As the jewelry market undergoes a color revolution, it is ultimately necessary for manufacturers to completely change their frame of reference regarding sales. If the merchandiser and designer have done their jobs well, capitalizing on color, their creations will sell. For long-term success the priorities must change from merely making the sale to being able to produce and deliver the item on time and as promised.

          The tendency of the conventional merchandiser is to make the sell without any consideration of the reality of acquiring the stones. And who can blame them in these hard times? A word to the wise – beware! With natural colored stones this attitude could be the death knell for customer relations and even for the entire business.   

          It may seem ludicrous, but with color the problem is not sales but production and delivery in the required quality and consistency. Sounds great doesn’t it? Sales are easy – supply is the problem. Beware! Taking the order without considering the realities of the supply side and consequencely not being able to deliver as promised can be more deadly than not getting the order in the first place.

          Because of the sluggish market during the past three-four years the competition has become fierce for the few real buyers who are still out there. And the colored stone jewelry market is still a frontier. It’s a dog-eat-dog world and the law of the Wild West prevails when it comes to making a sale.

          As mentioned in previous columns, during the past five years there has been a gradual shift in marketing trends from traditional retail store outlets to wholesale members’ stores, catalogue houses and TV home shopping. These changes have greatly affected production demands all levels in terms of size of orders and delivery times.

          This news marketing focus has reduced the number of wholesale buyers while it has increased their individual buying power tremendously. Whereas four-five years ago 500-1,000 pieces of an item was a large order of colored stones, these fewer but bigger buyers of the 90’s are looking for 5,000-50,000 pieces of an item.

          Such purchasing strength has allowed the new generation of buyers a deeper understanding of pricing and a previously unknown command over the suppliers. The buyers have done their homework well and learned how to mentally “break out” the manufacturing cost of each jewelry component for the wholesale price of gold, diamonds and color, down the cost of labor for mounting each stone.

          As the retail-consumer buying power has dried up in the heat of the recession the contest to capture the dwindling dollars has become stiffer than ever. Since the integral costs of making piece have been basically standardize the merchandisers and marketers have been forced to find new angles for competing.

          Because most marketers tend to think alike and/ or follow each others’ leads, the methods for dealing with the price-wise wholesale purchasers have generally been distilled down to the two most popular methods – creating the higher perceived value for the same price (more bang for the buck) and minimizing stock and holding costs (just-in-time production).

          So now the name of the game for the merchandiser looking to score to the big guys is “better product delivered faster for the same price.” From the supply side these new critical market forces manifest themselves even more simply as QC and Delivery Time.

          Three-four years ago 1,000-unit order (considered large at the time) was allowed 6-8 weeks for delivery and the retailer rightly demanded the promised quality but   was not so unrealistic to expect absolute perfection.

          Today an “average” order from the mass marketers is 5,000 units and, to stay in the game, the manufacturer must be able to deliver in three-four weeks and accept from 25-75 percent rejections from the marketer’s QC department. Is that a deal, or what?

          Now comes the real kicker – if the delivery is not on time and in full, there is a cash penalty to pay or, worse yet, the order is cancelled and the manufacturer is left holding the bag.

          To the mass marketers and their over-vigilant QCers, with jewelry being just another section of their catalogues or TV time, they apply the same delivery and QC requirements to which they are accustomed with porcelain figurines, electronic gadgets or kitchen utensils.

          Sounds unrealistic doesn’t it? Especially when working with natural stones and faced with the unavoidable small-finish defects inherent in giant-volume jewelry production for an affordable price.

          The manufacturers can’t complain because no one will listen. And if they try to force their complaints they might just lose the business altogether. If they can’t handle the heat there are three manufacturers in line waiting to promise just about anything to get the buyer’s list of vendors.

          And here comes the rub from the colored stone dealer’s perspective. The modus operandi for the manufacturing merchandiser is to promise the customer anything but get the order! Then worry about how to fill it: “Ten thousand pieces using three carat sapphire surrounded by 0.25 carat of illusion-set half-pointers in 14k fir $59.95?.... NO PROBLEM! Is three weeks fast enough?”

          The more experience a merchandiser has in traditional jewelry sales the more dangerous they may be when entering the wild world of non-traditional color. Many of the rules change drastically and, as with the law of the jungle, those who do not adapt will soon be dead in a business sense.

          The Old Guard jewelry wholesalers are accustomed to working with the classical components comprising gold, diamonds and a few basic standard sizes in commercial-quality ruby, sapphire and emerald – all relatively easy to source.

          However, what is possible in terms of volume, consistency and delivery with these items becomes difficult or impossible with other natural colored gemstones. A salesperson’s massive dream order may quickly become the stone supplier’s worst nightmare.

          The fundamental problem is the misconception that was inspired in our trade long ago by the term “semiprecious” stones. The implication was that these bubbles were plentiful, cheap and easy to find, relegating them to a limbo state somewhere between costume jewelry and the revered precious stones.

          Now with the insurgence of formerly renegade natural colors into the market and their enormous public acceptance combined with the unrelenting marker forces the lines of supply are being strained to the maximum. Many unaware manufacturers and merchandisers, in their anxiety to make the sale, have made rash promises for delivery that cannot be met. The result is often delivery of a sub-standard product causing heavy rejections and overall loss or uncompleted order and subsequent cancellation for an even bigger lost in terms of cash and the customer.

          For this reason many of the mass marketers and manufacturers have turned to an unnatural stones such as a cubic zirconia and synthetic reds, blues and greens to deal with the supply problem. The benefit here is that the raw material is limitless in supply and color matching is simple – they’re all the same.

          But the trend toward synthetics is only that – a fashion trend. Last year pink CZ was in, this year it’s lavender, next year perhaps orange. The glaring fact is that today’s consumers of those dazzling and colorful little valueless nothings will be fully inevitable craving for the mystique, feel and rarity of natural colored stones.

          Therefore the natural colored gemstone supply-side problems will by no means disappear. They will grow exponentially with the expanding market for natural color and the retreating global recession.

          Those manufacturers having recently entered or contemplating entering the color revolution may be discouraged but this supply conondrum.

          Not to worry! There is no need to avoid what can be an exciting and rewarding new adventure in creativity and sales as long as it is approached with wisdom and proper preparation.

          The key to success with color is the manufacturer’s awareness and consideration of the supply side. Working with the right supplier can easily resolve the problems.

          In the next issue of JewelSiam we will deal with these potential problems and options for solutions head to head.

Thomas Banker is the president of Gem Essence (Thailand).