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Shrinking Consumer Spending on Diamonds is of Major Concern
Oct 16, 2012 8:38 AM
By Dilipp S Nag
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RAPAPORT... Shrinking consumer budgets for diamond purchases is the biggest challenge facing the industry and there is an urgent need to raise the industry’s profile among consumers, warned Russell Mehta, the managing director of Rosy Blue (India) Pvt. Ltd.
“Electronics, holidays and other luxuries have eaten away our industry’s share of consumers’ wallet,” Mehta said at the World Diamond Congress 2012 in Mumbai. “Our industry has underperformed other luxury goods.”
Mehta said that the luxury goods market is estimated to have reached $249 billion (EUR 191 billion) in 2011, up 77 percent from 1999, while the diamond jewelry market grew only about 26.5 percent during the same period. This was despite programs such as De Beers supplier of choice where diamantaires invested heavily in downstream promotions and expansion, he noted.
Mehta stressed that there should be a collective effort from the industry for the marketing and promotion of diamonds. In the current global volatility, promoting diamonds as an investment is also tempting, he added. Mehta outlined other challenges facing the industry including the lack of profitability in the manufacturing sector.
While he estimated that rough purchases will amount to about $15 billion in 2012, Mehta added that the industry has overpaid for the rough and that these losses are absorbed by the polishing industry.
Manufacturers hired some workers and expanded their capacities during the uptrend experienced in 2010 and 2011, which resulted in excess capacity this year. As a result, manufacturers ended up paying more for the rough in order to maintain their manufacturing levels, Mehta explained.
For the vast Indian manufacturing sector, Mehta said that liquidity has been restored partially due to the recent rupee appreciation against the dollar and some better September polished sales. However, he noted that polished prices had softened in the third quarter, which further squeezed liquidity and manufacturing profitability given that rough prices remained high.
He expects inventory levels to become relatively smaller by the end of the year but added that existing factory capacities should be more than sufficient to polish the expected rough production coming to market in the near future.
Other challenges that Mehta said the industry needs to be aware of include undisclosed synthetic diamonds entering the market, differing business-to-business price lists, attracting the right talent, as well as correctly utilizing the vast volume of recycled diamonds in the market.
Mehta projected negative growth for the diamond wholesale business in 2012.
“If we have a reasonable consumer sales season, we will probably again see some uptick in polished and rough prices and a better stock turn perhaps in the first quarter also, helped by the U.S. quantitative easing stimulus,” he said. “It’s still a fragile recovery.”
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Tags:
Diamond
World Diamond Congress
WDC
Mumbai
India
Rosy Blue
Russell Mehta
Rough
Polished
Mark, Dilipp S Nag
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