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The 18 Inch Diamond Dream

Jun 13, 2014 8:00 AM   By Avi Krawitz
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RAPAPORT... On the sidelines of the JCK Las Vegas show, a deeper conversation was taking place than the usual negotiation for goods. Numerous educational seminars and keynote addresses urged businesses to move beyond simple product and price transactions and think long-term to ensure industry growth.

While De Beers management challenged jewelers and diamantaires to assess what they’re doing to keep the “diamond dream” alive, Martin Rapaport, chairman of the Rapaport Group, called on the entire pipeline to focus on the final 18 inches that the product must move across the jewelry counter for the customer’s purchase.

“We have to think what we can do with the last 18 inches that is going to make it possible for us to charge higher prices for diamonds and sell more of them,” Rapaport said during the Rapaport Breakfast at the JCK show. “If we can do that, then everyone is a winner, from the miners to the manufacturers, dealers, wholesalers and retailers.”

Doing so, he explained, requires a unified effort in which the idea that you have to look after your customer’s customer’s customer becomes part of the diamond industry culture.

Rapaport argued that higher prices can only come from jewelers, without whom, mining, manufacturing, merchandising and marketing activities would be worthless. With polished price increases persistently lagging behind the rough price rises, he stressed that growth cannot be driven from the rough mining sector because if people downstream don’t make money, the miners won’t be able to market and sell their product.

“If mining and manufacturing companies want higher prices they are going to have to get them from jewelers who make higher profits across the counter,” he said. “It’s high time the diamond industry respected and supported jewelers.”

Within that framework, Rapaport urged everyone to assess the “value of their added value” and understand their place in the market. More importantly, he stressed that diamonds need to be sold as part of an emotional package rather than as a utility product or as a function of price. “We all must recognize that we are not in the business of selling diamonds, we are in the business of building relationships,” Rapaport stated. Consequently, he explained that the entire supply chain needs to focus on their relationship with the customer and capture the emotion of the purchase within that interaction.

Philippe Mellier, De Beers CEO, assured that consumers still have an innate emotional connection to diamonds and that new marketing approaches could help the industry connect with the concept of the so-called diamond dream. In fact, Mellier stressed in his first ever address at the JCK Las Vegas show, that the dream is more alive than ever as global demand has never been stronger.

De Beers estimated that global polished diamond consumption grew by about 3 percent in 2013. Consumption in the U.S., which De Beers estimates accounted for 39 percent of the global market last year, grew 7 percent, while China – the second largest market with 12 percent share, rose 11 percent. Global diamond consumption is expected to rise by around 4.5 percent in 2014 on the back of further growth in China and the U.S. Growth is largely being driven by women’s diamond jewelry, which accounted for about 80 percent of total diamond retail sales by value in the U.S. in 2013, according to De Beers.

Stephen Lussier, CEO of the De Beers Forevermark brand, presented preliminary findings of a larger study expected to be published by De Beers later this year.

Lussier reported that the women’s diamond jewelry market grew in 2013 due to both increased volume and higher average price. The volume of sales increased 6 percent from 2011 to 21.6 million pieces of diamond jewelry in 2013, and the average price per piece rose 28 percent during the two years to $1,564. As a result, the U.S. diamond jewelry market was valued at $33.76 billion last year.

The De Beers study identified three important segments that have signaled notable changes in the women’s diamond jewelry market.

Lussier explained that more single women are actively looking for fashionable designs in their diamond jewelry purchases, but at lower price points. As a result, the past two years has seen a growth in the volume of purchases by single women but a decline in the average price. In contrast, married women bought fewer pieces but at higher prices. The share of affluent consumers in the married women segment increased while the lower income groups reduced their diamond jewelry purchases.

The study further revealed strong growth in the bridal segment with “very strong growth in volume and very significant increases in price” of the diamond engagement ring. Significantly, Lussier reported significant growth in wedding diamond jewelry sales, both in terms of volume and price.

Lussier reasoned that people are waiting longer between the engagement and marriage and perhaps have more time to save up for the wedding – and therefore they have larger budgets for wedding jewelry than before. He also stressed that the diamond purchase for the wedding should be the easiest target for the diamond and jewelry market because the jeweler knows who they are and already has a relationship with them.

De Beers management took the survey as a vote of confidence for the future of the diamond dream. However, both Lussier and Mellier cautioned that the industry cannot take its success for granted given the ever-changing consumer landscape.

“We must address existing and emerging challenges to consumer confidence and ensure that supply effectively meets the growth in demand,” Mellier said. “This involves understanding them better, coming up with new ways to meet their needs and ensuring a sustainable supply of the type of products and propositions they desire.”

Mellier stressed that the industry is faced with an exceptional opportunity to combine the consumers’ desire for diamonds with their desire for compelling brands. While De Beers has invested in developing its Forevermark brand to capitalize on those trends, both Mellier and Lussier urged others in the industry to do the same. Unlike other luxury products, Mellier noted that diamonds have not yet seen the benefit of brand competition that has elevated its performance.


The industry might need to up its game in that area. Amid the scarcity of high impact diamond brands, De Beers reports that there is increasing pressure from competitive categories for their share of the consumer’s wallet, especially from electronics. The study showed that 22 percent more people owned a smartphone in 2013 than in 2011, while only 2 percent more owned fine jewelry.

While consumers are spending more on experience, Lussier, like Rapaport, stressed that the challenge for the industry is to make sure that businesses stay connected to the emotional needs of the customer. After all, he argues, “love is no less important than it used to be. So the need [for our industry] is not disappearing.”

Having ditched its generic marketing spend, De Beers feels it is sustaining the diamond dream through the Forevermark brand. However, to be fully effective, Forevermark needs a fierce competitor to create some brand warfare that would benefit the whole industry – similarly to how Apple and Samsung compete and increase demand for electronics and as Smirnoff and Absolut do for vodka.

From De Beers viewpoint, Forevermark is adding value to the company’s mines by shifting its focus to the jewelry counter. Both the De Beers executives and Rapaport encouraged others to do the same. After all, as Rapaport said, it is the jewelry sector, not the miners or manufacturers that bring home the money for the industry.

The diamond dream, it seems, is only 18 inches away.

The writer can be contacted at avi@diamonds.net.

Follow Avi on Twitter: @AviKrawitz and on LinkedIn.

This article is an excerpt from a market report that is sent to Rapaport members on a weekly basis. To subscribe, go to www.diamonds.net/weeklyreport/ or contact your local Rapaport office.


Copyright © 2014 by Martin Rapaport. All rights reserved. Rapaport USA Inc., Suite 100 133 E. Warm Springs Rd., Las Vegas, Nevada, USA. +1.702.893.9400.

Disclaimer: This Editorial is provided solely for your personal reading pleasure. Nothing published by The Rapaport Group of Companies and contained in this report should be deemed to be considered personalized industry or market advice. Any investment or purchase decisions should only be made after obtaining expert advice. All opinions and estimates contained in this report constitute Rapaport`s considered judgment as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. Thank you for respecting our intellectual property rights.
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Tags: Avi Krawitz, De Beers, diamonds, Jewelry, Martin Rapaport, Philippe Mellier, Rapaport
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