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RAPAPORT... There remains much for the diamond industry to be proud of and look forward to, according to Philippe Mellier, the CEO of De Beers, at the launch of the company's inaugural Diamond Insight Report at the Hong Kong Jewellery & Gem Fair. The report noted that 2013 was a record year for diamond sales, increasing 3 percent year on year to $79 billion, following an increase of 2 percent in 2012. Even though the report highlighted growing consumer demand, in particular from countries such as China, India and the U.S., it also highlighted a number of risks and challenges for the industry. “We must understand the risks and opportunities in order for the industry to compete with other luxury sectors,” Mellier said, pointing out that diamonds’ share of advertising voice in the U.S. has been reduced by almost half since 2007. Over the same period, fashion and electronics grew their share of advertising voice in the U.S. The impact on consumer purchasing behavior is reflected in the fact that luxury electronic gadgets have seen a compound growth of nearly 14 percent between 2004 and 2013, while luxury jewelry sales have increased less than 2 percent over the same time period, he noted. Online habits have become an increasingly important channel for the diamond industry to tap. Consumer buying habits are changing and the report posed questions around how well the industry understands the cultural differences and buying behaviors of its global consumer base. China is the world’s fastest growing market for diamond jewelry sales and more than one quarter of all Chinese buyers research their purchase online in advance; and 50 percent of single women in China are making jewelry purchases. Stephen Lussier, the CEO of Forevermark, said, “The opportunity to tell consumers about our products and companies through a longer period of time on the Internet should not be underestimated.” The report emphasized the importance of building brands to stoke future growth as they not only give retailers an opportunity to differentiate themselves by product, but consumers also want branded merchandise and trust brands to deliver quality. Another risk factor to the future of the industry is a predicted imbalance in rough supply and polished demand with rough supplies expected to plateau in the second half of this decade before declining from year 2020 forward. The cost of mining diamonds is also becoming more prohibitive, De Beers stated. As supplies from existing mines decrease, mining will become increasingly complex and remote, driving up costs. The report recommended the industry invest in a number of areas to deal with the changes in its operating environment. Mellier said, “If we choose to invest, we stand on the cusp of the greatest opportunity for growth that the industry has seen in more than a generation.” Read the full report here: www.debeersgroup.com/insightreport
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