Jewelers agree: Affluent customers are spending again. But could problems in the equity markets scare them away?

Last April, Jay Mednikow began noticing something he hadn’t seen in a while: wealthy customers.

“We started getting high-end sales on a regular basis, very much how it was before the recession,” says the owner of Mednikow Jewelers in Memphis, Tenn. “We would get one here, one there, and it really helped. It was a real distinct change.”

In fact, Mednikow’s sales of more expensive items have been so strong that he now plans to promote them. “For the past few years, I have been advertising price-point pieces and putting forth the image that we are approachable,” he says. “I’m going to keep doing that. But I am also going to feature the high-end pieces we have avoided because we didn’t want to project that image.”

“I think that the wealthy got hurt during the recession like everybody else,” Mednikow adds. “But they still have the money to spend. And we are finally starting to see the result of all that pent-up demand.”

Beryl and tsavorite earrings; $13,260; Mednikow Jewelers, Memphis, Tenn.

Mednikow’s story is not unique. While the economy has limped along for the last four years, there has been one undeniable bright spot: the luxury sector.

Ritzy retailers like Harry Winston are posting strong results, and upscale department stores—­particularly Neiman Marcus, Nordstrom, and Saks—are outpacing mass-market retailers like Wal-Mart and Kohl’s. The MasterCard Advisors SpendingPulse Luxury Index jumped 11.6 percent year on year in July 2011—its largest increase since April 2010 and its 10th straight month of growth. “Many stores are stocking up on luxury items as shoppers flock to racks of expensive goods,” wrote The New York Times on Aug. 3.

“The 20 percent of households with the highest incomes are shopping more often and spending more,” said Kathy Tesija, Target’s executive vice president of merchandising, during the chain’s Aug. 17 conference call. “The other 80 percent have been cutting trips and spending less.”

New York City retail analyst Howard Davidowitz agrees: “The wealthy have gotten tremendously richer over the last two years. In the Trump Tower, they are buying $10 million apartments like it’s nothing.”

Luxury jewelers tell JCK they have seen big spenders coming back to their counters—but with the stock market plunging at press time, a few said they were concerned about the future.

At Lawrenceville, N.J.–based Hamilton ­Jewelers, president Hank Siegel has noticed an uptick in wealthy clients over the past 12 months. “We found interest in fine items from $20,000 up,” he says. “Better timepieces had a bit of a resurgence.”

Private Reserve emerald and diamond necklace; $35,000; Hamilton Jewelers, Lawrenceville, N.J.	Roberto Coin Fantasia Collection diamond bangle in 18k white gold; $32,600; Hamilton Jewelers, Lawrenceville, N.J.

Though the bridal and watch categories remain strong, he can’t pinpoint any one item as a big seller. “It is a little of everything and a lot of nothing,” ­Siegel says. “It used to be, when planning, we could pretty much call our business within a few percentage points. But today, we have no idea. It could be an important emerald one day, and something else the other. The consumer is extremely fickle.”

And the economy remains a huge concern. “Most of the clients who fall into the affluent category are businesspeople,” he continues. “They think, when you have a problem, you deal with it; you don’t fool around. So when Washington started to delay raising the debt ceiling, they just didn’t understand it.”

Alan Friedland, co-owner of Ream Jewelers in Lancaster, Pa., was a little more sanguine about problems in the financial sector. “If you have money in the market, you don’t panic. The market goes up, the market goes down. I don’t think that impacts us,” he says.

Topkapi necklace in platinum with 3.06 cts. t.w. diamonds, 2.35 ct. tanzanite center stone, and 680 cts. t.w. tanzanite beads by Gumuchian; $80,000; Ream Jewelers, Lancaster, Pa.

“I’m looking forward to a good Christmas,” he adds. “This isn’t five years ago, but the clientele that we cater to is starting to come in.”

Located in Amish country—“It’s not uncommon to see a horse and buggy parked next to a Mercedes at the local Costco,” he says—Ream caters to a ­conservative clientele that favors non-flashy looks. The store sells mostly diamond jewelry, particularly studs, as well as color and “rare, one-of-a-kind pieces.”

“People here don’t really flaunt,” Friedland says, and, perhaps, for that reason, never wrestle with embarrassment about their purchases. “Someone bought a real big diamond this morning,” he says, “and they didn’t feel funny about it at all.”

Conversely, Randy Cooper, owner of Randy Cooper Fine Jewelry in Wichita, Kan., believes her clientele had become skittish about flashing their wealth. “I think the affluent always had money, but when it was really bad [during the recession], they didn’t want to wear their diamonds and gold watches,” she says. “But last Christmas, they said, ‘Forget it; we’ll just do what we want to do with our money.’”

Cooper does think consumers still feel some vestiges of “luxury shame,” because today they are buying more understated jewels. “The market started designing for the recession,” she says. “They pared down gold to make it a little more delicate. It’s not a heavy look.”

Even though upscale customers began returning to her store last year, Cooper says business remains uneven. (Among her biggest brands: Rolex, Roberto Coin, and Marco Bicego.) “Our numbers are ahead of last year’s, but then you look at how bad the numbers were last year,” she says. “You think, if we weren’t ahead, we’d probably be broke.”

By contrast, Ellen Lacy, owner of Lacy and Co. in El Paso, Texas, happily reports her business is up, but it has been for years; her store is located close to Mexico, so it brings in well-heeled clients from both countries.

Her clients tend to crave unique items. “We have a lot of self-purchasers, and the beauty of a self-­purchaser is they are not getting anyone’s permission,” she says. “They don’t care if they spend $10,000 or $20,000.”

The key to drawing affluent consumers, Lacy feels, is personal contact. “We advertise a lot, but what really works are things like phone calls,” she says. “Our salespeople will call and say, ‘We have such-and-such in, and we only have one.’ That makes all the difference.”

She says the stock market’s problems haven’t hurt her store—with one exception. “Men are a little more cautious, and we have seen a drop-off in watch sales,” Lacy says. “That could be a function of the economy. A lot of wealthy people are highly invested in the market. My husband talks about it every day.”

Meanwhile, Al Molina, owner of Molina Fine Jewelers in Phoenix, thinks Wall Street’s woes could work in the industry’s favor, since jewelry retains its value better than other products. “Everyone is looking for capital preservation tools,” he says. “The high-end consumers have buckets of cash they’re just sitting on.”

Molina recalls having lunch with a group of Bernard Madoff’s former clients who lost millions with the convicted Ponzi schemer. “They were all having a serious attitude adjustment,” he says. “They told me, ‘We have a new philosophy of investing: If we can’t see it, we can’t touch it, we don’t want it.’ There is a lot to be said about something you can keep in your hand.”

“Our product is currency today,” Molina says. “It is ­portable and it is an asset which is appreciating.”

More on luxury on JCKonline.com:
+ How to Bring in Luxury Shoppers—and Keep Them Happy
+ What Upscale Buyers Want for the Holiday
+ A View From the Top