A diamond is forever. Is the Diamond District?
The pandemic tested the area’s business model like never before. How has it changed in its wake?
Nothing turns a jewelry salesman on quite like the sight of naked fingers. To walk down Manhattan’s Diamond District is to be constantly flagged down by such salespeople. All it takes is one slip-up — lingering by a ring in a window, walking at an uncertain pace, glancing down at an unadorned digit — and a roving agent appears. Some work just for one store, while others are independent. These scouts can rifle through mental maps of the estimated 2,600 jewelers on the block, guiding each buyer to the right seller with just the right stone.
It’s a time-honored process that has worked for the Diamond District since the 1920s, when diamond dealers, priced out of the city’s Downtown jewelry bazaar on Maiden Lane by growing financial institutions, fled for more manageable rents. The Diamond District continued to grow through the 1930s and ’40s, as Jewish diamond merchants fleeing the Nazis set up shop on West 47th Street. By the end of the war, the Diamond District was the quirky, bustling bazaar it is today. Millions moved with a handshake. Windows glittered. Family businesses thrived. But lately, the apparatus has been put to perhaps its hardest test.
The Diamond District is a tangled circulatory system that moves stones and people between its packed labyrinth of offices like red blood cells through veins. Inside cramped jewelry arcades lacking natural light, let alone fresh air, tactile negotiations take place. Jewelers and buyers pass diamonds back and forth, lean close to each other to examine gems through magnifying loupes and, if all goes well, shake hands and say “mazel und broche,” Yiddish for “luck and blessing.” These conversations involve mostly elderly shop owners and sometimes the mediation of a buyer’s older relative, who has bought gems from the dealer before. Sellers and buyers stake small fortunes on facial cues, not contracts, which means masks can disrupt business.
During the pandemic, foot traffic nosedived as borders closed and New Yorkers went into lockdown. Many landlords, with their own creditors breathing down their necks, refused to budge on rent. The family shops that used to fill the Diamond District’s exchanges began to vanish. Some ditched their pricey storefronts for smaller offices upstairs and focused exclusively on referral business. The less fortunate left for good. Meanwhile, larger retailers and online upstarts have made unprecedented forays into the previously impenetrable market, and one of New York’s canniest developers, former diamond dealer Gary Barnett, is putting the final polish on an assemblage that threatens to swallow the block whole. As these forces carve up the old Diamond District, what will remain when the dust settles?
At the onset of the pandemic, 93 percent of the world’s diamond mines and cutting centers completely shut down, according to Martin Rapaport, chair of the Rapaport Group, which publishes a Moody’s-for-diamonds-type price index. In 2020, rough diamond sales dropped by $4 billion, said Rapaport. In June, Alrosa, the producer that accounts for roughly 95 percent of rough diamonds extracted in Russia, was forced to shut down mining operations in Siberia after a string of Covid cases among workers. De Beers’ operations in Botswana and Namibia were also hit, lowering the company’s production year-over-year by over 50 percent in the second quarter of 2020. In November, Debswana, a mining company owned in equal parts by De Beers and the Botswana government, announced it would close one of its mines for three years due to a lack of demand for rough diamonds.
The rest of the production chain shook in response. Surat, the Indian city that dominates diamond cutting and polishing, shuttered operations in the spring as the pandemic spread throughout the country. As for retailers in the U.S., 54 percent had to temporarily close their stores, and just 3 percent maintained their standard hours, according to a survey by JCK, a jewelry industry trade publication.
While the Diamond District’s business channels dried up, Barnett’s Extell Development was busy. In recent years, Extell has acquired massive assemblages in three distinct project areas, giving the company enormous sway over a neighborhood that is just one city block long.
Extell has only developed one such plot so far, but the project lays bare the company’s ambitions in the area. The International Gem Tower, completed in 2013, is a stark departure from the prevailing streetscape. Located directly in the middle of the district at 50 West 47th Street, the 34-story tower’s angular glass façade looms high above the squat brick buildings around it. Its website declares “The future is here.” Further down on the site, Extell prominently features a quote from a New York Post article saying that the tower is “making the dusty block precious again.” In 2014, Extell, struggling to find office tenants, sold the upper floors of the tower to SL Green Realty for $295 million. This February, SL Green sold that stake to a Brookfield Asset Management fund for $275 million, or $793 per square foot.
Directly facing the tower, Extell owns another stretch of buildings, including 25 West 47th Street and 32 West 48th Street. On this plot, which would open the District up to 48th Street, the company plans to build a 534-key hotel. While the block’s shops sell luxury goods, the buildings themselves are often old and unimpressive. All signs indicate that Extell will change that.
The company’s plans for its third collection of parcels, which wraps around the Fifth Avenue side of West 47th Street to West 46th, are the hardest to parse. Extell has already demolished a series of slim buildings on the 46th Street side of the plot, clearing the way for what could be a new development at the lucrative retail junction of the Diamond District and Fifth Avenue. It already has permission to demolish two adjacent properties, 2 and 10 West 47th Street, which have about 150 feet of retail frontage currently sitting in disrepair, with brown paper covering their windows and graffiti on the doorways. These permits were approved more than a year ago, but so far the company has only installed some construction equipment inside, according to public records. While the developer remains characteristically mum on its intentions, Extell is considering “demolishing them [the buildings] to incorporate into a larger development” but has not ruled out “renovating and leaving them as is,” according to a source with knowledge of the company’s deliberations.
Though Extell’s exact intent for its Diamond District holdings is unclear, its track record isn’t. Barnett’s firm is notorious for projects that are bold, glitzy and favor big brands with international footprints.
Alexandra Aivadyan talks about the diamond trade like it’s an unfortunate cousin she has to see every Thanksgiving.
Her father, John Aivadyan, started Raffi Fine Jewelry in the Diamond District nearly five decades ago. The younger Aivadyan had no intention of joining the family business. She attended the Cornell School of Hotel Administration and dabbled in marketing and fashion. But when the pandemic forced her father to halt operations at his storefront, she felt compelled to help. She built a rudimentary website for the company so the store could continue some form of business.
While some district landlords worked with their tenants to either freeze or lower rents, many held firm, fearing their own income streams would run dry. Display windows once filled with precious stones now showcased “For Rent” signs. There was a waiting list for booths before the pandemic, according to one member of the 47th Street Business Improvement District. Now, even with widespread vaccines and a city roaring back to life, the district is facing widespread vacancies.
Most of Raffi’s sales come from repeat customers whose wealth has actually grown during the pandemic, according to Aivadyan. Such customers contact a favorite shop; jewelers like her father, with an intimate understanding of their tastes, can send a few pieces to the buyers, who select what they like and return the rest. These arrangements require a history of trust and mutual cooperation.
“People that haven’t lost a lot, that have actually increased their wealth, that were wealthy to begin with, they’re buying fancy diamonds,” said Alexandra. “They’re buying $125,000 diamonds. We’ve sold a few of those crazy pieces.”
But many retailers who are Diamond District neophytes have not had the chance to build this repeat customer base. They rely more on tourists, walk-ins and theatergoers from nearby Broadway. These customers generally purchase smaller pieces, requiring a higher volume of sales to meet rent payments, which can reach as high as $30,000 a month for prime street-level storefronts.
“Anyone who opened in the last five years is in big trouble,” said the member of the BID, who requested anonymity to speak frankly about the district’s challenges. He estimated that the district has lost 200 to 300 businesses over the last six months, although neither the city nor the BID has comprehensive data. There is a similar lack of data on foot traffic, but conversations with multiple street-level salesmen suggested that far fewer people walk down the block on a given day.
The digital diamantaires
As the Diamond District sat and waited, newcomers got busy changing the game from the outside.
Wing Yau is not like other jewelers, and she’d be the first to tell you that. Born in South America, Yau grew up around the copper and zinc mines where her father worked. She carries this personal experience into her business philosophy. While traditional dealers’ first, second, and third concerns are making a profit, “I had to admit to myself that I was selling stuff,” claims Yau.
The most significant difference between Yau and her old-school competitors, though, isn’t biographical: Yau’s jewelry business, WWAKE, doesn’t have a storefront. It never has, and likely won’t, at least for the foreseeable future.
Yau graduated from the Rhode Island School of Design straight into the Great Recession. She studied sculpture in school, and started WWAKE in 2012.
Yau keeps 47th Street at arm’s length. She acknowledges that her business requires some level of collaboration with the Diamond District, particularly when it comes to the manufacturing processes and equipment centered there. “I personally love those connections, but I also have resisted falling into it because it’s like a really old, cis, white, male industry,” she said. “I wasn’t even welcomed when I first started. So why join it now?”
WWAKE’s Instagram account is the company’s primary way of reaching customers. The posts favor amateur videos of finished pieces and shots from the studio, breaking down the often opaque barrier between buyer and seller on 47th Street. “We never had to shut down, because I have a really flexible team and we moved everyone home right away,” said Yau. With the online sales infrastructure already live, the only potential operational issue was on the production side, given the expensive machinery required to cut and set gems.
WWAKE’s typical customer is also different from that of most retailers in the district. “Our core customer is between 25 and 35,” Yau said, “so they’re buying jewelry usually as a future heirloom, but it’s usually smaller, like under $1,000. And those customers usually grow into bridal customers and come back to us for an engagement or a wedding ring.”
The digital diamond dealers aren’t just stretching the conventional approaches to designing and selling jewelry — some don’t even sell jewelry at all.
Rare Carat, founded by Ajay Anand in 2016, has not sold a single diamond in its five years of operation. Instead, Anand founded Rare Carat to address the discomfort he felt while shopping for his wife’s engagement ring. He went into the buying process like many men buying their first piece of diamond jewelry: uninformed.
“I remember Googling things like ‘Kayak for diamonds,’ ‘diamond price estimator tool,’ stuff that is so common when you’re buying a car, a home or other stuff that is going to cost a lot of money,” he said. He came up empty.
For decades, the diamond wedding ring was a benchmark in American life, an assertion of consumer power and the mark of full adulthood. However, in contrast to 1948, when De Beers coined the slogan “A Diamond Is Forever,” marriage is no longer the rite it once was. Only around half of American adults get married, down from nearly three in four in 1960. Those Americans who still do choose to tie the knot are doing so later in life. A ring is no longer the entry ticket into adulthood. Today’s diamond buyers are older, more experienced consumers. They shop online and hunt for deals. The Diamond District simply is not built for them. Rare Carat thrives on that mismatch.
Rare Carat is built around its algorithmically driven price report. A computer reads a diamond’s report card from the Gemological Institute of America, which grades the stone in a number of categories, including the famous four Cs — color, clarity, cut and carat. Using the metrics assigned to the stone by the GIA’s gemologists, Rare Carat’s algorithm generates what it deems a fair price for the diamond. It also offers a service where it connects buyers with small retailers, some of whom own shops on 47th Street. Rare Carat reports are free, and the company collects a fee from retailers every time a user clicks on a diamond.
Rare Carat has updated its platform to mitigate the unease many customers feel about purchasing a diamond without ever seeing it in person.
“We make that connection that never would have happened, and then we stand in the middle as a third party with a money-back guarantee, creating the trust and safety that it takes for somebody to fork over five or ten thousand dollars over the internet,” said Anand. And if the buyer still wants to see the diamond before taking the plunge? Rare Carat now has a number of local showrooms where buyers and sellers can meet to examine the diamond before completing the purchase.
Tom Moses, the chief researcher at the GIA, doubts whether services like Rare Carat will ever fully convert diamond buying into an online-first business.
“Digital engagement is growing, but still, a lot of people, especially with something that’s a little more expensive, want to go and touch it and see it and feel it and talk to someone,” said Moses. Even as companies use AR and VR simulators to mimic the in-store experience, Moses anticipates diamond rings will remain uniquely fickle.
“When one thinks of bridal purchases or special occasion purchases, I think brick and mortar will still have a place,” he said.
And Anand himself does not necessarily disagree. “Diamond jewelry is very laggy in terms of online penetration as far as categories go,” he said. “And I still think that’ll be the case for quite some time.”
As the Diamond District recovers from Covid, jewelers may reclaim their storefronts, but their businesses can no longer exist entirely offline.
“I don’t think it will ever go back to just brick and mortar,” said Olya Linde, the lead author of Bain & Company’s Global Diamond Report. “The companies that can offer a seamless experience — that’s the future.” The Diamond District will not disappear, but part of it will become digital.
The June 2021 edition of Diamond District Monthly, the district’s newsletter, focused on ways tech-skeptical business owners could adapt to digital and social media marketing. Dealers are “justifiably exhausted by the unending arrivals of must-have, must-know, ‘invaluable’ apps and sales platforms,” wrote Avi Fertig, executive director of the Diamond District Partnership. The issue went on to detail basic social media tips, answering burning questions like “what is TikTok?” Fertig ended his letter on a hopeful note: “Don’t despair at technology’s breakneck pace. TikTok and Instagram may be so today, but tomorrow or soon after they’ll be so yesterday, like Twitter and Facebook. When it comes down to it, they’re still just different tools that you’re free to pick and choose.”
For all Fertig’s belief in the strength of brick and mortar, the rest of the publication was far less optimistic, as are diamond dealers themselves. “With over 1 billion people every month and 71% of the audience under the age of 35, if you’re not active on Instagram, then you’re invisible,” wrote Emmanuel Raheb, a digital marketer specializing in fine jewelry sales. Over two-thirds of diamond dealers are “very or somewhat” concerned about the future of brick-and-mortar business, according to the JCK survey. That’s down more than 10 percent from a similar study conducted during the pandemic, when three-quarters of respondents anticipated an increase in digital sales. Yet it’s still far from reassuring.
The Diamond District is shrinking. As unprepared shops fell by the wayside during the pandemic, those that survived will want to consolidate their presence, refining the network of tunnels and storefronts into something less expansive. The shops might all consolidate to one side of the street, said the member of the BID. Linde agrees that once stores make the transition to digital sales, many will probably never return. Mom-and-pops may cede their storefronts, as Raffi Fine Jewelry did, and focus on custom pieces for longtime customers. The block’s anachronistic strangeness, the uncontainable energy that animates its every square foot, will feel less enveloping.
But for now, there is a confidence that things are on the upswing. It could have been worse. Yet it would require willful ignorance to miss the district’s obvious bruises, and the jewelers are anything but ignorant.
Outside of Malidani Jewelry, a salesman sporting a close-cropped beard and denim jacket that reads “HUSTLE HUSTLE HUSTLE” scans the corner of 47th Street and Sixth Avenue for walk-ins. The shop is holding up, he says, but there is only so much it can do without the regular traffic. There are clones of him up and down the block, dozens of hustlers doing their best to eke out a living, to be among the survivors. Everyone knows someone whose shop closed in the pandemic. Those who are making it through are haunted by those who have not.
The salesman retrieves his unlit cigarette from the ground, passing time dispensing unsolicited musings about recent protests that he believes are scaring people out of the city. All the time, though, wherever his mind goes, his eyes remain locked on the corner. He waits. And then: He’s gone. A young couple is thinking of buying a ring. Their fingers are naked.