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Seven billion, and counting - part 2

We left off, on the last post, posing a question.  Just what will retailers need to consider in the coming decade, especially when it comes to the diamond business? We can make some reasonably good assumptions, and speculate from there.  (I am thinking mostly of the US market, but most of these points apply in many established markets). The number of brick and mortar retailers will slowly decline.  Persistently high costs of materials (metal and stones) will cause local markets to consolidate further, spurred by low unit sales.  That will mean that efficient, well-capitalized and marketing-oriented operations will accrete volume, become dominant and drive even more operations out of business.  We already see that effect now, with some retailers having very good business in these economically difficult times, while others are doing poorly. Diamonds will remain the bedrock of the business (even though specialized retailers dealing in fashion goods made with alternative materials, i

Seven billion, and counting

Sometime in the last month or so the seven billionth living person joined us, or so say the demographers.  We also learn that the world population grew by a billion in just 12 years, and probably another billion in the next 12 years or less.  As a reference, about 50 years ago there were three billion people on the planet.  We know the world's resources are strained now to meet the need of 7 billion people, never mind the 10 billion or so expected before the end of the century. Let us accept for the moment that the world will adapt - somehow.  A little optimism is a good thing.  But according to futurists and prognosticators, that adaptation will come at the expense of many of our treasured standards of living.  While we in the US and elsewhere in the developed world might be struggling to maintain those standards, many hundreds of millions elsewhere in the world aspire to become "Americans", to enjoy the benefits of leisure time and modern conveniences. We have alrea

More thoughts about Oppenheimer selling to Anglo

We read today that Stephen Lussier's, of De Beers, stated that there will be no changes in De Beers operations.  It would have been destructive to have said otherwise.  Such comments are a necessary part of keeping the boat from rocking.  There is nothing else he could really say.  As the closing on this sale will take time, it is of paramount importance to have "business as usual."  By the time Anglo fully takes over, Lussier's comments will have faded away. I thinking about this kind of distance between actions, I cannot help thinking there has been some pre-planning in the Oppenheimer sale.  There had been some rumblings about a sale at least a year ago.  But there were a few open issues that had to be dealt with first. First, Nicholas Oppenheimer had to quit the Anglo board, a necessary move as his presence at this juncture would once again tie him to whatever moves Anglo wants to makes.  Second, there had to be a new contract with Botswana.  That happened

De Beers - end of a remarkable era

The news today that the Oppenheimer family has sold out its remaining share of De Beers to Anglo-American, subject to regulatory approvals, brings to a close a remarkable era, and the extraordinary tale of the Oppenheimer family.  In many ways, the diamond industry owes its success and perhaps its very existence to this family.  Observers have been commenting for over a decade on De Beers' struggles to transform itself from a near monopoly into a modern commercial operation.  At every turn, it fought to maintain control of its distribution and historical methods, and step by step it has been forced to retreat.  At the core, the issue was whether it could create an effective marketing plan that would create added profits--and justify the existence of a complex marketing and sales organization, the DTC.  European regulators forced it to sever its long-time control of Russian diamond production, and to create a cumbersome and onerous system for continuing its sightholder processes. 

Retailer tantrums

Just this week we read about Blue Nile selling a $300,000 diamond, and over a smartphone.  We wondered about its size and qualifications - just curiosity - but the sale itself came as no surprise.  Blue Nile has been working the loose diamond business now for years, and has amply proved that these nearly commoditized objects are well suited to Internet selling.  After all, can anyone name a company that sells diamonds that went from zero sales to $300 million plus in a handful of years. Still, there are retailers who think the whole thing is a sham and a lie.  I read the comments that appeared on JCK's web site, and was shaking my head over those that came from "deniers."  Oh, they said, this was a marketing stunt, there was no such sale, and certainly not on a smartphone.  How could anyone buy a stone that expensive without looking at it.  One retailer suggested that the buyer got a retailer to bring the stone in, learn all about it, and then bought out without sales

Forever, and Forevermark

I finally got a look at Forevermark's web site , and everything took forever.  I viewed it on an I-Mac with plenty of speed and memory.  I mention that up front, because this site uses lots of Flash, and it crawls.  Crawls so badly that my browser timed out waiting to load a page.  When it did load, we see a slick, spare site.  The photos are over-Photoshopped, with metal a shade of gray, and diamonds always blue.  Navigation is clumsy.  When looking at collections, for example, I had to click back five or six pages just to get to the point where I can look at another collection.  There is an app available too (click here) , where one can see oneself wearing a piece.  It is a cute gimmick, but not worth the trouble and waiting.  I looked odd wearing a necklace. No prices are shown anywhere, so it is left to the visitor to go to the retailer locator to find a store.  For the moment, the retailer outlets listed are very few.  The only New York retailer shown is up in Skaneateles

Where is Everlon?

Where is Everlon? Here we are in the fall season 2011 and it occurs to me that just two years ago De Beers introduced its Everlon program of knot designs. Now, not a word about it, or at least that I can detect.  It falls right into the pattern of other so-called beacon programs that De Beers has run over the last number of years.  In this case, as we saw, De Beers went much further, suing various companies for copyright infringement - suits they eventually had to drop, as the concept was old as the hills.  The industry, with Everlon just as with other programs in the past, simply came along for the ride, with De Beers and it's participating sight holders and retailers paying the fare.  Now, once again, De Beers has developed a program, Forevermark, with some enhancements intended to make the "coming along for the ride" a lot more difficult.  The underlying motivation remains the same, build added value for the channel, thereby maximizing De Beers prof

Good business, and not

A late summer respite does a lot for clearing one's mind. August was that for me and I have returned refreshed ...and confused. Earthquake, hurricane (returned during that) and a public malaise that runs deep and wide. Still, while public confidence has plummeted, many luxury marketers report strong sales increases. Is there hope? I would cautiously venture a yes.  Of course, it depends on where one sits.  We think of the jewelry world as having somewhat different rules than the rest of the fashion and gift world, but it isn't so.  I recently attended the monster gift show at the Javits Center and saw the same range of winners and sufferers that we see at jewelry shows.  I was concentrating on visiting jewelry companies, but took some time to see what other vendors were doing.  As in jewelry, the busy booths had products that were immediately of interest, tended towards much better quality, and were well-packaged and presented.  As would be expected of a sh

Roller coasters and Rip Van Winkle

OK!  Tomorrow is Friday and I am ready to have two days off from insanity.  The stock market fully reflects public sentiment, namely confusion, anxiety, fear, amazement, and disgust.  It has been a roller coaster of feelings and money, possibly good for day traders and computer-driven automated transactions, but not for us mere mortals.  Trillions blown and trillions recovered, while most of us stand about with our mouths open in amazement.  We read reports in the media that the rich (maybe the super-rich) continue to spend lavishly, and some retail sales reports show strong trends.  (Macy's reports that jewelry was one of their strong categories.)  On the flip side, some vendors of high end goods say business is awful.  Mass market retailing in July was weak.  We will see what the reports say.  We see the stunning rise in diamond prices weakening in some categories.  And gold has become an emotional commodity, as even sovereign states are heavy buyers, hedging against weak cur

Tender is the sight

The diamond industry is grappling with an issue that has been looming over everyone's heads for some years.  Moti Ganz, president of the International Diamond Manufacturers Association, just released a statement in which he claims that the rising number of tenders of rough endangers the business.  He says that without some base of established sights, where manufacturers can rely on supply, companies will have increasing difficulty sustaining factory operations, never mind invest in new factories.  He does concede that some companies failed when they lost their sights in the past number of years, but he feels that the problems inherent in tenders are worse. Perhaps.  But there are some hard facts--and reasonable speculations--that counter his position.  The producers see the realities of the working market.  Boxes are flipped immediately for profits.  Other goods pass through many hands at times before being converted.  And major firms are increasingly dominating supplies of roug

Fabulous class and fabulous fraud

I was really impressed with the Van Cleef and Arpels exhibit that was staged at the Cooper Hewitt Museum in New York.  The Arpels touch was extraordinary.  The perfection of metal work and quality of color serves to remind us of what true jewelry talents can do.  The colored stones were extraordinary, and a knowledgeable dealer who was present said that these qualities can no longer be found.  As if the industry does not have enough stress. I found it interesting to find myself unimpressed with many pieces from a design point of view.  Our taste has really moved far since the 1920's and 1930's.  Some pieces were truly classic and timeless, but others were clearly done to suit specific customers.  There were actual ledgers displayed, showing for whom pieces were designed, the components, and the costs.  All of it was written out in careful script.  A wonderful look into the past, in days before any automation.  Great show. By contrast, just a few days later, I read a remark

De Beers Forever, or maybe not the way we know it

A couple of years ago I proposed that everything De Beers was doing pointed to the end of the sight process.  First off, they offered "additional" goods to sightholders, then proposed to sell off excess goods to non-sightholders. They quickly backed off from that when, undoubtedly,  sightholders saw their price and marketing edge dented and squawked loudly.  Also, everyone knew by then that production was going to decline and fall behind demand.  BHP was already demonstrating that auctions were producing solidly better prices - though the quantities were not that great.  Moreover, De Beers was being put into a tighter and tighter box by the producing countries, notably Botswana, South Africa and Namibia.  Russia was already fated not to be a supplier to De Beers.  People in the trade pooh-poohed the idea, saying that De Beers would always want to distribute through a small number of clients; would not give up the power of dictating the content in the boxes; and needed assur

Rising sun - or false dawn?

The array of shows in Las Vegas are over, and we are all recovering.  The shows were busy--very busy--and many vendors had excellent results, the best since before the downturn.  Nevertheless, the mood was a mix of relief, excitement and more than a touch of worry.  Why worry?  Well, we are all still staring at a stumbling economy, one that has shown signs of stalling, which scares everyone.  A major supplier has seen a double-digit increase in sales, and it appears to them that consumers are buying again, even if it is cautiously.  But they are still not sanguine about the months to come.  Part of the energy we saw might be due to retailers needing goods after working down their inventory levels.  Part may be because they have made good money buying gold and stone jewelry off the street.  One vendor said that every retailer they met with reported that buying from the public has been a big boon. Another open question is whether the public will pay for much higher prices.  One can pre

This year in Las Vegas

The JCK Show marks its 20th year in Las Vegas, and things sure have changed!  Las Vegas became the important battleground for jewelry trade shows, and then economic forces beyond anyone's control disarmed the battle.  Yes, there are still changes (JCK moving to the Mandalay, for example) but the reality has not changed.  There are fewer manufacturers extant that can exhibit--and others that have simply dropped out--and there are ever fewer retailers that can come and buy.  We should set aside the question of whether this is good or bad; whether in some ways we are better off not having the overheated market of the boom years.  But on the supplier side, we know that we have long suffered from too much capacity, a condition that will probably continue for quite a while.  The low barriers of entry into the business assures that.  And on the retail side, we have undergone many years of consolidation and stratification that has forced retailers to adapt or die.  The mass market now bel

Whereto diamonds?

A number of years ago, maybe ten or more, I was regularly asked by De Beers to do focused studies on the US diamond market.  In those days, De Beers was still working to keep the monopoly boat afloat and trends in the US market was important.  The US market was, after all, better than half the world market, especially after Japan faded away.  In the course of one study, I pointed out to them that they were consistently minimizing the recycling of diamonds, especially better ones, in the US.  After many successful years of selling billions of dollars into the US market, and substantially expanding the consumer base, it made sense that a percentage of that was going back upstream as people sold jewelry out of estates or need.  I took a pure guess and said that it could be 5% of publicly held stocks. Just today, I read a column by Chaim Even-Zohar in which he describes the US consumer as the next "diamond mine", precisely the term I used in a presentation at the JCK Show thr

Mixed messages

We are now moving into the critical part of the year of the jewelry industry.  The summer trade shows are not far away, and suppliers are waiting to see, with bated breath, just what depth of commitment retailers are going to make in stocking for the fall.  The political news, here and abroad, is unsettling.  The stock market is bubbling, but news about the residential market is bad.  Employment stays relatively high, but corporations are making money.  The dollar is weakening (making our exports more attractive overseas), but the cost of materials and labor for our jewelry seems to be rising geometrically.  Even US Treasuries have seen its credit standing trimmed. All of this adds up to uncertainty about the future (as evidenced by the latest New York Times/CBS poll).  Is this a problem only for the lower and middle market, while the affluent are back buying? What do you think?  And how are you responding in your business?

Better (a little) late than never ...

I started this blog in January of this year, thinking I would get to redesign and open my website fairly soon thereafter, and tie it all together.  Funny how life, work and family stretch things out. Just today the site is open (http://www.janosconsultants.com/) and I think it has been tweaked enough.  So on to starting a dialogue about our industry, with all your help.

A New Year, and some new thoughts

Next month will mark 19 years of my consulting in the diamond and jewelry industry.  It has been a great run and I have enjoyed most of it.  I will not, of course, have another 19 years of doing the same.  I think now, at the outset of 2011, of the remarkable changes that have transpired, and of the greater ones to come.  So, I wish to make the most of the years to come, however many they may be. I still have much work to do, thankfully.  But it also time to open a conversation with anyone inclined to consider the larger world within which we operate.  The jewelry industry is introverted, small, and entrepreneurial.  But we are nevertheless buffeted by an astounding variety of societal and technological revolutions. So I open this blog in the hope that friends, colleagues and fellow members of this great industry will use it for a frank and profitable venue for discourse. I can't promise to chime in every day, as I will be preoccupied at various times.  I will do my best to c