The recession is affecting many people in the US as well as people
globally in the supporting industries as reported in an article in
the Washington Post today - Saturday - entitled “The Jewel Trade’s
Fading Luster.” I hope you are all staying financially healthy and
will ride out the storm safely
The Jewel Trade’s Fading Luster
Americans Are Buying Less Bling, and the Effects Cross the Globe
By V. Dion Haynes and Rama Lakshmi
Washington Post Staff Writers
Saturday, March 28, 2009;
Last fall, recession-wary Americans more concerned about basics
than bling began to lose interest in diamonds and other jewelry,
and now the sales slump is reverberating around the world.
Retailers are taking a big hit. Tiffany said Monday that its
profit dropped more than 75 percent in the fourth quarter. Lynn
Jewelers, a downtown Washington presence since 1946, closed its
doors last month. Christian Bernard Jewelers, a national chain
with several stores in the Washington area, has shut down, as
well. They are among 1,000-plus jewelers across the country to
go out of business in the past year.
In India, drought-ravaged villagers who found salvation in the
diamond-polishing factories of Gujarat have been let go in
recent weeks, and thousands are migrating home. And Botswana,
which depends on diamonds for more than 30 percent of its
economy, has put all four of the mines it operates with De Beers
Group on furlough.
Even the world’s wealthiest are feeling the effects. In a recent
television interview, Warren E. Buffett reported that his Dairy
Queen holdings were fine, unlike his jewelry interests, which
"just get killed."
Americans buy nearly half of the world’s polished diamonds, and
when they pull back, it’s noticed.
The market for jewelry slowed in September, when credit markets
tightened after the collapses of Lehman Brothers and American
International Group. Sales showed little sign of recovery, even
through the typically bustling Christmas season and Valentine’s
Day. And there are no signs of a resurgence anytime soon.
Ask Hala Meiser of Fairfax, who was relaxing with a friend at
Tysons Galleria in McLean on Monday. Meiser, a retired teacher,
said her mother gave her a sizable cash gift last month to
splurge on jewelry.
“There are more significant things” to buy than jewelry, said
Meiser, who used the gift for something more practical – a new
tile floor for her kitchen.
Jewelry “sales were down 10 to 20 percent last year – I can’t
imagine they won’t be again this year,” said Dione Kenyon,
president of the Jewelers Board of Trade, a credit-reporting
agency for the industry. “I hear people say, ‘Oh, things will
[improve] and go back to the old days.’ You don’t go back to the
old days – there is a new order.”
About 60 percent of diamonds cut and polished in the western
Indian state of Gujarat are sold to the United States, and the
region accounts for about 72 percent of the international
processed-diamond industry.
Plants are being shuttered, and perhaps thousands of people are
losing their jobs. The 50-year-old industry is in the midst of
crisis after three decades of soaring business that provided
work for about 1 million people, mostly poor migrants fleeing
drought-ruined farms. They earned about $130 a month polishing
diamonds, nearly four times what many made as farm laborers. The
Indian media has recently reported a few suicides because of
joblessness and debt.
“About half our business units have shut down, and many workers
have either gone back to their villages or not returned from
their vacation last October,” said Champakbhai P. Vanani,
president of the Surat Diamond Association. He said about 50
percent of the total workforce in the local diamond industry is
now jobless, though officials said workers float between
companies, making it difficult to give exact figures.
“Ours is a $15 billion industry,” Vanani said. “But right now,
only 15 percent of diamond cutting and polishing work is going
on.”
Government officials tried to prevent the closures. “We
requested the owners to keep their businesses open for the
benefit of the workers. But they don’t listen. What can they
do?” said Rajnikant Patel, labor secretary in the Gujarat
government. “They are in a crisis; their business is down.”
In Botswana, Debswana Diamond, a joint partnership between De
Beers and the federal government, last month imposed a 50-day
"pause" on production there, temporarily closing three mines
until mid-April. A fourth mine will remain shuttered
indefinitely. The company produces 22 percent of the world’s
diamonds.
The slowdown comes a year after De Beers invested $83 million in
a cutting and polishing facility, an effort aimed at putting
more people to work.
“Clearly, reduced production means reduced [number of] diamonds
going into those factories that were newly established,” said De
Beers spokesman David Prager in a phone interview from London.
He added that the company believes that demand for diamonds will
resume, eventually outpacing supply.
Prager said a joint venture between De Beers and Namibia is
planning a similar furlough on operations there. Like their
counterparts in Botswana, the workers in Namibia will be paid
during the pause, he said.
Still, Botswana’s new president, Ian Khama, said in recent media
reports that the nation faces a deficit and will have to dip
into its reserves and borrow to make up for lost revenue from
the diamond mines.
When workers lose their jobs in India’s polishing plants or are
furloughed from Botswana’s diamond mines, the consequences
ripple outward.
The cobblers, restaurants and others supporting them suffer,
said Russell Shor, senior analyst for the Gemological Institute
of America. Closing the mines “has a devastating effect on
surrounding businesses.”
Last year, 1,137 jewelry businesses closed in the United States,
while bankruptcy filings rose 18.5 percent, according to the
Jewelers Board of Trade. Nearly a third of the closures occurred
toward the end of the year, after a disappointing holiday
season. December jewelry sales for non-anchor tenants in U.S.
shopping malls were $718 million, down 20 percent from the
previous December, according to the International Council of
Shopping Centers. Earlier this month, Tiffany announced that it
was closing its 16-store Iridesse pearl chain.
“In order to keep a business thriving, you need people to spend
money,” said Mitchell Engle, who managed Lynn Jewelers and
worked with his brother and mother. Engle said he plans to
establish a new operation specializing in customized jewelry and
online sales because the traditional jewelry-store model – with
high rent and hundreds of slow-selling expensive products on
display – doesn’t work in a contracting economy. “It’s harder
to get loans to maintain the level of inventory we’d like to
get.”
The wedding market has been a bright spot for many jewelers.
Officials at Mervis Diamond Importers, which operates four
stores in the Washington area, said sales of engagement and
wedding rings are strong.
Until business picks up, many retailers are trying to make do by
tapping into growth from another recession-related phenomenon:
Customers, taking advantage of rising gold prices, are selling
their used jewelry.
Justin Carmody, co-owner of Diamond Exchange USA in Rockville,
said just-because purchases of bracelets and necklaces have
nearly dried up. People are buying smaller, less extravagant
engagement rings. But the store’s used-gold buying is up
fourfold.
“We’ve pursued that out of a need,” he said.
Correspondent Lakshmi reported from New Delhi.