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"Tsunami" In the Form Of Weak Dollar Hurting Jewelers.
Rapaport Trade Wire reports today that the rapidly sinking U.S. dollar is taking its toll on the jewelry industry. Profits are being squeezed for both jewelry retailers and suppliers and in some cases, merchants are reporting losses on business transactions denominated in U.S. dollars.
Several retailers like Kay and Zales are fighting back by cutting out wholesalers and buying directly from overseas jewelry and diamond producers, thus reducing the impact of the weak U.S. dollar.
This is causing great anger and ill will on the part of suppliers who now find themselves being squeezed out of the supply loop.
As jewelry costs rise, retailers have few choices. They can either raise retail prices or they can cut costs.
Most jewelers opt to cut costs before trying to raise prices. Internally, merchants have several methods of reducing costs including less store-level discounting, repositioning of the product line to higher-profit goods, cutting overhead expenses and having salaried personnel work longer hours.
Externally, jewelers can reduce their costs via direct sourcing with overseas manufacturers. This cuts out wholesalers and other middlemen who add costs.
Raising retail prices is extremely difficult in a highly competitive retail environment. During the all-important holiday selling season, many U.S. jewelers tried to raise the value of their average ticket — in other words, raise prices. However, this strategy proved to be unsuccessful; jewelry demand waned as consumers purchased less-expensive goods.
This problem is further exacerbated by the growing strength of the Internet, which serves to decrease in-store traffic and puts tremendous pressure on Brick & Mortar stores profit margins.
The bottom line is that jewelry wholesalers are being cut out of the pipeline at a rapid rate, and it is not inconceivable that in the very near future the jewelry industry will be dramatically transformed and resemble such industries as consumer electronics, Home centers, and Office supplies.
We are seeing before us the evolution and re-organization of the jewelry industry as Darwin's survival of the fittest takes hold. This "Scopes" trial won't play in Peoria but surely consumers will benefit by the resultant competitive and excellent pricing.
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