Rap takes heat over price list increases

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Rap takes heat over price list increases

Defends decision based on current diamond market

By Teresa Novellino

June 03, 2008

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New York—At the end of a presentation on the state of the diamond market, held on May 29 during the jewelry shows in Las Vegas, Rapaport Group Chairman Martin Rapaport ended up on the hot seat over a 25 percent increase in stone prices on his price list.

Several members of the packed ballroom at the Venetian hotel said the price increases, which occurred just before the Las Vegas jewelry shows, have created confusion in the market among dealers and buyers worldwide who rely on the list for diamond transactions.

"By doing it the way you're doing it, you freeze the market," one audience member griped, adding that if there were increases to the list, they shouldn't have been across the board. Others suggested that if changes had to be made, they should have been made gradually, or only for certain diamond grades or sizes.

Rapaport said he was sorry if people didn't like what he called a price adjustment, but he defended his decision, insisting that the list reflected the prices that were actually being paid in the market, and that the list is strictly his opinion and meant to provide guidance.

"Prices are not set by Rapaport," he said. "They're set by buyers and sellers. The fact of the matter is we're living in a difficult time. I didn't want to be sitting here at the show knowing prices [on the list] were below what was happening in the market."

He said that diamond buyers who didn't want the prices on the list should discard the list altogether, or tell suppliers they won't pay and walk away—a suggestion that was scoffed at by buyers who said they have long-term relationships.

Earlier in his presentation, Rapaport warned that the middle class in India and China would create more competition for U.S. retailers who will have to compete with jewelers in fast-growing markets for diamonds. That competition will be coupled with inflation and speculation in the diamond market, meaning that external forces will have a greater influence on jewelers than local ones.

Worldwide, demand for the largest stones and small inexpensive goods remain strong, Rapaport said, but the United States is over-inventoried in middle-quality goods, and middle-income consumers will shift toward less expensive goods.

"Middle America will go to Wal-Mart" for their diamonds, he said.

Branding will continue to have a big impact on the market globally, he said, mentioning De Beers' Forevermark brand specifically.

He suggested that the best way to get through tough economic times is to be flexible, and focused on profits versus prices.

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