Diamond Market Trends

Due to the acquisition of gold jewelry manufacturers - Ber-Oro International and Aurafin LLC, Buffet’s Berkshire Hathaway Inc. is becoming the largest jewelry supplier to the American market. 

Both companies will be merged under the auspices of Richline Group which will continue promoting jewelries under their previous brands and this will enable it to reduce operational and management expenses. 

Berkshire Hathaway Inc. owns such brands as Ben Bridge Jeweler, Borsheims Fine Jewelry and Helzberg Diamonds.

The hit of this year according to most experts, retailers and jewelers is fantasy diamonds and color precious stones. There is both an active supply and a stable demand for such products. Experts emphasize that color precious stones of this year are larger and have more unique cutting and ouch design than before. American retailers regard the new trend as a future season mainstream.      

Undoubtedly, jewelers have exerted every effort to attract attention to color stones. The International Association for Color Precious Stones specialized in their active promotion has also played its role. On May, 22 the Association declared winners of the fourth annual advertising bills contest dedicated to precious stones. The winner was Ekaterina Sverdlova from Russia. The first prize of $1,500 was awarded for a poster “GO COLOR” with a picture of fruits and semi- precious stones. The Association for Natural Color Diamonds which includes nearly 80 manufacturers and trade organizations promotes color diamonds.     

However, both Associations state that in this case the trend partly outstripped the supply. Based on the American market research, the Association for Natural Color Diamonds links the supply growth for natural color diamonds with a general propensity of consumers for all natural things.

Large retailers like Blue Nile developed special marketing strategies for realizing color diamonds and claim that anybody now can buy a stone he/she wishes and which he/she can afford. However, according to the Association for Natural Color Diamonds these stones though so expensive by reason of their rarity have greatly grown in price. 

Retailers and market exports foresee that wrist jewelries will be in the focus of attention during the spring and summer season. Especially there is an increasing demand for bracelets in the form of interconnected hoops.     

Thin bracelets made of amber gold remain a popular jewelry for a daily life and jewelries encrusted by diamonds have become a fashionable tendency for social events and night parties. 

The situation in the jewelry market (retail sales), especially in American is controlled by a number of factors, the most important of which is an unprecedented price for gasoline and week dollar.  

This however will not lead to the decline in the jewelry demand. On the contrary compared to 2006 experts point out the demand growth for gold jewelries. James Burton, head of the World Gold Counsel stated that the performance in the first quarter of 2007 was optimistic: “After the price instability of 2006 the more stable beginning of 2007 has stimulated sales of jewelries and this lives up to our expectations”. Experts emphasize that the current price level for gold is positively perceived by buyers.                    

According to the recent research of Gold Field Mineral Services (GFMS) consulting company the consumption of gold jewelries grew by 17% in the first quarter of 2007 in terms of weight and by 38% in value terms against the similar period of last year. The research conducted for the World Gold Counsel also showed that the gold consumption has doubled over the last 4 years reaching $17.4 billion. Gold supply went down by 2% in the first quarter.

The research suggests the demand growth for gold jewelries in most of the largest markets in the second quarter of 2007.

The American super-rich having properties worth more than $10 million do not fear an economic slowdown and intend to increase their expenditures by 55% this summer compared to 2005. According to the poll carried out together with Elite Traveler and Prince & Associates money will be primarily spent on high end watches, design clothes, accessories and electronics.

The Poll covering 198 families with a high standard of living carried out in early May showed that 73% of responders will spend on average $94,000 on luxury watches or jewelries.

Based on results of the poll of the 2007 Luxury Brand Status Index (LBSI) carried out by the New York Luxury Institute, Bergdorf Goodman was recognized as the most prestigious retail brand. 1,500 people with an average income of  $319,000 and worth $3 million.

As far as the middle class is concerned it restructures its expenses. According to the poll carried out by the American National Retail Federation due to unprecedented prices for gasoline 40% of consumers do less  shopping. Meanwhile Internet sales are expected to grow by 18% in 2007 compared to 2006. 

It concerns among other things jewelry sales. 96% of female American who visited Internet last year made at least one purchase on-line, ShopSmart reports. In general, according to the poll, women do not snend on Internet-shopping more than $400, but 15% of women say that they spent more than $1,000 for one purchase on-line. It means that this category of consumers is potentially ready to buy on-line jewelries at an average price level.

According to the latest report “Internet–trade in the USA: five-year forecast and brief survey” prepared by Forrester Research Inc “Sales doubling is expected in the jewelry class from $4 billion in 2006 up to $8.5 billion in 2011 which will be equal to 14% of all Internet trade”. Jewelry companies and retailers have to take into account this trend.  

From the other side professional jewelry organizations maintain and actively lobby a bill for fair and simplified taxation on trade submitted to the USA Senate. Provided that it is adopted Internet shops may loose a considerable part of their preferences over retailers.

At present, Internet is primarily a means of jewelry sales, but its potential for advertising and PR possibilities apparently over time will be actively explored by jewelry companies and trade because, as polls show in the USA, people at the age of 18-34 are more sensitive to advertising in Internet than consumers generally. The advertising industry and public relations experts pay attention to a growing popularity of such a form of mass media as Internet blogs; however their efficiency as a means of creating an information flow has not been properly investigated yet. 

Besides the American market, Chinese and Indian jewelry markets also merited mass media’s attention in May-June.

In the largest gold consumer market – Indian, the demand for gold jewelries grew by 50% in the first quarter of 2007 compared to the similar period of 2006. 

Indian jewelers showed noticeable international activity. Gitanjali Gems announced the purchase of Samuels, New York jewelry brand for $100 million and conducts negotiations with some other international jewelry and watch brands. Indian KGK Group will become a manufacturer of jewelries and high quality diamonds mounted in amber and white gold, platinum and palladium for Charles and Colvard.

The Indian Diamond and Colour Precious Stones Association (IDCA) has actively taken part in exhibition events in Las Vegas. It is worth mentioning that the next large jewelry exhibition of this year will be JCK New Delhi (June, 7-10).

The French brand of luxury jewelries (LVMH) intends to increase a number of its shops in India from 18 to 40 within three years. The company pays special attention to watch sales and intends to control up to 12% of the Indian market in the price segment from 1000 to 4000 euros.  

The Chinese market this year is especially attractive to experts and market participants as they point out a stable demand growth for jewelries in connection with the fact that this year by the Chinese calendar is the year of Golden Boar. Gold jewelry sales grew by 31% in the first quarter of 2007 in China against the similar period of last year.  

LJ International, Chinese Jewelry Company earned 40 million US dollars in the fourth quarter of 2006. The earnings per share reached $0.16 due to growing revenues of shops and the recognition of ENZO shop network brand by customers (including among other things a contract made last year for placing an ENZO logo on Ferrari racing cars). The all-year income was $123 million (34 cents per share) and exceeded the initial forecast of $115 million. 

According to the company at present it reaps the fruits of the Chinese economy’s prosperity and unless the plans for opening new shops fail and changes in retail trends occur, the company expects to achieve extremely successful results based on performance in 2007.   

The Chinese economic miracle and the stock exchange’s growth have resulted in appearance of “new Chinese”. By number of millionaires the county holds the sixth place in the world. An open demonstration of luxury is still not welcomed by the government which not without reason fears social frictions between the rich and the poor, but as it is said the process has already began.         

Its evidence is the holding for the first time of the Fair for millionaires in Shanghai (such fairs are held in Moscow) where a mobile phone encrusted by diamonds could be bought for $3.5 million or a Swiss gold music watch for more than two million US dollars.

 “The local rich are only getting to know about global trademarks”, fair organizers say, “but by 2015 China will be the second largest luxury consumer market in the world after the USA”.