Refraining from purchasing high-priced rough diamonds and avoiding unsustainable subsidies from banks and government were some of the strategies Martin Rapaport, the chairman of the Rapaport Group, offered during his presentation on how companies can combat both global recession and changes in the jewelry industry, at The Rapaport International Diamond Conference (IDC) on August 14 in Mumbai, India.
Rapaport suggested, "Miners are raising prices and rough is ahead of the polished. So why manufacture diamonds when it is so hard to make money? It just seems better to just buy polished." He credited a "three-ring circus," in part, for the current environment, made up of "peacockers," who pay anything for rough; "ponzi players," individuals that pony up the higher prices to protect their inventory; and "down-streamers," who purchase expensive rough and try to make it up "downstream" with polished goods. "A diamond is not worth what you paid for it," advised Rapaport. "Your inventory is not worth your cost. Your inventory is worth replacement cost."
Other factors why rough supersedes polished in price, according to Rapaport, include limited distribution, a surplus of credit, and the fact that six companies manage 93 percent of the world's rough diamonds.
Rapaport also encouraged companies to engage in better business and fair-trading practices. "You are forced to do things that you shouldn't be doing because your competitor is doing it," he said. "This is negative competition." Rapaport insisted that it is "so easy to do good business."
Ultimately, Rapaport believes that the long-term outlook is good. "When you see this kind of instability and change, this is a call for competition," he said. "It is a call for you to put on your sneakers because you don't have to outrun the whole market. You just have to be the best in your category."
First held in 2004, the IDC is an annual event for the diamond and jewelry industry. This year's conference, the second one held in Mumbai, focused on the challenges the industry faces.