Staying strong: Projecting a bright future for diamonds

by carly_midgley | February 22, 2018 7:57 am

By Karen Simmons

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As a 30-plus-year proprietor of a jewellery business, I can tell you dealing with diamonds is a blessing. Where else can you make dreams come true on a daily basis with a former ‘rock’ turned to polished perfection? Those who love the craft and share their passion thrive when it comes to diamonds—no doubt about it.

They say history repeats itself, and that it’s a fool’s errand to attempt to predict the future, but it is still worth asking: in the diamond industry, where are we and where are we headed?

Roughly speaking, smoother sailing ahead

First, it’s best to accept the current reality. Ernest Blom, president of the World Federation of Diamond Bourses (WFDB), says polished price indexes are faltering for all major sources, such as RapNet, IDEX, and Polished Prices. He adds today’s market imbalance is due in part to manufacturers “cutting and polishing quantities of diamonds that are simply not in tune with demand at the retail end of the pipeline.”

Having witnessed a recent history of rises in rough prices that have not transferred directly to polished prices, intermediaries and the retail segment along the pipeline have suffered reduced margins.

Although he does not anticipate long-term problems for underlying demand, Martin Rapaport—chair of the Rapaport Group—indicates diamond categories and market niches are key. He says the industry should “expect continued SI and I1 demand with no significant overall market increases until the Chinese move into market opportunities.”

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Rapaport sees the VS2-grade range as performing decently, while high-end demand remains challenging. In fact, he says stones in the range of VVS near D colour have seen pricing slides since peaking in 2011.

Supporting the sentiment of continued demand for slightly imperfect and imperfect clarity, Blom says buyers are “happy to opt for less expensive diamonds in their engagement and wedding rings and other diamond jewellery purchases.” He adds, “It appears clear that American consumers are still feeling the pinch more than nine years after the great financial crash of 2008.”

Had the crash not occurred, producer graphs hinted at rough drawback by now, but pricing predictions are frequently a murky bet. There are too many industry variables to consider, in addition to the fact many top industry figures must avoid speculating to preclude legal entanglements.

Glimmers of hope

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Tom Ormsby, head of external and corporate affairs for De Beers Canada, noted the North American market had a very strong response to the Black Friday weekend. He says this is evidence “consumer confidence continues to grow in the United States and has reached its highest levels in almost 17 years.”

This bodes well for the entire holiday season, since not only are most diamonds sold during this time, but the U.S. market also makes up close to half of world diamond consumption.

Ormsby was quick to confirm Canada’s passionate love affair with diamonds is also alive and well. He reminds us with a “solid economy and a multiple-diamond ownership culture in Canada on a per capita basis,” Canada is the world’s third-largest diamond producer based on value. In part, this is driven by women.

“Economic empowerment of women with more women in the workforce has increased self-purchasing,” Ormsby says. Thus, it is no surprise De Beers’ 2017 Diamond Insight Report revealed up to 90 per cent of diamond jewellery global sales demand comes from women. (For more on these statistics, visit www.diamonds.net/news/NewsItem.aspx?ArticleID=59337&ArticleTitle=De+Beers+Marketing+Targets+Women and www.wsj.com/articles/de-beers-faces-tricky-task-of-selling-diamonds-to-millennials-1509328920.)

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These are not the only bright spots in the diamond value chain. Despite the impending closure of De Beers’ Victor Mine in Ontario, for instance, Ormsby declared Victor “struck a chord as the little diamond mine that could” due to its spectacular production of high-quality diamonds. Although the mine is small, he says “the sorting floors in London, then Botswana were (and still are) all abuzz when Victor diamonds arrived. Sorters and diamond experts always wanted to get a good look.” As part of the original team that built and opened the mine, Ormsby is proud it withstood two global recessions and credits the dedicated culture of many long-term staff members.

All in all, Canada’s mines are doing well. In Nunavut, Baffin Island anticipates the opening of the Chidliak Mine in 2020, while Gahcho Kué (Canada’s sixth mine) began operation in 2016. Expected to yield more than 4 million carats annually, the latter mine will continue to produce for up to 12 years. The country’s original diamond mine, Ekati, will likely be depleted in 2020; however, plans for a new open-pit operation on adjacent property may extend operations for about 10 years.

Due to world-class environmental standards, high quality, and genuine national pride, Canadian diamonds have always been a consumer favourite. There is no doubt they will continue to shine brightly.

Millennials and diamonds: A fabulous future

Baby boomers have been superseded in numbers by millennials, who have growing purchasing power. This isn’t only true in Canada—Ormsby says China and India’s middle-class households, which consist of huge numbers of millennial-aged diamond buyers, will continue to grow over the next decade.

Obviously, millennials are quite savvy with social media and online research. Mix that with spontaneity, a leaning toward instant gratification, and their desire for experiences, and you’ve got the key to their hearts. As Rapaport puts it, “successful people want symbols.” He also notes the important role fashion and design play in positioning diamonds. When it comes to luxury goods, millennials have an affinity for the latest tech gadgets, designer shoes, handbags, and similar.

“Diamonds, by contrast, are units of value that remain and that can be handed down from generation to generation…objects that are bought to symbolize the milestones of life,” says Blom.

Low- to mid-grade diamond buying is becoming popular, and is an opening to connect with millennials. Remember, this age group has cherished memories, too. Diamonds are the perfect ‘super glue’ to memorialize relationships. They are durable, while other luxury goods lack shelf life.

Millennial marketing

Following a pattern of historical industry successes, the fairly new Diamond Producers Association (DPA), formed in 2015, is actively promoting diamonds with a multimillion-dollar marketing strategy centering around the phrase, “Real is rare. Real is a diamond.”

In this campaign, short commercials and print ads are capturing moments shared between couples in love. Debuting the commercials on the Grammy Latin Awards and the American Music Awards allowed DPA to capitalize on a hip and trendy celebrity connection.

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Although devised by diamond miners to promote their stones on a generic level, the DPA’s efforts have achieved traction by sharing precious moments in young millennial couples’ lives. Marketing videos depict aspects of each couple’s relationship that are imperfect but genuine—just like diamonds themselves.

Focusing on women and millennials for future diamond sales growth is an excellent way to secure diamonds’ place in the storyline of love, life together, and commitment of future diamond buyers.

A true love story

Get to the heart of your customers’ stories, and there’s sure to be a diamond that will make them shine. For an example, look no further than Sierra Leone’s Peace Diamond. This 708-carat gem was found by a priest who voluntarily turned it over to the government. Rapaport says much of the proceeds from its sale will support clean water, hospitals, medicine, and other citizen needs in Sierra Leone. Tales like this are never forgotten, and nor should be any customer’s story.

Life events are journeys to be shared, so retailers should leave no ‘stone’ unturned when promoting passion for diamonds. They are the real lynchpins in every love message.

CHEMICAL COUSINS CAN’T CUT IT

Lab diamonds (also known as lab-grown, synthetic, artificial, cultivated, and even cultured diamonds) will continue receiving attention from the industry, says Tom Ormsby of De Beers Canada–but there is no doubt natural diamonds rule the roost. No substantial market would exist for artificial stones if not for the extensive and strong history of natural, authentic diamonds. Synthetic, lab-grown diamonds are easily replaceable, while the Earth only has so many natural diamonds to give. Ernest Blom of the World Federation of Diamond Bourses (WFDB), Martin Rapaport of the Rapaport Group, and Ormsby voiced varying opinions regarding synthetic diamonds as compared to their natural counterparts. Rapaport expressed concern about the livelihood of artisanal diggers and their families if synthetic diamonds grow stronger. From this author’s experience as a jewellery store owner, no clients have directly sought out synthetics. Many jewellers have shared there is a certain stigma associated with these gems, as there was with other synthetic stones such as rubies and emeralds, which have dropped significantly in price since they were put on the market. Lab-grown diamonds are closely priced to natural ones, and in many cases, customers prefer to have the real thing.

Earning a reputation as a trusted advisor to gem investors around the world, Karen Simmons is a Gemological Institute of America (GIA) graduate. In addition to being the proprietor of The Gem Gallerie, Simmons frequently travels overseas with clients for onsite mine visits and helps diamond investors fully realize the immense potential of fine gems as solid alternative to traditional investments. In her 10^th book, Perfectly Clear: Buying Diamonds for Pleasure & Profit, Simmons describes how to add S.P.A.R.K.L.E. to your portfolio. She can be reached via e-mail at ks@karensimmons.com.

Source URL: https://www.jewellerybusiness.com/features/staying-strong-projecting-bright-future-diamonds/

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