The online retail trade for jewelry has continually increased over the previous decade to a phenomenal figure of billions of dollars. It’s not that people around the world are buying more jewelry – it’s actually the opposite. The global economic slowdown has taken a big chunk out of our expendable income and the diamond and jewelry business was one of the first to feel it. It’s very simple. Looking for an engagement ring? Why bother driving out to the city center, search for parking, take time off work and of course – pay substantially more for your ring when you have it all under your fingertips?
What has happened to the traditional jewelry trade over the past 5 years? The phenomena I am going to discuss has accelerated over the past 24 months as the global “credit crunch” crisis continues and deepens. Notwithstanding the various news reports in the media about the US, British and Western European economies emerging from the recession and moving towards growth – and the slowly improving situation for the Wal-Marts and Tesco's out there, when speaking to anyone in the jewelry and diamond business who is willing to be frank and open, they will reluctantly admit that this “new era” is here to stay for a while and it is time to quickly adapt to the new situation.
The so called “global village” and “e-commerce” era has completely transformed and revolutionized the jewelry and diamond supply chain from one that consisted of a long and extensive list of suppliers, middle men, agents, and numerous other coupon/commission takers on the way to the consumer, into a short and streamlined channel that emerges direct from the source and concludes with the modern technologically advanced consumer, who is influenced strongly by social media and vast amounts of information from the internet. Today consumers are researching, comparative shopping and closing sales online at various levels of price points for all sorts of jewelry from fashion, to silver, to gold and diamond jewelry and even for exclusive designer jewelry pieces.
The first long serving and trusty member of our trade's supply chain - the traditional jewelry wholesaler - who for decades has been importing, distributing and serving the regional and national jewelry stores – has (to use an analogy) been brutally shoved off the fast moving train and left lying in the muddy ditch fatally injured and bleeding. Most of these wholesalers have not recovered and will unfortunately, or fortunately depending on from where you stand in the supply chain, never recover from their 'injuries' and have had to accept their fate, constantly trying to superficially and unsuccessfully dress their wounds (deserting customers, insoluble customers, manufacturers cutting them out, etc) -by taking on more loans and saving energy bills by dimming the lights in their ancient showrooms. This was once a place that used to be a bustling and active area with a steady flow of visitors during business hours. Today it’s like a nightclub where the barman wears a t-shirt print saying “I have swine flu”.
These wholesalers have ended up with a marble / granite lid over their business with an engraving on the tombstone stating - 'thanks for your service and support over the good years sucker but we don’t need you anymore'. The select few old and loyal customers (his father purchased goods from the wholesaler in the 70's and 80’s) may pay a visit once in a while and see how the flower bed around the graveyard of the business is doing and then leave a small donation (pity purchase) to help pay for the gardening.
As a result of the above situation, the jewelry manufacturing community, primarily in China, India and other Far Eastern locations, witnessing the disappearance of the wholesaler, made a quick move and began to offer their merchandise directly to the independent high street jeweler .They conveniently hid their “terms and conditions” small print on the reverse of the order form and gave up on minimum quantity requirements, cancelled shipping costs, and for the icing on the cake – generously offered extended credit terms with prices cheaper than the wholesaler used to offer. All you had to do, is let them in the front door.
They also started to send regularly a rep all the way over to visit from China – even if situated in the small high street of a remote Scottish village – and leave you with trays of goods on a memo/consignment basis until his return on the next sales trip.
By doing a simple google search and reading the “about us” pages of the well known diamond moguls and jewelry manufacturers, you can clearly see that they have not only passed over the wholesaler (on their trek to a 'decent margin' dream) some of them have now even conveniently skipped their customer’s customer (where the trek ends) - the independent high street family jeweler / chain store and are now selling online directly to the consumer!. Let’s face it - it worked for the insurance companies - they dropped their agents a long time ago and sell online directly to anyone that will pay. Same story with the major airlines – when was the last time you bought an air ticket from your local high street travel agent?
The savvy wholesaler that is aware of what’s happening around him has made the gradual transition himself – instead of being thrown off the train he has chosen simply to move to another carriage either in front of him or behind him – up or down the supply chain. He may have started manufacturing locally on his own - developing a basic line and branding it, or alternatively elegantly skipped over his own customer (who has by now developed his own commercial website targeting the same end user).Winston Churchill, after WW2, in order to save the British economy gave some very useful advice to the business community: “export or die” – well today in our industry we can apply a similar quote: “establish yourself online or die”.
However – there is still one good reason for the wholesaler to exist. Although only the tough ones will manage to survive –meaning only those with a bank account that is as deep as a black hole (surely only those with the finances their previous generation made in the 70's and 80's - the good old wholesaler’s days). It's called a bank .The stores can’t afford to buy merchandise anymore on 30 days terms! The credit crunch has crunched their credit line down to a knife’s edge. They desperately need the wholesaler to fill their windows with goods during the year while only paying months after the all important Christmas season. The question is; for how long will the traditional wholesaler survive at this rate?
It looks to me more like we are witnessing the end of the wholesale trade and welcoming in a new era of direct supply to the fortunate end customers.
