The rising price of gold and the falling price of lab-grown diamonds are key issues for the jewelry industry this year, said panelists during a session titled “360-Degree View of 2024: Industry Market Outlook, Expert Insights, and Business Opportunities,” held April 15 at the American Gem Society Conclave in Austin, Texas.
After soaring during the COVID-19 pandemic, jewelry sales are back to normal, said Chris Casey, managing partner of Tenoris, which tallies point-of-sale data from retailers.
“The COVID boom ended in April 2022,” he said. “It’s incredible how similar the first quarter of 2024 is to last year’s first quarter. We have reached the end of the turmoil of COVID and hit a point of stasis in the industry.”
While the industry’s no longer on a COVID-fueled roller coaster, it still faces challenges—including the big increases in the gold price.
“Consumers don’t care about the price of gold,” said Larry Rickert, owner of Jim Kryshak Jewelers in Wausau, Wis. “But jewelers do. I would say to manufacturers, ‘Be careful with your prices.’
“On any product we buy, the elements that make it up are a small part of the cost. The overhead is not the corn in the cornflakes. It’s the marketing, the distribution, the production. We as an industry don’t look at it that way. Jewelers know too much.
“But customers aren’t going to spend $3,000 for an item that used to be $2,000. They have a budget. We sometimes have to forget how the sausage is made.”
Casey said that “platinum is having a moment,” in part because of concerns about the cost of gold.
“[Platinum] had a great fourth quarter,” he said. “They had a good first quarter this year. It’s off a very small base, but it’s meaningful, and it’s obviously completely tied to the gold price.”
Falling lab-grown diamond prices, however, are a “ticking time bomb” for the industry, said Casey.
“Our view is there is a bubble that is going to burst,” he said. “For March 2022 to March 2024, [lab-grown diamonds] were a great deal for retailers. They kept on getting [higher] margins. But costs kept going down, and as a result the average sales price is going down and down. The result of that is your gross profit dollars have declined 27% on an incredibly important piece of jewelry in two years.
“And the trend line says that’s not going to change. Those gross profit dollars matter because that’s money in your pocket. We’re all making less and less money on each and every item that we sell.”
Moderator Erich Jacobs, president of the Jewelers Board of Trade, said he’s seen an “explosion” in lab-grown companies, but many of them have already gone out of business.
“Some of them have been taking advantage of our collection services, and pulling the trigger at collections at 91 days [post-due],” he said. “We don’t know if they’re worried of the declining value of the industry, or if they just need cash.”
As far as a possible pivot back to natural diamonds, Casey said the data isn’t showing any evidence of that yet.
“That’s just spin at this point,” he said. “There’s nothing validating that’s really happening. Loose diamond natural sales were down 6.3% in units for the first quarter, and 10% in the first quarter.”
But he said natural diamonds could claim higher price points, which no longer work for lab-growns.
“The retail price point of engagement rings from $5,000 to $7,500 has kind of been abandoned. There’s no lab-grown ring that’s the right size anymore, so you’re selling this big 7 ct. lab-grown to get in that price range. So natural [diamonds have] the opportunity to backfill the retreat in different retail price points. From $5,000 to $7,500 is empty now, and $2,500 to $5,000 is becoming that way.”
That shift is “not happening yet,” he added. “That’s something that the retailers want to happen, the miners want to happen, and it makes sense for it to happen. It will get there, but not yet.”
Jacobs said that evidence from past cases of industry disrupters shows that the “lab-grown boom will probably break. But the bad news is, there’s still pain ahead” for natural diamonds.
Rickert said jewelers have to look at “margins and business” differently.
“[Everyone is] having rising costs. They are sneaky in a lot of cases. It could be anything from staffing or shipping. All these things are pulling at your businesses.”
He said retaining good employees remains a challenge.
“Finding competent people is okay. Getting them to stay is harder,” said Rickert. “It’s almost like you have to keep your staff entertained and engaged for their own good, as well as the good of the customers. Sometimes they just leave because they find something more fun. It just seems really hard to keep younger people engaged.”
The writer also participated in the panel.
(Photo: Getty Images)
Follow JCK on Instagram: @jckmagazineFollow JCK on Twitter: @jckmagazine
Follow JCK on Facebook: @jckmagazine
