Diamonds may be a girl’s best friend but unfortunately (for jewellery retailers) diamonds and other fine jewellery items are not one of life’s necessities for the great majority of the population.
Therefore, as we are all too well aware, diamond and jewellery sales are normally closely aligned to the economic cycle –hence when the economy booms so do jewellery sales and when the economy slows so too do jewellery sales.
However despite the recent downturn in the economy and talk about a looming recession, most Australian diamond wholesalers and retailers seem confidant that sales of the world’s most precious gems will not lose their sparkle – at the top end of the market at least.
While acknowledging the slowing economy’s negative impact on “entry level and middle level sales”, Musson argues that “people will always face adversity with celebration” and “will continue to have birthdays, engagements and anniversaries”.
“Retailers who have invested in premium larger diamonds will find there is growing demand for them,” he says. “The middle market in Australia will slow, but as always the top end seems to continue, reinforcing again that when troubled times threaten the intrinsic value of fine jewellery still appeals to investors.”
Nick Dracakis of Dracakis Jewellers in Brookvale, NSW, is another retailer convinced that diamonds will always be a girl’s best friend:
“Last year was our best ever in diamond sales with more sales of bigger and better diamonds,” he says. “I don’t think rising petrol prices and interest rates are affecting how much people spend on diamond rings as almost every girl has her heart set on a big diamond engagement ring.”
Nicholas Pike from Nicholas Pike Jewellers in Adelaide shares a similar sentiment.
“The diamond sales are constant in our store. Despite the general economic downturn people still want to buy the best diamond they can afford when they are purchasing an engagement ring. In fact today most of our customers choose a two carat diamond when buying an engagement ring – ten years ago most of them chose a one carat stone.”
Similarly Diana Thompson, part-owner of Briolette Jewellers, declares that sales have been “very strong” in the Canberra store in the last year.
She acknowledges that the rising cost of living is impacting to “varying degrees” on fine jewellery sales but says “customers at the top end still have money to spend”.
Travis Trewarne, the managing director of four Trewarne Fine Jewellers stores in Melbourne, has also experienced “strong growth” in diamond and diamond jewellery sales in recent months but is nonetheless worried about a sales downturn in the months ahead.
“We have noticed that the increase (in profits) is coming from increases in our average diamond sale and not from volume,” he says. “Whilst our volume is consistently decreasing our average sale is growing by a greater amount resulting in an overall increase.”
In the next 12 months Trewarne expects “special occasion purchases will remain solid” while “impulse and discretionary purchases will continue to dwindle as money becomes tighter for the bulk of our market”.
On the wholesaling side of the jewellery business, Teracast director Manish Agarwal and Miller Diamonds director Lonn Miller both report positive business growth in the last year as well as concern about slowing sales in the next.
Agarwal says rising interest rates and petrol prices etc have already resulted in a reduction in retail spending “right across the board” although top end jewellery customers seem to be maintaining their spending patterns.
“In the next 12 months I feel consumers will be looking for value,” he says. “They will shop around a lot more … There will always be demand for jewellery/engagement rings but they might downgrade to a smaller size.”
Miller agrees that demand in the mid- to lower-ends of the market has already begun to slow.
“We think this (slowing demand) will gain momentum over the next twelve months due to the nature of the economy,” he says “ …The top end will probably also slow a little”.
Whatever the impact of the slowing economy on total sales, Australian jewellery buyers are definitely choosing to buy the biggest and best quality stones their budgets can afford.
Rami Baron, the president of the Diamond Dealers Club of Australia, has observed an enormous increase in sales “of large high quality stones in all shapes and sizes”.
“The classic solitaire was (and still is) the number one seller,” he says, “but the major changes is the increasing use of parve to complement the solitaire as well as jewellery in general”.
Miller says his customers are also demanding “larger carat sizes, better colours and better clarities”
“Cut is also now on the consumer’s radar. We are experiencing very strong sales in our Passion8 branded diamonds and in our (well cut) diamonds in general.”
Agarwal’s customers are also are moving away “from lower colour goods to better white goods” and “50 point buyers are now one-carat buyers and sol on”.
“We feel that certification of all goods above 40pts is now imperative,” he says. “All my customers now prefer to buy independently certified goods.
Similarly Musson reports that increasing numbers of his customers want “high quality diamonds that are excellently cut”.
“Larger diamonds of lesser quality are becoming less popular as consumers realise size is not the most important aspect. Consumers are finding it’s far more embarrassing to have a friend say: “Why doesn’t your diamond sparkle?” compared to having a smaller diamond.
Dracakis is also a firm believer that the strongest trend in diamond and diamond jewellery sales is “people’s desire for a quality stone”.
“I have great success with ‘Hearts on Fire’ diamonds because people know they are not just good diamonds but the very best.”
“I honestly believe people need reassurance when making a diamond purchase – a brand like Hearts on Fire provides that reassurance.”
Diana Thompson is another retailer who believes that today’s “more savvy and knowledgeable customers” are demanding better quality diamonds.
“We sell ‘Hearts on Fire’ diamonds as these are the most perfectly cut diamond in the market place,” she says. “These diamonds sell themselves on their merits with a full margin and no discounts. If a customer truly wants the best they will pay for it.”
Pike agrees that customers want to buy “the best quality diamond they can afford” and want reassurance that “the stone is what it is supposed to be”.
However he doesn’t sell branded diamonds as “our company name is our brand and people trust our brand”.
Meanwhile Trewarne believes that the quality and size of the diamond has become more important than design in jewellery purchases – especially engagement rings.
“Classic solitaires set with exceptionally high quality diamonds of larger sizes are now our most popular engagement rings style,” he says.
A growing number of diamond dealers have set up websites selling direct to the public but most ‘bricks and mortar’ wholesaler and retailers remain relatively optimistic about the internet’s impact on their stores.
Miller concedes that wholesalers and retailers lose some sales to the internet but is certain there will always be a place for ‘bricks and mortar’ retailers.
“We believe the impact the internet has on sales is lower than the hype makes it out to be,” he says.
“A lot of the time the consumer seems to use the internet as a tool to negotiate lower prices with the retailer as a lot of the online merchants offer stock at almost wholesale prices.
“However a lot of retailers are now becoming aware of this and have developed the ability to defend their goods and their prices with better education and staff training. Afterall a person sitting behind a computer terminal cannot see the diamond and cannot therefore judge exactly whether they are getting value or not. A well trained salesperson has the chance to engage and instill trust in the consumer”
Agarwal also doesn’t view the internet as a major concern.
“As diamonds are an emotional/romantic purchase we feel people still prefer to have a look at what they are buying,” he says. “Diamonds are cheap on the internet for a reason.”
Musson acknowledges that the internet is a fantastic tool for consumers to learn about jewellery but believes the majority “still wish to deal with a jewellery brand that offers quality service and a quality product”.
“As ‘branded’ jewellers refuse to mount loose diamonds, loose internet diamond sales will become less attractive,” he says.
Dracakis also refuses to view the internet as a threat although more than 50 percent of his customers have done research online before entering his store.
“In the old days (15 years ago) they used to just come in and handpick what they wanted out of the front window. Now they come in with their research, they sit down, we show them some of the designs from the windows and then we do drawings etc to create their unique designs. They want a good price but they don’t want a bargain.
“Occasionally a potential customer compares my prices with online prices but I simply ask them “How can you pay $10,000 for a diamond you haven’t even seen?”
Nicholas Pike is also not worried about internet sales of diamonds as he knows his customers prefer to purchase person-to-person rather than online.
“How do they fall in love with a stone that’s online?’
Nonetheless he is happy to set a stone purchased online and does do so “every now and then”.
“As someone once said there is more to diamonds than just the four Cs – the 5th C is the setting. There’s no point in a beautiful stone unless it’s set beautifully in a beautiful design.”
According to Trewarne the internet is making a small impact on sales to customers “motivated solely on price”.
“If the customer values service, trust, warranty and quality then they still seem to buy from reputable jewellers,” he says.
“It seems that everyone knows of someone who has had a bad internet purchasing experience. This is resulting in a mistrust of the internet purchase, especially when big money is concerned.”
In contrast Baron believes diamond wholesalers and retailers need to embrace the internet to survive.
“The impact (of the internet) is obvious,” he says, “you either use the internet as part of your marketing mix or you will not be in business in the next five to ten years.
“The younger generation trusts the online retailer in many cases when they have the type of perceived back-up which a bricks and mortar store has.
“There is no doubt more and more will buy on the web. That being said there will always be a place for the traditional retailer as it is inarguable and in human nature we have those who are ‘touchy feely people’ and they will demand the personal interaction and service that only the face to face experience can give.”