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In-Depth
Diamond Dream East vs. West
Understanding consumer diamond desire from the U.S. to China.
By Shuan Sim
Diamond marketing has traditionally been about selling stories — of diamonds being symbols of everlasting love, commitment, empowerment and more. But stories are not uniform across the world. What a diamond means to a consumer in the U.S. differs for a consumer in China. Different traditions in each country shape impressions and attitudes toward diamond jewelry, and businesses have to understand which milestones and narratives are important to each market to sell their diamonds effectively.
The U.S. is currently the world’s biggest diamond- consuming market, with China following right after, according to “The Global Diamond Report 2014” by global management consulting firm Bain & Company and the Antwerp World Diamond Centre (AWDC). Recent industry insight data from De Beers in March 2015 also showed that the U.S. diamond jewelry demand stood at $37.3 billion in 2014, while China was at $10.1 billion.
The U.S. has steadily rebounded from the 2008 global financial crisis, where the diamond retail market declined by 1.6 percent during and after the period. The U.S. diamond retail industry has seen a stable annual growth of about 2 percent since 2013, according to the Bain report. Economists forecast that the U.S. is on pace for a steady long-term 2 percent to 3 percent gross domestic product (GDP) growth, which suggests that U.S. demand for diamond jewelry will continue to rise. The report also included short-term forecasts that are even more optimistic, with expectations of growth slightly above 3 percent in 2015.
According to Chinese state media Xinhua, back in 2012, Ari Epstein, chief executive officer (CEO) of the AWDC, predicted that because of its precipitous growth, China would overtake the U.S. as the world’s largest diamond- consuming country in 2016. According to a December 2014 Bain report, China’s luxury market contracted in 2014 but still accounted for 30 percent of all global luxury consumption. Further drops of 2 percent to 4 percent are expected in 2015, according to a May 2015 Bain report. An anticorruption campaign launched in 2013 by Chinese President Xi Jinping and a slowing economy in recent years have choked the diamond and luxury industry in China. Yet, many companies believe that the country is still full of potential and that it will eventually recover from the current slump. “We’re confident about the mid- to long-term growth potentials in Mainland China, backed by a rising middle class, increasing disposable income and favorable government policy to boost domestic consumption,” says Kent Wong, managing director of Chow Tai Fook (CTF) Jewellery Group.
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American consumers tend to buy diamonds for two reasons: for marriage and for gifts for themselves or others, with bridal jewelry making up the majority of sales. The bridal market customers range from 25 years of age to 35 years at Hearts on Fire, a diamond brand acquired by CTF in 2014, while the self-purchase and gifting market skews older, at ages 35 to 65, according to Caryl Capeci, chief marketing officer for Hearts on Fire. While the diamond brand has products that are available to all income groups and demographics, Capeci finds that the majority of its clientele are college-educated with jobs that provide solid income levels. In the U.S., about 80 percent of women get engagement rings, according to Capeci. “Often, it’s two rings: a wedding band and a center-set diamond ring,” she says, adding that she’s noticed a trend that some women are stacking rings on a finger. The first is a diamond engagement ring and the second is a ring to commemorate the first anniversary. “Some customers are buying engagement rings with the anniversary ring in mind already,” Capeci adds.
Chinese consumers exhibit similar traits, except that they buy less bridal jewelry — only a third of all customers’ purchases at CTF are bridal jewelry. The Mainland China and Hong Kong markets are also differentiated. “Hong Kong is deeply influenced by Western culture and diamonds are widely recognized not only as a symbol of love and long-lasting value, but also as a gift for self-achievement,” explains Wong. The majority of CTF’s customers in Mainland China are women in the age group of 30 to 50, and in Hong Kong, 70 percent of its customers are ages 40 and below. Another difference is that in China, he adds, men tend to be less involved in jewelry purchases than their counterparts in the U.S.
“The spending capacity in China, in line with GDP per capita, is still lower than in developed economies, so the price points are lower,” says Bruno Sané, general manager of marketing for Rio Tinto Diamonds. “The big opportunity in China really lies in the range of $300 to $700 pieces,” he explains, adding that as the U.S. market is more mature, Rio Tinto can focus more on creative designs and storytelling, and the price range can be up to $5,000 for high-fashion items.
Diamond marketing goes back a long way in the U.S. De Beers is known for its generic category marketing from the 1930s and 1940s, and came up with the idea of a “Diamond Dream.” It was a term hoping to tie the strong emotional values of weddings with the idea that only something rare and precious is worthy of those precious moments. According to the BBC, prior to the De Beers campaign, only 10 percent of couples had diamond rings when they got married. In 1947, De Beers created the tagline “A Diamond is Forever,” which was wildly successful and cemented the desirable status of the diamond engagement ring.
De Beers controlled more than 80 percent of the global rough supply during the height of its generic marketing, and it made sense for the company to spend about $200 million annually to spread the desire for diamonds as widely as possible. Today, the mining company holds about 38 percent of the global supply, and it is no longer in its interest to engage in the same kind of generic marketing.
Instead, a new marketing climate in the U.S. began. De Beers, while keeping the essence of the “Diamond Dream” intact, tried to differentiate its products from others and launched its diamond brand Forevermark in 2008. “Forevermark is what we like to push as the best representation of the ‘Diamond Dream,’” explains Charles Stanley, president of Forevermark U.S., claiming that no other diamond brand can give an equal assurance of quality and integrity. “Millennials are increasingly interrogating the provenance of their diamonds,” says Stanley, adding that Forevermark is De Beer’s way of keeping their marketing current, so that it is engaging and inspiring today’s young customers.
“Not all diamonds are the same,” Stanley points out, “Diamonds have become commoditized and everyone is too focused on grading reports. There is no one explaining how one diamond is different from another, and we believe that the branded approach is the best way to create differentiation.”
According to Rio Tinto’s Sané, “The U.S. consumer is extremely well-informed and spoilt for choice.” He says that with flagship stores, out-of-town shopping malls, factory outlets, online shopping and more, sales and marketing strategies of the past are no longer relevant. “Gone are the days when the consumer had little choice and nowhere else to shop,” he adds. Sané believes that because the U.S. is such a mature market, consumers want their diamond purchases to align with their values and show off their individuality. “American consumers are very much interested in understanding the ‘who, what and where’ behind the diamonds they are purchasing,” Sané goes on to say. “Therefore, diamonds and jewelry that can showcase their origin are becoming increasingly more desirable, as are diamonds manufactured by companies that have ethical and sustainable business practices.” To pull the consumers back, Rio Tinto has launched “Diamonds with a Story,” a global initiative that tailors a palette of stories geared to the maturity of each market. The initiative aims to capture the emotions of diamond purchasing through its design, collaborating with top designers to create jewelry collections exclusively featuring Rio Tinto’s Argyle mine’s diamonds.
Hearts on Fire, also utilizing its unique and premium cuts and designs as its selling point, launched its multigenerational campaign, “Ignite Something,” in August 2015.“The idea is that Hearts on Fire, because of its classic cut, produces such a brilliance that it allows an igniting of passion to happen,” says Capeci. Taking a leaf from the page of its parent company, CTF, Hearts on Fire is also trying to cultivate its own group of VIP customers in the U.S. — a core group of loyal clients who spend about $50,000 a year on its jewelry. CTF’s VIP customers, numbering some 1.6 million, account for 20 percent to 30 percent of its sales.
The tradition of buying a diamond engagement ring has taken root in tier-one cities — highly established metropolitan areas such as Beijing and Shanghai — in Mainland China and in Hong Kong. Second- and third-tier cities, especially those in China’s inland, are still slow to catch on. “China has traditionally been a gold and jadeite market,” says Nancy Liu, president of Forevermark Asia Pacific. “In 1993, when De Beers entered China, there was no diamond culture. Ever since Forevermark was launched in China in 2008, eight out of ten women in tier-one cities now receive a diamond engagement ring or wedding ring when they get married,” says Liu. For tier-two cities, about 70 percent of women sport diamond engagement rings in 2015, Liu notes.
“Diamond engagement rings and wedding bands are getting more common among the younger generation as they are more exposed to Western culture,” says CTF’s Wong. However, the traditional Chinese gold jewelry wedding dowry, such as the “Dragon and Phoenix” bangles and necklaces, are not going away and are must-haves for the bride and parents of both families. Capeci agreed that traditional Chinese wedding jewelry does not usually include diamonds, but adds that their importance provides an opportunity for jewelry brands to incorporate diamonds into the design of those wedding pieces. “We have a design director who tracks what the Chinese customers want and is able to create jewelry that appeals to them,” Capeci says of the Hearts on Fire operation in China.
Rio Tinto tries to appeal to the rise of individualism in China’s Millennials. “The narrative here is all about versatile fashion jewelry that can be worn as an expression of your personality,” says Sané. “Gold products and simple solitaires are no longer sufficient to satisfy Chinese customers. Chinese consumers increasingly want to feel unique and are starting to buy according to what they want, not what society dictates.”
Another aspect of diamond marketing in China concerns authenticity. “In 2008, when Forevermark entered the Chinese market, it was and still is the ‘perfect storm’ to promote the diamond brand with ‘provenance,’” says Liu. China is known to have a counterfeiting problem with luxury goods, and even diamonds are not spared. In 2012, the Beijing-based National Gemstone Testing Center had warned that there were synthetic diamonds entering the Mainland Chinese market and being passed off as natural diamonds. “With ongoing issues in food safety and travel safety, to name a few, the Forevermark diamond and its unique inscription guarantee our consumers that each Forevermark diamond is natural, rare, beautiful and responsibly sourced from the diamond experts at the DeBeers group of companies,” says Liu.
Wong says Chinese customers are highly event-driven, self-purchase and gifting alike. Only a third of CTF’s sales are bridal jewelry, the rest span ranges from affordable mass luxury for the Millennials to fashion jewelry and high-end luxury products. For Forevermark in China, bridal jewelry comprises 60 percent of sales. Chinese consumers would buy jewelry not just for weddings, but also birthdays, anniversaries, graduation, birth, Chinese New Year, Valentine’s Day, Singles’ Day and more.
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Source: “The Diamond Insight Report 2014,”
De Beers Group. |
There is a tendency toward smaller diamonds and more delicate settings in China. Wong says that CTF’s customers prefer simple styles. He also points out that pricing and unique designs play a very important part in diamond sales in China. Young people are willing to pay for pieces that reflect their individuality, he says, adding that affordable fashionable diamond jewelry is increasingly popular.
Capeci observes that in the U.S., as a woman’s age and income increases, she usually expands her diamond jewelry collection to include more fashion-oriented styles and bigger designs, something she does not only for self-purchases but also for gifts. She adds that women in the U.S. are more willing to buy and wear large pieces of diamond jewelry for everyday use, unlike in China.
Reaching out to Millennials and instilling that “Diamond Dream” desire before they enter their prime spending years is of key importance. “We don’t find a drop-off in diamond engagement rings yet,” says Stanley, explaining that the steady nature of the bridal industry will ensure continued demand for diamond rings. While diamond engagement rings remain a stable business, nonbridal jewelry is more susceptible to economic conditions and consumer confidence, according to Capeci. To smooth over such kinks, the key is spreading awareness and preference, she says. “It’s about letting them find you,” Capeci explains. “You have to make sure they have all the information they need to come down to the store. Social media is constantly changing, so it is a hefty investment in technology, but it’s all worth it.”
In the U.S., social media marketing revolves around multifaceted marketing, seamlessly combining various platforms to tell a part of a larger story. Diamond marketing is mainly done through Facebook, Twitter, Instagram and Pinterest, as well as traditional forms of advertising such as online, radio, billboards and print. All these different media work together to drive traffic to a physical store, a “clicks-to-bricks” strategy, so to speak.
In China, the prime tools of communication are WeChat and Weibo, a messaging service and microblog, respectively. Brands are able to send subscribers messages of new products, deals or promotional events via the mobile app. “The one-on-one connection is very important,” says Capeci. Consumers like to feel special, and the idea of being granted access, such as getting to meet designers or having advanced viewings of upcoming products, connects them to the brand. Social media takes on a more personal form as consumers feel like brands are communicating with them directly, and the apps provide the tools and platform to share such content.
In addition to tackling the demand side, retailers and diamond brands also have to worry about a depleting diamond supply. “The value of the global rough diamond supply is forecast to be flat over the next decade, reflecting a steadily declining global supply reserve and no significant new sources of supply,” Sané predicts.
“We are now in a next generation of marketing,” Forevermark U.S.’s Stanley concludes. “As long as we recognize the challenges and adapt accordingly, we’re confident that consumers will continue buying into diamonds.”Article from the Rapaport Magazine - September 2015. To subscribe click here.
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