Inflation and a glut of synthetic goods mark the end of 2022.

The year began with a spillover of sales from 2021, but it’s ending at a more tempered pace. Inflation, a reality of everyday life, threatens economic recovery. Yet companies with strong liquidity will be better-positioned for 2023.

New York: Focus on mined

“Holiday sentiment is more subdued” than it was last year, says Nick Jain, vice president of sales at New York-based manufacturer Paramount Gems. However, he views the leveling-off as an expected development, especially after “the industry experienced the best two years in its history.”

He sees strong demand for 2 carats and above. Requests for smaller stones are tapering off, which he attributes to a combination of factors including too-high price levels, greater acceptance of lab-grown, and macroeconomic conditions affecting some demographics.

“Natural diamonds continue to be our focus,” Jain states. While he recognizes the “pervasiveness” of lab-grown in the market, he believes the increasing supply of synthetics will result in a significant price drop, bringing them “closer to costume jewelry” and making them less attractive to customers.

To compensate for lab-grown in the market, he cautions against “turning a blind eye to the type of inventory you carry. There is a definite shift in the sizes and qualities that are selling. A broad-scale category such as 1-caraters may not work.”

Incorporating technology will also help drive success, he believes. Paramount Gems recently launched an eponymous app for loose stones and plans to add jewelry later.

“It’s always a balancing act,” says Jain, looking toward 2023. “If you make the right investments in natural, there is always an opportunity.”

Philadelphia: Financially strategic

“Bridal is always strong — regardless of market conditions,” says Larry Rosenberg, president of wholesaler Rosenberg Diamond Co. in Philadelphia, Pennsylvania. “In contrast, jewelry sales are more dependent on people with discretionary income. Right now, the middle and lower segments are worried about buying groceries and filling up their cars with gas.”

He does not expect inflation to abate any time soon. The results of the US midterm elections did nothing to allay his fears; he believes the “economy is going to get worse,” and he does not envision any change in policy. “I don’t see interest rates being any lower, because inflation rates are still way too high.”

Rosenberg specializes in 0.50- to 10-carat goods. He eschews “even the patina of association” with lab-grown and is adamant that only mined diamonds provide “the stability of value.”

He expects Christmas selling to pick up this month after a slow start in November. “There will be a season, but I doubt that a lot of consumers in the middle range will be able to spend money on jewelry,” he predicts.

He does note that “people buying diamonds are paying more than they did six months ago,” a trend he sees continuing into next year. “Dollars will be higher in 2023, but it will not be a stellar year in terms of transactions, which will be less.”

Having a cushion of funds will be key in 2023 to support business activity and scoop up deals that may arise, he says. “It never hurts to adopt a more defensive strategy.”

Chicago: Asset management

Chicago-based wholesaler Diagem “experienced a very, very strong start to 2022 that catapulted us to being ahead of 2021, which was one of the best years we’ve ever had,” reports vice president of sales Jai Bhansali. However, he points to a “gradual tapering” of business since the end of September.

While the company sells both mined and lab-grown goods, it has allocated most of its assets to natural diamonds, a strategy that successfully matched demand this year. “The mined market was very robust and significant. Those investments were instrumental in driving sales. Our margins remained basically the same,” Bhansali explains.

He draws a contrast with diamond dealers who “lost sight of what the mined market was doing” and shifted assets to lab-grown, a segment of “diminishing value” with “no cap on supply,” he says.

Bhansali cannot envision any scenario in which the first quarter of 2023 will match 2022’s. “[The Federal Reserve] will continue to raise interest rates — as they should — to combat inflation,” he says, acknowledging that this will increase the cost of borrowing money.

Bhansali is not anticipating strong holiday sales, and ending the year “slightly behind” 2021 would surpass his expectations. “Overall, we are very happy where we are because of the stance we took in continuing to focus on mined diamonds.”

Image: A shopper at the window of a jewelry store. (Shutterstock)