News / Diamonds
Full of Sound & Fury
Fall conferences proliferate as speakers attempt to predict the future of diamonds
by Peggy Jo Donahue & Robert Weldon, G.G.
Most of you were unable to attend fall diamond conferences because you were preparing for holiday sales. So were taking you on a quick tour of the issues discussed at the conferences, including profitability, branding and consumer confidence. Heres a quick summary.
Will Consumers Accept Higher Prices Ever?
Suppliers who predicted jewelers would have to accept higher polished diamond prices in 2004 were disappointed. Though rough prices increased 25%, polished prices rose only 8%. Ken Gassman, director of research for the Rapaport Group, New York City, told attendees at the Rapaport International Diamond Conference in New York City that retail jewelry prices overall were actually down 2%-3%.
Terry Burman, group CEO of Signet, parent of Sterling Jewelers, Akron, OH, told attendees, We must be careful of the value proposition to consumers. Burman added that Sterling did raise prices a bit in 2004 without seeing an impact on sales. But its a delicate balance too much of an increase and we could see resistance.
Ed Bridge, president and joint CEO of Ben Bridge Jewelers, Seattle, WA, who also spoke at the conference, agreed. Buyers wont accept [it], he says. There has been relative stability for the past 10 years, and they dont remember the days of regular price increases.
Bottom line? Suppliers will have to pass on some of the increased price of rough diamonds to retailers in 2005, but retailers feel they cant raise prices to consumers so retail profitability will continue to take a hit. Higher precious metal prices in 2005 (gold had risen to over $450 an ounce at press time) will exacerbate the problem.
The relentless growth of web-based diamond sales also affects the prices traditional retailers can charge consumers for loose diamonds. Rock-bottom mark-ups online make it increasingly difficult for non-mass market jewelers to make a profit on loose stones, as retailers at the two-day Couture Diamond Leadership Conference discussed at length.
Is Branding the Answer?
Mary Forté, president and CEO of Zale Corp., Irving, TX, spoke at the Rapaport conference about how her company is repositioning its brands to connect with consumers in stores and online. The customer is at the heart of all our marketing decisions, she said. Zale conducts customer surveys and keeps its database current so it can market to the various types of people who patronize its core retail brands. The research is causing Zale to evolve its brands so media are better targeted and messages are customized and resonate more, said Forté.
Besides focusing on customers emotional needs, retailers must differentiate themselves with unique diamond products, said Bridge. You can differentiate commodities, he said. He cited a successful supermarket promotion for beef, called Ranchers Reserve, that charged higher prices for specialized cuts that promised and delivered a better quality of that well-known commodity.
Jewelers also need to develop better store brand images because more branded suppliers are becoming their competition. These companies are betting that opening their own stores offers the best hope for selling diamonds and diamond jewelry in the future because it strengthens their direct ties to consumers.
Robert Gannicott of Aber Diamond Corp., Toronto, Ontario, Canada, discussed at the Rapaport conference why his company, a part owner of Canadas Diavik mine, skipped the entire diamond distribution system and instead bought majority ownership of Harry Winston, an established retail brand. We decided to stay a pure diamond company thats interested in only mining and retailing, he said.
The World Diamond Congress in New York City in October focused diamantaires attention on issues of consumer confidence in particular how synthetic and treated diamonds are affecting the natural diamond business.
Scientists from the Gemological Institute of America and the Diamond High Council laboratories in Antwerp, Belgium, noted that synthetic diamonds entering the trade still account for a very small percentage of the market and those that made it in are readily identified by their labs. Still, diamantaires were concerned about the modus operandi of some labs and resolved the following:
- To cooperate fully with trade associations and companies to formulate a common standard of disclosure and nomenclature for synthetic diamonds.
- To call on all laboratories to refrain from issuing grading reports for synthetic diamonds.
- To call on all laboratories to issue certificates linking high-pressure/high-temperature treatments in diamonds to their color to underscore that HPHT-achieved color is not natural. Attendees discussed the idea of moving the color description on certificates from the space normally reserved for it to under the space for comments at the bottom, next to HPHT comments. GIA said it would review the proposal. Another recommendation involved use of a different paper color for HPHT certification to further differentiate them from certificates for untreated diamonds.
The Diamond High Council, which hosted the Antwerp Diamond Conference in November, marked the occasion by announcing the development of the D-Screen machine, a battery-operated device about the size and shape of a shoe. Its able to indicate instantly whether a loose, colorless (D-J) polished diamond is natural and whether the color has not been enhanced through HPHT treatment. It can distinguish all kinds of synthetic diamonds, including CVD-manufactured diamonds. It also indicates whether a diamond requires further testing at a qualified lab. D-Screen will be available from HRD starting in April for $3,220. This is considerably less than the two synthetic diamond detection devices developed by De Beers Diamond Trading Co. and now available through the Gemological Institute of America for about $10,000 and up.
In Antwerp, Matthew Runci, president and CEO of Jewelers of America, announced the launch of an Early Adopters Initiative to coordinate best-practices principals among various companies around the world, from miners to retailers. When completed, the principals will help retailers choose suppliers who champion business integrity and safe environmental and labor rules. Among those whove signed on to the initiative are retailers Zale Corp., Tiffany & Co., Cartier and Signet Group, parent of Sterling Jewelers.
For more information on these diamond conferences, go to www.professionaljeweler.com and click on Daily News Archives for October and November 2004.
|Sarah and Ehud Shimoni of Tycoon (left) pose with Couture Conference guest speaker Lev Leviev of LLD (center), Toros Kejejian of Tycoon and Nancy Robey of VNU Jewelry Group.