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Podcast: Cash, Credit and Covid-19

Erich Jacobs, president of the Jewelers Board of Trade (JBT), on how US businesses have handled this year’s liquidity crisis.
Oct 20, 2020 3:26 AM   By Joshua Freedman
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RAPAPORT... 
The coronavirus crisis has split US jewelers into haves and have-nots, Jewelers Board of Trade (JBT) president Erich Jacobs told the Rapaport Diamond Podcast.

Digital-savvy businesses have thrived while less advanced competitors — or those exposed to the tourist industry — have fallen by the wayside, he noted. This has led to many jewelry companies losing their strong credit ratings.

“We crawled through all of the social networks and looked for folks who said they were having banner years versus folks who were saying that they’re really, really having a tough year,” Jacobs said. “One of the commonalities we found for the folks who were struggling, almost to a person, was they had almost no online or social presence.”

The JBT, which assesses how promptly jewelers have paid their suppliers, downgraded 1,705 companies’ credit ratings in the second quarter and 1,373 in the third quarter. At the same time, it introduced an option allowing members to begin collection proceedings without damaging their clients’ scores.

Jacobs also advised companies to speak with their suppliers rather than leave them in the lurch when they fall behind on payments.

“The biggest mistake we ever see retailers make is not contacting the upstream partner,” he asserted. “Having the difficult conversation is a lot better than having no conversation at all, because typically that’s what makes a distributor really mad.”

Listen to the podcast below:

Show notes

00:30 – Some jewelers are having banner years, while others are struggling. Online capacity is a key factor.

03:20 – The collapse of travel retail has hit some parts of the industry hard.

03:50 – How the JBT helps companies through the pandemic by providing financial information.

05:45 - The rate of credit-score downgrades eased in the third quarter. Again, different companies are experiencing vastly different fortunes.

08:00 – Explanation of the JBT’s credit-rating system.

11:00 – Bankruptcies didn’t increase in the third quarter, partly because landlords were forgiving. Suppliers are also being compassionate. The JBT added a new option allowing claimants to notify debtors without affecting their credit ratings.

14:30 – Companies should contact suppliers about late payments rather than leaving them to wonder what’s going on.

15:40 – The impact of the potential stimulus package. The initial Paycheck Protection Program saved close to 40,000 jobs in the jewelry industry.

17:05 – Expectations for the holiday season. A resurgence of Covid-19 raises concerns about lockdowns at malls. Last-minute shipping could be difficult. The total flow of dollars through the jewelry supply chain has still not recovered, perhaps because retailers are holding less inventory.

21:00 – Online commerce has become a necessity. Even old-fashioned manufacturers and wholesalers are getting into it.

22:30 – Jacobs’s journey from technology startups to jewelry. The ability of the industry to adapt during Covid-19 has surpassed his expectations.

Images: A holiday jewelry gift, Erich Jacobs, and dollars. (Shutterstock, JBT)
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Tags: Coronavirus, COVID-19, credit, credit ratings, Erich Jacobs, jbt, jewelers board of trade, Joshua Freedman, Liquidity, Podcast, Rapaport Diamond Podcast, US
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