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October 1999 Diamonds: News 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:
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
demand cycles. 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. Branding Arrives 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. Shocking Solution 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
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