver as one of the core beliefs in the festival is that it is auspicious for the buying of gold. With the help of the World Gold Council, a great deal of promotion and publicity turned the festival into a countrywide phenomenon that could be relied on to produce a spike in gold sales. There was talk of it rivaling Diwali as the gold and jewellery sales driver in the Indian calendar.

 

Great New Blog From An Industry Veteran

I’m really happy that my old friend Mark Boston, chairman of H. Goldie & Company, a De Beers Diamond Trading Company broking firm, has decided to start a blog. Mark is the man who introduced De Beers to India  and its potential as a diamond processing centre. Read his first post here. It’s utterly candid and written with a veteran’s perspective of the diamond business.

Good luck with the blog Mark!

 

Big & Beautiful Won’t Save The Diamond Industry

It is great to read that despite the subprime crisis and looming recession in the US as well as the negative impact of it all on other markets, diamond prices have been holding their own. Check out this report. This is what the mining companies like De Beers, Rio Tinto and BHP Billiton tout when they face investors and industry analysts.

The problem is, this only refers to the large, good colour and clarity stones. Every other category of diamond is struggling with nosediving sales in the US and almost nowhere else to go. These other categories constitute some 85% of all diamonds sold.

The mining companies will make a pretty packet because of the huge premiums the big and beautiful stones command. Very, very few in the diamond processing pipeline will however, get to see these stones. The rest have to do what they can to keep their heads above water. China, India, the Middle East and even Russia are showing sharply increased – and steadily increasing – diamond consumption patterns. But all of them put together can’t take up the slack left by a sagging US market. And as consumers in these markets get ever more affluent, they too want the big and beautiful…

 

Mounting Pawnbroker Inventories Will Hit Jewellery Production

With the global jewellery industry already struggling to stem the large sales losses brought about by the economic slowdown in the US – a market that consumes fully half of all the jewellery manufactured in the world – this report about mounting jewellery sales to pawnbrokers is really bad news.

What it means in effect is that firstly, the US consumer doesn’t think jewellery is something worth holding on to in tough times. Something that doesn’t bode well for the future, as the competition for a share of consumers’ discretionary spend becomes even more fierce with other luxury products barging in with large promotion budgets and innovative sales pitches.

Secondly, pawnbrokers’ inventories swelling daily and few if any attempts at redemption, there is an increasing supply of readymade jewellery now available to the consumer at attractive prices.

As though the situation wasn’t already tough enough for jewellery manufacturers and retailers…

 

Diamond Brands May Devalue Beneficiation

De Beers has announced the schedule for the staggered worldwide launch its proprietary Forevermark branded diamonds. ‘Launch’ is something of a misnomer, as these goods have been available to consumers in various parts of the world, including India, for some time now. The fact is, De Beers was only testing the waters until now. With the enthusiastic response it has received from consumers everywhere, the Forevermark is guaranteed a great formal launch.

What’s significant about theForevermark, though, is that it signals the beginning of something really new for diamonds – and the beginning of the end of an old idea.

What most people – including many in the diamond industry – don’t realise is that diamonds don’t have any value of themselves. De Beers created that value with its umbrella advertising. Diamonds as a whole became a brand, the symbol of the special relationship between men and women. Since De Beers controlled almost all the world’s gem diamonds back then, this was just fine.

Now, under 40% of the world’s diamonds pass through the De Beers system. De Beers has, naturally, lost interest in promoting the generic diamond brand. The Forevermark is its game plan for the future, building value for only those diamonds it controls.

 

$300,000 Watch That Doesn’t Tell Time – An Example For The Jewellery Industry

This is where the jewellery industry should be heading! Check out this report on the $300,000 watch that doesn’t tell the time! The string of comments also makes great reading! While I laughed at the whole thing, I was struck by the fact that a watchmaker had taken away the basic utility that makes us call the thing a watch and still sold it at this astronomical price. What the watchmaker did was to create a piece of jewellery with no utility value (unless you think a $300K gadget that tells you whether it is day or night does have utility value!). The term ‘watch’ in this case, is merely a categorization of the piece of jewellery – the way we distinguish pendants, rings, bracelets etc.

I strongly recommend that jewellery companies start hiring marketing crew from the big brand watch companies. Those guys seem to know what the game is all about.