The U.S. diamond wholesale market is experiencing a mixed situation. While retail demand has remained steady in recent months, with July showing an 8.5% year-over-year growth in consumer sales of natural diamond jewelry and loose diamonds, dealers report a slowdown in purchasing by retailers compared to recent years.
The underlying cause of this contradiction seems to be a shift in the way retailers are approaching their diamond procurement strategies. Due to falling prices, many jewelers are hesitant to stock diamonds, fearing that their value will decrease in a few months. As a result, retailers are aiming to minimize risk, and the memo (consignment) system is becoming more prevalent.
David Bonaparte, CEO of the Jewelers of America (JA), explained that the disparity between steady consumer demand and cautious dealer sentiment stems from retailers' current inventory levels.
From the retail perspective, high-end luxury stores have seen stable diamond sales, while companies that rely on larger sales volumes are struggling. However, as Bonaparte noted, "New York dealers are quiet now, and I think that’s because retailers are currently well-stocked. My sense is that while [consumer] sales are strong, buying is slower now due to inventory levels. But this is common in the summer."
Data from RapNet shows a slight increase in diamond inventory within the U.S. market over the summer. The number of round diamonds available in the U.S. (by selected sizes) rose from approximately 21,200 on March 1 to about 28,000 on September 1, reflecting a 32% increase (see Figure 1).
However, this increase is smaller than in India, where diamond inventories surged from around 60,000 on March 1 to nearly 160,000 on September 1. This surge is a result of Indian factories ramping up production following last year's voluntary freeze on rough diamond imports, which led to an oversupply. The percentage gap in inventory levels between the two countries has reached its highest point in two years. The U.S. trade has healthier inventory levels compared to India, allowing dealers to be more selective about the goods they stock.
Opportunities for Buying
Despite concerns over inventory movement, Andrew Rickard, Vice President of Operations at RDI Diamonds in Rochester, NY, sees current low price levels as an opportunity for buyers to acquire diamonds directly.
“We are seeing retail buyers coming in looking for deals,” he commented. He noted that demand is particularly focused on 1- to 4-carat, F to J color, VS1 to SI2 clarity diamonds in round, oval, radiant, cushion, and marquise cuts. Rickard warned that retailers relying solely on an order-when-needed strategy might miss out on sales opportunities.
“Those who prefer to hold more inventory, rather than only ordering diamonds as needed, are benefiting from this strategy," he added. "They are capitalizing on the market's softness by purchasing best-selling items at lower prices."
Nilesh Sheth, president of Nice Diamonds, a polished diamond supplier in New York, mentioned that while diamond sales have picked up since the slow summer period, they remain below last year's levels. “Retailers are cautious when placing inventory orders,” he said. “They rely on quick, overnight delivery when they need something.”
The general consensus is that even though purchasing is slow now, the situation is expected to improve by the fourth quarter as the holiday season approaches.
“No matter how you look at the current market, Christmas is coming,” Rickard from RDI asserted. “There will be a busy season regardless. Those who are better prepared will be in a stronger position to take advantage of the surge in demand they’re likely to experience.”
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