Latest News from Ehud Arye Laniado

Follow all the latest diamond news, views, events, endorsements and more from Ehud Arye Laniado

Posted by on
  • Font size: Larger Smaller
  • Print

Reconsidering Trade Shows

Reconsidering Trade Shows

It is the end of February, which means that diamond traders, diamond wholesalers, diamond manufacturers, jewelry makers, as well as diamond and jewelry buyers from around the globe are getting ready for a series of trade fairs taking place all over the world. There are no less of 14 such occasions in March alone, from Hong Kong International Diamond, Gem & Pearl Show starting on March 1 to the IWJG Show held in Las Vegas that concludes March 27.

Some of these shows are large key annual events attended by many hundreds of companies and thousands of people from the midstream of the diamond pipeline, such as the two shows running in Hong Kong next week or the Baselworld show to be held in the last week of March. Many of the shows are small gatherings. They take place in Moscow, Atlanta, New York, Vilnius, Gdansk, Istanbul, and Chennai. This is all very exotic, but gives the false impression that this is a booming business that requires a bevy of meetings, get-togethers, cocktail events, and other activities just for the sake of an efficient exchange of goods and information. This is not the case.

Attending a trade show is a serious matter. Doing it right means defining very specific goals, arranging meetings, booking hotels and flights, and deciding on the goods to buy. Exhibitors also need to decide what goods to sell, what space to reserve, and how to plan and design the booth. They will also need to oversee the construction of the booth, ship the goods, insure them, and set procedures for tracking and protecting them. Preparations include, for example, knowing what type of goods prospective buyers will be interested in, and making sure to have the right goods for the buyers that attend a show – by size, shape, color and clarity range. Making the effort to attend a show also means considering the time out of the office. And this is just pre-show. After the show, there are follow-ups, results to be reviewed, accounting for the entire process, and most importantly, ensuring that it made sense financially.

Attending trade fairs, especially as an exhibitor, is a pricy affair. Just a few weeks before the show in Basel, hotel rooms go for $1,000 per night or more – if you can find a hotel room. The cost of booth space is so high that it is not unusual for companies to share the space – and the cost. What’s more, show organizers frequently don’t let you bring the company of your choice to erect your booth, limiting you to their own contracted suppliers, which – not surprisingly – ask for well above regular cost, because they have no competition. Everything is limited to a few vendors, even bottled water. That drives up the cost of exhibiting.

Usually when a large group of businesses have higher costs to conduct their sales, they respond by raising prices to mitigate those costs and maintain their gross margin. However, that is not always an option at a busy trade show, quite the contrary. First, when you have numerous companies selling similar products all pressed in together, it becomes a buyer’s market, as sellers compete by lowering prices. Worse yet, the high cost of exhibiting may themselves push down prices as well. Imagine that the financial commitment of exhibiting is relatively high for all the companies exhibiting at the show. To cover their costs, they need to generate sales. So what do they do? They lower prices. But then, that is not enough, because with lower prices there are also lower gross margins, which means that they must sell large volumes to compensate for the loss margins. When something like this happens at a show, it has a ripple effect that resonates with other sellers that have the same type of goods. And remember, this is something that happens in an industry that already suffers from low, single-digit margins. Bring down prices by a few percentage points, and you may cover the costs associated with exhibiting, but you’ll lose on the cost of your diamonds. And this is at the heart of the question – what role do exhibits really play, and how much financial sense do they make?

As a business, attending a trade show must pay off financially. So with the high costs in and around a show, it may not make sense for many companies. The polished diamonds brought to a show could comprise about 20% of a company’s inventory. Assuming that an exhibitor sells only 15% of those goods at the show, is that a success? What about the prices achieved? To justify the effort involved in generating these sales, sales must exceed what could have been sold out of the office without going to the show, either a larger quantity of sales at the office price, or higher prices for the sold polished diamonds, or both. Ideally, you should attract additional customers too. These new customers should generate future sales that make the trip worthwhile, maybe even a new class of clients to expand your client base – traders, jewelry makers, brands or retailers.

Post-show review should include a few questions to establish whether the show was a success. Did the company bring the right goods to the show? Why didn’t some of the goods sell – were they priced too high or incorrectly for the show? Is staff training needed? How well did the marketing work – did it attract the right clients? Did marketing attract enough traffic to the booth?

These are, in a way, micro issues that apply to individual businesses. However, if we take an industry-wide perspective, what about the macro issues? There are some pre- and post-trade fair reviews the industry itself should ask. For example, is it appropriate for the diamond industry to offer mass quantities of loose one-carat diamonds at these events? What is the message we are sending to the high-end consumers who frequent trade fairs, if they see high-end diamond jewelry pieces at one booth, and then loose diamonds in large quantities offered at wholesale prices at another booth? How can we show piles upon piles of diamonds in booths the same way as peanuts at a bazar or grapes in a souk? Does this help us promote diamonds as a rare creation of earth or harm those efforts? How will this help us sell luxury jewelry?

Isn’t it clear that we are hurting our own business with these actions? Healthy trade is based on daily sales out of the office or at the customers’ businesses, not at trade shows. Selling at a show is not the basis of trade. At best, it can serve as an assist, but not more than that. The high costs of exhibiting, the difficulty of making the right price, the possible degradation of the positioning of polished diamonds, all require us to carefully consider our trade fair strategy.

 

  The views expressed here are solely those of the author in his private capacity. No one should act upon any opinion or information in this website without consulting a professional qualified adviser.

SUBSCRIBE TO THE LATEST NEWS BY EHUD LANIADO

Your Name:
Your Email:
Copyright © 2017 - Ehud Arye Laniado - All Rights Reserved.   Twitter | LinkedIn | Privacy Policy | Terms of Use