As a bellwether for the U.S. jewelry market and global diamond industry, this year's Las Vegas shows met the trade's conservative expectations. While foot traffic and diamond trading were slightly slower than previous years, jewelry sales were resilient.
The good news is the U.S. continues to support the global industry. In fact, it's just about the only growth market at the moment. Less encouraging were the numerous factors that weighed on sentiment.
Conversations with diamond dealers and jewelers revealed concern about lagging demand for diamond jewelry, the rise of synthetics and the challenge of how to effectively market to millennials. Traders also recognized the impact a contentious U.S. presidential election might have on consumer confidence and economic stability.
Their concerns were reinforced by the disappointing U.S. job numbers in May, released just as the JCK Las Vegas booths opened for business on June 3. Subsequently, a relatively dovish speech from Federal Reserve chair Janet Yellen outlined a cautious economic outlook which, to the relief of diamond dealers, eased concerns of a potential interest-rate hike and the knock-on effect on the dollar.
"I expect similar slower growth for the rest of the year as we had in the first half," said Charlie Rosario, senior vice-president of Lazare Kaplan, a diamond manufacturer and high-end jewelry wholesaler. "As long as the Fed stays away from raising interest rates, we'll have a decent Christmas. A rate increase would add another level of uncertainty to the market."
Like Yellen, Rosario sees the current uncertainty as a remnant of the economic crisis in 2008-09 and part of the slow recovery the industry is still enduring. Most telling in that process is the consolidation taking place in the market -both among jewelers and diamantaires.
In the diamond hall, suppliers said they expected to see more companies exiting the industry, given their difficulty to make a profit. As one broker noted, "it's easy to make business, it's not so easy to make money." Yet, competition has become more intense as companies expand their reach along the pipeline, encroaching on space traditionally occupied by other stakeholders.
Increasingly, suppliers are competing with their clients, evidenced not only in the pavilions of the JCK show, but at all the major global trade shows. Lines demarcating the distribution chain are blurring as diamond suppliers expand into jewelry, miners offer branded products and retailers delve into production as part of a vertical integration aiming to improve margins.
There's also more competition in sourcing the right goods as demand has become specific for a narrower range of diamonds. Buyers visiting Vegas came with orders and precise requirements to fill. And, if a supplier didn't have a diamond with the exact cut, carat, color, and clarity they sought, they moved on.
Rosario observed jewelry retailers have become savvier in anticipating their requirements and assessing the availability of goods in the diamond market. And while consumers shift toward lower price-points and are more particular about what they want, retailers are managing with smaller stock. "They're not buying for [building up] inventory, but when they see an opportunity to buy in that bullseye of strong demand, they're very aggressive," Rosario said.
There are also fewer jewelers in the market as consolidation continues in the retail space. Some 1,114 jewelry businesses closed in 2015 across the U.S. and Canada, up 10 percent from the previous year, according to the Jewelers Board of Trade (JBT), and the group's newly appointed president Tony Capuano expects the trend will continue. However, in contrast to the diamond trade, Capuano explained the consolidation is being driven by business closures rather than bankruptcies as ageing jewelers are unable to recruit their children to continue the business.
That has left an industry of baby boomers scratching their heads on how to sell to millennials. And it showed in Las Vegas as exhibitors mulled how to stand out in the crowd, while seminar after seminar tackled what millennials want.
Tasked with leading the way, the Diamond Producers Association (DPA) unveiled its campaign slogan on the opening day of the show. While onlookers wowed the presentation, they were somewhat underwhelmed by the final tagline. "Real is Rare. Real is a Diamond" aims to tap into millennials' sense of individuality and their search for 'real' moments in a world where virtual communication has made such connections hard to come by.
The jury is still out whether the message will resonate with millennials in the same way the iconic "A Diamond is Forever" punchline has reverberated for generations before. Somehow, it doesn't roll-off-the-tongue in the same way and will take a substantial promotions budget -which it is still unclear the DPA has -to indelibly sink in.
As far as slogans go, Pandora's "Unique as We Are" fall collection seemed to capture exactly what millennials are about. Except, as the company's public relations officer pointed out, it's not referring to millennials who are unique, but women, and how women can use jewelry to express who they are. That's an interesting concept for the diamond industry to consider and an angle which, some noted, the DPA campaign is missing.
In a sense, the shows highlighted that diamond and jewelry companies should take that same message of uniqueness and individuality on board to deal with the challenges facing the market. Exhibitors were hoping their added value would not only distinguish them from the booth next door, but help them navigate the evolution in consumer taste and values, the threat from synthetics and a sluggish economic environment.
As Martin Rapaport, chairman of the Rapaport Group, concluded at the annual Rapaport Breakfast in Las Vegas, jewelers and diamantaires can transcend these challenges by understanding and celebrating their self-worth. "Who you are is an essential part of what you sell. Integrate who you are with what you sell and define your brand identity. Focus on yourself and your promise. Branding is about your values," Rapaport said.
The diamond industry left Las Vegas feeling confident the U.S. market is relatively healthy and stable, even if trading wasn't so great. More importantly, the shows highlighted the industry is grappling with its identity in a rapidly changing consumer and corporate landscape.
