January/February 2003 • To the Finish • Economy Dominated Jewelers Sales in 2002 • News & Updates • In This Issue

More and more loose gem dealers are expanding their sales by producing finished jewelry. By Suzanne Wade

14K gold buff-top amethyst ring with diamonds; jewelry and photo courtesy Idaho Opal & Gem Corp.

Until recently, Philip Zahm was almost exclusively a gemstone dealer. In business for nearly three decades, Zahm had built his company around fine, loose colored stones.

Over the years, Zahm experimented with making jewelry in avant-garde designs, but it had never taken off. He usually ended up unloading the pieces at cost or below.

Five years ago, something clicked. Zahm offered a tennis bracelet made out of his existing stock of ruby, sapphire, fancy sapphire, and tanzanite -- and it was a hit.

"I could see people really liked it," he recalls. "The price points were good. It was very generic, but it had a pretty broad appeal." Sticking with classic designs, he soon added rings and pendants, and increased his earring offerings. Today, finished jewelry accounts for nearly half of his sales.

Zahm is not alone. Increasing numbers of gem dealers are carrying finished jewelry lines next to their traditional offerings of loose color.

Colored stone channel-set bracelets; jewelry and photo courtesy Philip Zahm Gemstones. TOP OF PAGE: 14K gold blue topaz earrings; jewelry and photo courtesy Idaho Opal & Gem Corp.

"We have seen a steady increase in finished jewelry offered by wholesalers of colored stones," says Stuart Robertson, director of research for The Guide. "In the past, at the AGTA [American Gem Trade Association] show [in Tucson], one would see virtually no finished jewelry. However, in 2002, finished jewelry made up a significant amount of the goods offered for sale."

The move into finished goods is coming at a time when many dealers struggle with stagnant or declining sales of loose gemstones. "We've been a stone house for 70 years," says Todd Wolleman, whose company, Leo Wolleman Inc., markets loose goods primarily to U.S.-based volume manufacturers. "When we started in business, there were three times as many manufacturers as there are now. We've had to change the nature and scope of our business to maintain survivability."

"People just aren't buying loose the way they used to," confirms Zahm. "If I hadn't gone into finished jewelry, my business would have stagnated. I'd have had to seek out new sales methods just to tread water. [But] with finished goods, you open yourself to a national market. You can put finished jewelry in the hands of sales reps who can really get out there and promote the product. I can sell loose -- I love it and it's a huge part of my life -- but you can't give loose to a salesman and expect him to sell anything. It's too esoteric."

Gem dealers often attribute the need to move into finished jewelry to declining numbers of bench jewelers who can turn loose stones into finished pieces. "In the last decade, we've seen fewer and fewer really talented goldsmiths," says Robertson. "They're still out there, and academic programs still exist to produce [goldsmiths], but more and more people seem to take one- and two-day courses that basically teach them how to solder a pre-fabricated head to a pre-fabricated shank."

Colored stone and diamond rings; jewelry and photo courtesy Philip Zahm Gemstones.

Many bench jewelers disagree with that perception. "Our demise has been greatly exaggerated," says bench jeweler David L. Huffman, owner of a trade shop in Cortland, New York. "We're there; we're just not in the same places anymore. There are fewer veteran bench men and women, but there is a whole generation eager to take up a line of work that is both challenging and rewarding."

"I have never seen such an increase in interest in young people interested in metalsmithing of all kinds -- from artists to tradesmen to hobbyists to students," agrees Thomas Blair of Island Gold Works.

Although these newcomers often lack the abilities and experience of veteran bench jewelers, the growing number enrolling in jewelry classes and advanced workshops in recent years suggests they are eager to hone their skills. "Schools advertising in trade magazines cover the classifieds, and various courses for the accomplished jeweler/metalsmith abound," notes Blair.

Since its launch in 1997, Jewelers of America's (JA) Bench Certification Program has certified approximately 2,000 bench jewelers. The association estimates there may be as many as 30,000 bench jewelers in retail organizations, and another 20,000 or so employed by jewelry manufacturers.

In addition, Colored Stone's annual survey of independent retail jewelers shows no sign that bench

Tanzanite, opal inlay, and diamond pendant; jewelry and photo courtesy Idaho Opal & Gem Corp.

jewelers are disappearing. In the 2002 retailer survey, 92 percent of respondents said they make custom jewelry, and 91 percent said they buy loose colored stones to set in jewelry. And while 28 percent reported buying less loose color than they did five years ago, 29 percent said they are buying more, while 33 percent reported buying at the same level.

If the bench jeweler hasn't disappeared from the landscape, why the growth in finished goods? It may be simply that gem dealers are offering a product that appeals even to retailers with a bench jeweler sitting in the back room.

"A lot of benchies, like me, will buy a piece complete rather than buying a semi-mount or making a piece, because the item is not so special that it requires a custom or semi-custom job," says Bob Lynn, owner of Lynn's Jewelry in Ventura, California. "One of my favorite houses will memo me several pieces to augment my stock for a special call. The client gets great color, a great mounting, a price that reflects a fine piece but not as high as a fine custom piece. They get it now, and they had more to choose from than I can afford to front. And best of all, I'm not making another ring that is just like the zillions of other classic pieces out there, and I have time to spend on an item where the client really is willing to spend the dollars per hour needed for a custom CAD [computer aided design] job, a hand-carved model, or a handmade, original 'Lynn' design."

Another advantage is finished colored stone jewelry goes straight into the showcase instead of languishing in a safe. "I call it putting wheels on the car," says Frank Farnsworth of Idaho Opal & Gem Corp. "It's nice to have a beautiful sapphire, a gorgeous ruby, or a wonderful tanzanite, but it's not going anywhere until someone does something with it."

"Jewelry store owners want to buy something that solves a problem for them," agrees Zahm. "Buying a finished piece is so simple. They can just tag it and put it in the case. When they buy loose stones, they're creating a problem: Now they have to design a piece. It's just so much simpler to sell a piece of jewelry."

The retailers these jewelry lines appeal to are generally looking for a better-quality stone and more upscale product than those being offered by volume retailers, at a lower price point than the retailer would have to charge if the piece were made by a staff bench jeweler. Many prefer classic styles that appeal to a broad range of consumers.

"Mass merchandising people use color as a commodity," observes Farnsworth. "You need to supply them in such a quantity that it automatically moves them to an area of more availability, which is going to be medium quality. Independents have learned this, and have begun to move their purchasing to higher-quality color."

The emphasis on classic "is a reflection of the economy," says Robertson. "[This economy is] one that is not allowing many retailers to experiment with new looks. What is selling are the staples: traditional cuts, better qualities, and traditional designs."

Gold rings with peridot and amethyst center stones and diamond accents, jewelry and photo courtesy Leo Wolleman Inc./Color Craft.

"What we find in color is that designs need to be balanced very carefully with the stones," adds Farnsworth. "You can over-design a colored stone. Simplicity still sells the most color."

Gem dealers are well-positioned to give these retailers what they want. They have well-trained eyes for selecting fine color, and they often already have the contacts with overseas manufacturers that enable them to create a quality line of jewelry at competitive prices.

"Who but a colored stone dealer is better positioned to fill [this demand]?" says Zahm. "I can offer the customers a better price point by cutting out the middleman. I not only have experience in the [colored stone] business, but a background [in art and design]. I'm not a designer or a metalsmith, but I travel to all these places and see all these people, and little by little things began to click."

Because of their connections with stone cutters, dealers can frequently offer a more consistent, better-quality product. "We're vertically integrated: We manufacture our own stones, which gives us a distinct advantage," says Wolleman. "That's our unique selling proposition."

Years spent in Asian markets as gem buyers also give gem dealers the connections they need to find skilled jewelry manufacturers, who can produce quality products for prices that can't be matched by U.S.-based competitors.

"We produce everything in Bangkok," Zahm says. "We work with a small company where we know the owners personally, and we communicate with them several times a week. They do such nice work, and the price is very fair. We could save more money if we went to China, but we elected not to do that. In Thailand, we know [our] people make a living wage. I like working in Thailand. I've been going there 20 years, and I love the people. It's working very well."

With such advantages, it's no wonder increasing numbers of gem dealers are finding success with lines of finished jewelry. And the trend is showing no sign of abating. "I have a feeling, the way the business is changing, that many of the gem houses are going to find themselves selling more finished than loose," says Zahm. "We still sell a bit more loose than finished, but I think in the next two years that's going to change."

"The industry is shrinking very quickly, and you need to remain competitive in this difficult environment," says Wolleman. "Ultimately, the best way to do that is to find a niche. We feel we have developed one by being fully vertically integrated in the manufacture of colored stone jewelry."

Ultimately, observers believe the move to finished colored stone jewelry by the people who know color best will be a positive development for the industry as a whole.

"I think [the trend toward finished] will probably help the retail end of the business," predicts Ro-bertson. "The people with the strongest passion for colored stones are now involved in the manufacturing of jewelry, and will keep that critical eye toward quality focused on the product. We expect this to be a growing trend, and expect it to have a good impact on the wholesaler-retailer relationship. We expect it to blossom into a wider variety of jewelry products with colored stones [being made] available to the retailer."

"Anything that promotes color, especially beautiful color, is healthy for the industry," says Zahm. "This area has huge growth potential, but people have so much to learn -- not just the public, but the jewelers and store owners themselves. Any way we can get nice color out there and educate them and share the beauty of color, the better it is for the market."