The Diamond Innovators

As the industry evolves, more parties throughout the distribution chain are realizing they need to embrace technology if they want to survive. Here’s a look at how three companies are using cutting-edge tools to improve efficiency, transparency and storytelling for retailers.

By Avi Krawitz

Venus Jewel:
Know Your Diamonds At the busiest intersections of diamond pavilions at major trade shows, Venus Jewel doesn’t display its polished goods as other manufacturers do. The Surat, India-based company’s booth, with its signature dark-blue branding, centers instead on giant screens with 3D images of rough morphing into polished.

Buyers — typically retail jewelers — leave their loupes in their pockets as they approach to view the company’s Know Your Diamonds (KYD) online inventory program.

“Check this out,” says Mahiar Borhanjoo, managing director of Venus Jewel International, inviting potential clients to tap into the technology.

Via touch screen, he navigates from the stock list to a deeper look at a diamond’s information. That includes the in-house Venus Grading Report with the stone’s specifications, as well as the country or region where it was mined, the weight of the rough, and images and video footage of its progress through various stages of production.

Borhanjoo soon shifts to Venus’s latest development: its 3Diam machine, which not only incorporates all that information, but also lets customers try on the diamond virtually, with a choice of different settings and bands.

A good story

In addition to helping customers feel more confident about buying diamonds remotely, Venus’s technology means retailers don’t have to hold a stone physically in their stores: They can tap into Venus’s inventory online and let customers choose the right diamond. And as Borhanjoo explains, having the stone’s provenance information helps the jeweler tell the diamond’s story effectively and transparently.

“If you look at our industry, those who are successful are the ones who tell a good story,” Borhanjoo tells Rapaport Magazine. “Technology has made the diamond story and information much more interesting to the consumer, because now they’re buying with absolute confidence [that they know what they’re getting].”

Beyond certificates

Venus launched KYD in 2015, but the system has its roots in the Venus Grading Report, which the company developed in the early 1990s. While the company also provides each stone with a certificate from the Gemological Institute of America (GIA), the Venus report offers additional parameters about the polished diamond.

Venus was also the first company in India to sell single-stone parcels, according to Borhanjoo. Those developments empowered it to be an early mover in online trading, launching its business-to-business portal in 1997.

With such detailed information available on each stone, the company saw a chance to go a step further and benefit retailers. To build KYD — and subsequently the 3Diam machine — it just had to add a few elements, such as the pictures and videos of the rough, which it already had.

Today, all of Venus’s retail clients have access to KYD when they log in to the system. The company is now focused on rolling out the 3Diam machines to approximately 400 independent retailers in the US.

The company is continually tweaking the system to enhance the wow factor for the customer, adds Borhanjoo.

“We’re working on how to tell the story better. We want to make the diamonds’ information more interesting to the consumer...[and] retailers are hungry to tell that story.”

Lucara:
Custom-ordered rough This past December, Lucara Diamond Corp. held a rough-diamond sale that was small in value but highly significant for the company. The first of its sales to use the Clara Diamond Solutions system, it was enough to show the platform could deliver on its promise to bring some much-needed efficiency to the market.

Mining companies traditionally sell their rough in assortments, meaning manufacturers must buy the entire lot even if they only need a portion of the goods. That’s not very efficient, as manufacturers invariably end up re-trading a percentage of their rough on the secondary market.

“With Clara, they buy only the diamonds they want,” states Lucara CEO Eira Thomas. Manufacturers upload their orders to the system, providing the exact specifications for the polished they need, and Clara matches the order with the appropriate rough. The system then shows the buyer the best manufacturing plans, having scanned the rough via Sarine Technologies’ Galaxy machines, she says.

At the December sale, “we demonstrated that there was huge value to be unlocked through Clara, both for producers and manufacturers,” adds Thomas. Her confidence was bolstered by the 8% premium the sale achieved over what the diamonds would have garnered at a regular tender.

From push to pull

The sale results supported Thomas’s feeling that Clara could change the archaic way the industry conducted its business. In the current distribution system, miners push their supply to the market, but Thomas envisions a shift to a system that instead lets manufacturers pull the goods they need. Not only would that create a greater connection between the rough and polished segments, she says, it would allow manufacturers to avoid excessive inventory costs.

The program is suited to rough between 1 and 8 carats — which Thomas admits excludes Lucara’s core product, as most of the value of its Karowe mine in Botswana lies in stones above 10 carats. These “special” stones have too many potential cutting outcomes for Clara to present effective solutions, and they also require the expertise of a diamantaire to plan.

“We recognize that tendering is the most efficient way to sell certain types of goods,” Thomas notes. “Clara is ideally suited to the bread-and-butter goods that represent the majority of the value chain.”

The right fit

Thomas was the one who introduced the platform to Lucara, though her involvement with the technology began before she became the miner’s CEO in February 2018.

The creators of Clara were third-generation diamantaires who were frustrated with outdated rough-buying methods and had developed an algorithm to change them. In their search for investors, they brought the platform to Thomas, an industry veteran with 25 years of experience in diamond mining.

In her efforts to commercialize the product, she pitched it to Lucara, of which she was a co-founder. The board initially dismissed the idea, Thomas recalls, since Lucara was looking for mining-oriented growth avenues. But new mining prospects proved hard to come by, and the board soon reexamined Clara “as a diamond rather than a mining opportunity,” she says.

Significant revenue

Thomas sees potential for Clara to generate significant revenue in the long term, but in the meantime, the company is ramping up gradually. The goal is for other producers to sell their supply through the system, since it needs high volume — which Karowe doesn’t have — to be viable, she says. Lucara is confident that at least one other miner will start selling via Clara this year.

Once it builds up to a critical mass of stones, Thomas believes Clara can have a lasting impact on the diamond trade.

“There’s a huge volume of goods that can easily and efficiently be sold using technology,” she says. “This can improve margins for all participants in the market.”

Sarine:
Stones in profileDavid Block, CEO of Sarine Technologies, has a provocative response to critics of automated grading.

“What’s the advantage of grading a diamond manually over using technology?” he asks those who argue that there’s a subjective, almost artistic side to gemology that’s under threat, along with jobs that could be lost to artificial intelligence (AI).

“I can only think of reasons why it shouldn’t be done manually — why it’s a huge risk to do so,” Block continues, citing tests that show different gemologists giving the same diamond varying grades. As for the jobs, he adds, some may disappear, but technology also calls for new skills, and that means more roles for people to fill.

A bigger pie

Block has faced resistance to tech-driven change before. To its detriment, he says, the diamond industry hasn’t evolved fast enough to meet the needs of today’s consumer. Sarine’s mission, he stresses, is to create the change that people are not looking for.

As a self-described “diamond technology” company, Sarine has historically specialized in equipment for mapping rough diamonds and turning them into polished. More recently, its strategy has shifted focus to retail.

“One of our main objectives is to add value to the retailer, because that trickles down the whole pipeline to the manufacturer, wholesaler and the producer,” he explains. “As an industry, we need to create a bigger pie rather than see how we can all take a piece of the existing one.”

Shift to branding

Central to its retail program is the Sarine Profile report, a digital sales platform that encompasses the company’s automated 4Cs grading, details of the stone’s light performance, and virtual imaging, along with information on the diamond’s journey from rough to polished.

But the platform isn’t just about providing information.

“We need to see how we can contribute to the sales experience — before, during and after it closes,” Block explains. For example, when a customer enters a store, the retailer can access Sarine Profile, show the client a diamond’s information, and email it to them on the spot. And if the customer doesn’t buy it, the jeweler can send them other options later, continuing the conversation.

Key to the strategy is for Sarine to stay in the background, Block insists, as the aim of Profile is to support the jeweler’s brand — to help the retailer differentiate its goods, and to sell them more quickly and at higher margins.

By doing so, the company is capitalizing on the strong trend toward branded products, as well as program goods, which are manufactured to order. That trend is contributing to a more efficient market, since a program diamond takes significantly less time to work its way through manufacturing to the retail store than a generic stone does. The branded diamond doesn’t change hands as often, and since the goods are made to order, there’s no waste along the way, says Block.

Manufacturers that can take part in this process are doing better than others, he observes, so parties in the industry increasingly recognize the need to tap into these efficiencies.

“There are strong indications that the industry is changing quite rapidly, as there is an openness to technology that I didn’t feel 10 or five years ago,” Block states. “Any industry that tries to stop technology doesn’t stand a chance. It will happen regardless, and you’ve got to utilize it to gain value.”

Image: Shutterstock

Article from the Rapaport Magazine - March 2019. To subscribe click here.

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Tags: Avi Krawitz