Tuesday, May 24, 2011

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 three years ago.  Even-Zohar speaks of the negative ripple effect on diamond stocking upstream as the recession hit, and the reverse, going back downstream, as the economic recovery kicked in. 

He treats the American "mine" as a newly important phenomenon (which it is not - it has always been there) and growing rapidly, which is correct.  Jewelers are making good money buying gold (and diamonds) off the street, and at prices well below those from suppliers. 

In my view, the recession will end someday, hopefully in the near future.  But retailers will have established a process for buying from the public that have many positive aspects.  I can think of a number of wonderful ways for retailers capture business.  The flow of diamonds from the public to retailers and wholesalers will become a fixed, critical part of diamond distribution.

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