Brave New World
De Beers' role in the diamond market is changing, and that's
changing the market
They arrived at it by different means, but speakers who addressed
diamond economics at the recent International Gemological Symposium
in San Diego found a common theme: De Beers' flirtation with
diamond branding is due to the convergence of three factors:
- Changes in the world economy.
- Changes in the specialized diamond economy.
- The growth of technology.
Supply & Demand: World Economy
The shifting world economy, most apparent in the Asian economic
meltdown, and development of new mines have led to an abundance
of diamonds. In addition, De Beers sits on a $5 billion stockpile,
said Martin Rapaport of the Rapaport Diamond Report, New York
City. Meanwhile, consumer demand hasn't grown enough to absorb
the increased supply.
New Diamond Economy
The traditional specialized diamond economy at least
the one De Beers controlled for most of this century through
careful distribution of the world's diamonds has changed
profoundly. Many mining concerns no longer sell full runs through
De Beers or stockpile, which was De Beers' strategy during slower
As De Beers has increased its stockpile to shore up prices by
limiting supply, its own profits have fallen. So De Beers is
focusing part of an internal review on increasing demand, says
Carl Pearson, a London based diamond economist.
Technology Clicks In
Technology has led to the growth of better synthetics and
the GE POL color altering process. These initially caused
De Beers to investigate branding as a guarantee of a natural
diamond product, said Russell Shor, editor in chief of GemKey
USA, New York City. Technology also fueled the rise of the Internet,
where brand names are vital to success.
Test marketing of De Beers diamonds in England and the sale
of its millennium branded diamonds worldwide have caused
diamond cutters and dealers to fear De Beers will sell polished
diamonds on a large scale, competing with companies it supplies
with rough diamonds, said Eli Haas, president of the Diamond
Dealers Club of New York City. De Beers could soon sell directly
to consumers also, he said. De Beers' research shows many consumers
distrust retailers' ability to distinguish natural diamonds from
lookalikes. De Beers wants to ensure continued confidence in
diamonds, said Shor.
De Beers' internal review may lead it to abandon its role
as diamond monopolist, said Haas. Rapaport pushed the scenario
a step further by imagining a diamond market in which prices
of rough actually fluctuate, a situation rarely encountered since
De Beers began to control the rough diamond supply.
The speakers had little trouble imagining a world in which
De Beers would embrace its role as a diamond brand name, shifting
its attention from regulating overall rough supply to branding
the products of its stockpile and mines, then controlling the
sale of these diamonds to consumers.
What's a Retailer to Do?
Ultimately, retailers will survive De Beers' branding by becoming
or remaining branding powerhouses. Not all consumers
will buy into branded diamonds because of the higher cost of
an already pricey product, said Haas. Good retailers can offer
better value for diamonds sold under a store name, said Rapaport.
Becoming an authority on gemological issues and opening an on site
lab to grade diamonds, for example, can make your brand name
one consumers turn to when they don't want to pay higher prices
for a branded diamond.
by Peggy Jo Donahue
Copyright © 1999 by Bond Communications.