Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=122007
Story Retrieval Date: 8/29/2014 1:17:57 PM CST
As consumers continue to scale back on purchases and focus on essentials, no price tag, even one attached to an engagement ring, is escaping scrutiny.
Koorosh Daneshgar, CEO of Koorosh & Valencia, located high in the Jewelers Center on South Wabash Avenue in Chicago's Loop, has seen the economy’s impact on engagement rings first hand.
“Right now people are coming in with budgets,” he said. “Before, they used to come in with love.”
According to research group The Wedding Report Inc., of Tucson, Ariz., the average spent on engagement rings fell 30 percent from $4,615 in 2007 to $3,215 last year and will continue to drop, by 9 percent this year and by an additional 3.7 percent, to $2,828, over the next five years.
Daneshgar said he's seeing fewer shoppers these days, and those who are coming in are looking for less expensive metals, opting, for example, for 14-karat gold bands instead of platinum ones. The shop has had to lower prices to avoid losing customers, he acknowledged.
At Diamonds Chicago, a few floors below Daneshgar’s store, manager Carlee Kelly said customers now “want more bang for the buck.” She said this translates into purchases of what she called “bluffy diamonds,” or diamonds with a lot sparkle of and a large carat count, but of a lower grade because of flaws that can be detected only with a loupe or microscope.
Kelly also noted another trend: shopping for rings at one price, then returning and spending less. According to Kelly, a customer who walked into the store during the interview to have her ring sized had come in with her husband several months ago and looked at rings in the $15,000 range. The ring the woman was having sized looked like the one she and her husband had discussed. However, Kelly said, unbeknownst to the wife, the ring being sized was not the one she and her husband considered. Instead, Kelly said, the woman’s husband came in at a later date, found a ring that looked the same and had the same carat count, but because it had lower-grade stones, cost $7,000.
Randall Wagner, CEO and founder of GemEx Systems Inc., of Mequon, Wis., which owns a technology that grades diamond brilliance, said the shift to focusing on diamond brilliance—how a diamond reflects light—instead of judging it strictly by grade, makes sense.
Wagner said a top-grade one-carat diamond can cost between $12,000 and $15,000. However, he said, a diamond may have “inclusions” the naked eye can’t see. The inclusions lower the intrinsic value of the gem, and with it, its rating.
According to Wagner, if the cut and polish are optimal, the brilliance of a lower-grade diamond, which can sell for between $5,000 and $7,000, can match that of a higher-grade one.
In Atlanta, gem broker Rami Hachamoff said his clients, whom he characterizes as in their mid-thirties and financially established, are buying rings that are 10 percent to 15 percent cheaper than in previous years. Hachamoff said the change “isn’t drastic, but it’s a change,” and that couples are willing to buy a smaller diamond as long as it is a high-grade one.
Even Internet merchants have seen customer preferences change.
Online retailer Blue Nile Inc., which obtains about 68 percent of its revenue from engagement rings, saw profits plummet 53 percent to $3.5 million in the quarter ended Jan. 4, compared with $7.5 million in the same year-ago period. In a phone interview, the Seattle-based company said it has seen a change in what its customers are looking for. This is despite what the company described as its affluent consumer base and prices it says are generally 20 percent to 40 percent less than those found in brick-and-mortar stores.
Cutting back on carat count and quality, however, are just two ways couples are trimming costs and maintaining appearances.
Amanda Gizzi, a spokesperson for the New York-based Jewelers International Center, said that couples are making the most of their purchases by buying thinner bands so the stone itself looks bigger.
John Baird, Blue Nile’s diamond expert, as well as other jewelers say that “colored stones” such as rubies and sapphires, which can cost less, are beginning to appear in engagement rings, either as the sole stone or paired with diamonds.
Alex Fetanat, CEO of online jewelry network GemFind.net based in Tustin, Calif., said people on “the lower end” gravitate towards colored stones. He said “people that still have their jobs and are still making money, if they want to buy diamonds, are going for the smaller size, saying ‘I just want to buy something to get engaged.’”
Lakeview resident Fraya Lynn Hirschberg finds herself between the two trends. Her boyfriend of several years is adamant about saving up for a flawless D-grade diamond that costs about $30,000. She, on the other hand, is interested in a $12,000 sapphire. “I would love it and just be done” she said. "If [a sapphire] was good enough for Princess Diana, it’s good enough for me.”
Senior Analyst George Van Horn of IBISWorld, a Los Angeles-based industry intelligence firm, said there's an overall trending-down for weddings— opting for civil ceremonies, renting wedding dresses, as well as scaling back ring expectations. He calls it “the new pragmatism.”
To be sure, in an industry as diversified as jewelry retailing, there exist very different views of the current market.
According to Brides.com's American Wedding Study 2009, the average price of engagement rings actually has risen, to $6,348, a 43 percent increase over the past three years, and a stark contrast to The Wedding Report’s outlook.
Mark Moeller, CEO of R.F. Moeller Jewelers in Minnesota and president of the American Gem Society, said shoppers continue to come in with budgets, just as they did before the economy faltered, and just as they did before, they still find they can go beyond their “limit,” by as much as 20 percent. Moeller’s explanation: customers come in thinking “I want [to buy] something I’m proud of.”
For those who are trading down, however, there are limits. Among those interviewed, none saw synthetic diamonds as becoming a major factor in this downturn.
“There are pros and cons of shifting to a synthetic diamond,” said IBISWorld analyst Van Horn. “It breaks a very strong tradition that goes back generations. Is this recession big enough to consider that?” he asked, then added that people may delay getting married before committing to a synthetic diamond.
Fraya Lynn Hirschberg’s reaction to synthetic diamonds: “No,” she said, without hesitation.