Following the pattern seen in Japan’s clothing and accessories industries, in which ultra-expensive designer bags by Louis Vuitton are snatched up with as much vigor as cheap clothing from Uniqlo stores, the “middle market” is rapidly disappearing from the nation’s gemstone and jewelry industry.
Despite the protracted economic downturn, business is still bustling in the high and low ends — at least for businesses that have found a niche and didn’t get too accustomed to the bubble-economy years of asset inflation.
“Over the last two or three years, business has been getting better,” said Iwao Tezuka, who crafts handmade “graniation” jewelry, made with dozens, sometimes thousands, of tiny spheres of precious metals. His pieces range in price from 100,000 yen to 1 million yen, wholesale.
Tezuka admitted that his elite clientele is little affected by the ups and downs of the overall economy, but added that there’s another reason his business has been picking up recently.
“My retail prices are coming down because the number of middlemen is decreasing,” he said.
Observers affirm that middlemen are getting squeezed out of their traditional roles in just about every supply chain in Japan, as increased competition, the rise of the Internet and continued deflation force manufacturers to reduce prices. And gems and jewelry are no exception.
“The Japanese economy got wrecked because too many middlemen were making too much money. That’s changing,” said Setsuko Shimada, a custom jewelry designer and president of Biz, a jewelry company based in Kofu, Yamanashi Prefecture.
This shift is effecting big changes in production and sales strategies. Wholesalers buy gemstones and jewelry in bulk to distribute to multiple retailers, whereas retailers tend to purchase a small number of pieces — maybe only three or four at a time — as testers, to avoid getting stuck with stock.
After just 10 years, Shimada said, Biz is booming. Her one-of-a-kind rings sell for around 130,000 yen a piece wholesale.
But since she also sells directly to consumers, such prices are a relative bargain, she said, noting the whimsical and colorful designs are especially popular.
“People want something uplifting, because the economy is so dark,” she said.
A student of psychology might do very well in the jewelry business amid Japan’s recession.
“Cheap items are selling well, but so are the larger, more expensive items around the 300,000 yen wholesale range,” said Masakazu Shimada, deputy manager at Kofu-based Shimada Jewelry Inc. “We can sell these because the economy is bad — they make people feel better.”
Jewelry made from gold and diamonds is the easiest to sell in Japan, industry sources said. But with everyone selling it, competition is tough and profit margins are tight.
According to figures compiled by customs officials, diamond imports were down in calendar 2001 by more than 6 percent in carat weight and almost 9 percent in dollar value compared with 2000.
In addition, customers with money have already bought their share of diamonds and other precious stones and now want something different, many insiders believe.
In 2001, imports of colored gemstones other than rubies, emeralds and sapphires decreased over 21 percent in carat weight compared with the previous year, but actually increased by 1.2 percent in dollar value. This points to imports of fewer — but more expensive — gemstones.
“Everyone has rubies, emeralds and sapphires,” said Naomi Sato, a sales agent at Tokyo jewelry firm Gem Bazaar Ltd. “More unusual stones are perhaps doing better.”
Currently popular rare stones include blue-violet alexandrite and the aqua-colored Paraiba tourmaline.
Marketing still works wonders, as does being in the right place at the right time.
“For me, Japan is very good right now,” said Manoj Bhandari, president of RMC Gems Japan. Bhandari’s exhibit at the International Jewelry Tokyo trade show in January was awash in tourmalines, with necklace beads from 50 cents a carat and cut stones for between $100 and $200 a carat.
“Tourmalines are the only things really moving, because it’s a power stone,” he said. “It’s sold as a health product in Japan.”
Jewelry companies that have emerged since the collapse of the bubble economy have a completely different way of approaching the business, according to many observers, who point out that the newer firms are more flexible and better able to meet customers’ changing needs and desires.
“Our company started just five years ago, so we don’t know about the bubble years,” said Ruta Verp, owner of jewelry store Amber Ruta. “We started at the worst time and are going up.”
Her Tokyo-based company has successfully promoted amber — an inexpensive gemstone when heat-treated — as contemporary jewelry, moving it away from its traditional image as an accessory for older women.
“The Japanese economy is normal now,” said Nikos Chilos at Vienna-based gem vendor Firma Luttenberger. “Before, it was very high. Actually, it was more like a dream.”
Chilos said he sold several aquamarines of 300 to 400 carats to clients at the recent IJT, which was the firm’s eighth appearance at the annual show.
“This economy is real, and people in Japan must learn the new situation,” he said. “For me, it’s no problem.”