Las Vegas 2015: Selective Demand Buoys a Slow Season

The 2015 JCK Las Vegas show was deemed a success by an industry that needed some good news after very disappointing sales in Hong Kong and Basel. Photo by Russell Shor/GIA
The 2015 JCK Las Vegas show was deemed a success by an industry that needed some good news after very disappointing sales in Hong Kong and Basel. Photo by Russell Shor/GIA
Business at the 2015 JCK Show in Las Vegas was good if you had exactly the right goods at the right price. Whether it was diamonds, colored stones or designer jewelry, buyers − which included major retailers, jewelry manufacturers and other dealers − came with very specific wants in mind and stuck to them. The show was deemed a success by an industry that needed some good news after very disappointing sales in Hong Kong and Basel.

Exhibitors at the accompanying Couture and Luxury shows generally outperform the other sections of the show and this year was no exception. One reason is that their retail clients – generally higher-end independents – have a strong base of return customers who collect pieces by many of these designers, so in a sense, their business is built-in.

Designer jewelry sold well throughout all of the shows if it had a high-end, one-of-a-kind look. At Couture, the pieces tended toward understated luxury with an emphasis on design instead of high gem content. The jewels tended to be showier at the Luxury show; designers favored frilly, curvy lines and lots of small gemstones set to create a larger look, such as blossom motifs with a lot of negative space, which made it possible for them to use less metal. In the sub-$1,000 market, bold, colorful looks were in; designers employed lower-priced color gems and beads like citrine and blue topaz and even non-gem material set into 14k gold or vermeil.

Diamond demand centered on excellent cut and medium-quality one- to two-carat stones. There was some demand for larger diamonds, but buyers were extremely selective. While buyers did roam the JCK show’s diamond pavilion and Luxury area, there were simply too few of them – the high U.S. dollar kept most Asians and Europeans away – to satisfy all of the exhibitors.

“People were buying just what they needed for the immediate future,” said one exhibitor who noted that buyers were also holding out in hopes that polished prices would decline over the summer.

Retailers have been very cautious about sales prospects for the second half of the year because jewelry demand has been slowing despite the improving economy and employment market in the U.S. In addition, banks have curtailed many of the generous memo programs that had made it possible for retailers to order large numbers of diamonds without payment due until the beginning of the following year.

Banks blame memo programs for some of the cash flow difficulties the industry is facing today and, quite often, the goods end up in dispute if the retailer or dealer files for bankruptcy.

Colored stone demand was equally selective.

A number of exhibitors at the American Gem Trade Association show that ran concurrently with JCK said the industry was still trying to come to grips with the decline of the Chinese market. Prices had soared for ruby and sapphire during the past five years, they explained, because Chinese dealers often outbid western dealers for the top goods – and even medium qualities. Now, the Chinese are not buying at the same level or are making lowball offers. Most of the major primary dealers in gem centers, however, are still holding out for those high prices. Many dealers and buyers believe prices are too high and this has brought much of the trade to a standstill and sent buyers searching for substitutes.

Buyers at the AGTA show were looking for red spinel as a much more affordable substitute for ruby and tsavorite as a substitute for emerald. Sellers of beads and lower-priced gems generally did well as retailers strove to keep prices affordable for their middle- and lower-market customers.

The JCK Show also hosted De Beers’ CEO Philippe Mellier who, in an address, acknowledged the diamond industry’s current difficulties, but said the long-term prospects would see solid growth, particularly in the U.S.

“No one gets the glamor of diamonds quite like the American consumer,” Mellier said, adding that its share of market was again increasing against newer markets like China and India.

An increase in the number of affluent U.S households (earning over $100,000 yearly), along with tourists from newer markets like China, will drive the growth of U.S. diamond jewelry sales.

Mellier noted that diamond mine production will begin to decline at the end of the decade and that, while De Beers is taking measures to lengthen the life of its resources, there are few promising finds on the horizon – only 60 out of 7,000 known kimberlites have been economically viable to mine.

Financial transparency and responsible sourcing are growing in importance, the first to regulators, the second to millennial consumers, while consumer confidence remains an on-going concern as treatments proliferate and synthetics enter the market, Mellier told the audience.

By the show’s closing, business proved strong enough to sustain diamond and gemstone dealers and offer a sense that the fall quarter may bring an upturn.

Russell Shor is senior industry analyst at GIA in Carlsbad.