Wednesday, April 26, 2017

Protecting the Image of Diamonds

Late last year there were two events in New York about the diamond business.  I'd call them bookends to the business, in that they address two real concerns - the image of diamonds, and the growing presence of man-made diamonds (MMDs).

The first was the presentation by DPA (Diamond Producers Association) on the new advertising and promotional program for natural diamonds, "Rare is Real."  This was, finally, an attempt by the leading mining companies to rebuild the natural diamond image in the minds of consumers.  Two ads were shown (you have probably seen them by now) and I liked them both, if that means anything, while other people were very dubious.  Both were appeals to the millennials, with different approaches, though both skated around the classic themes of commitment and happiness.  As I think further about it, both reflect lifestyles that most Trump supporters, and even many Clinton supporters, probably disapprove of.  In introducing "real life" stories, filled with doubt and adventure, the DPA seems to be trying to equate real life with real diamonds.

One question here is whether the DPA at this point is deliberately not reaching for Boomers and Trumpers, and plain old-fashioned thinkers.  It seems so, though I was told a whole range of ads have been prepared targeting other demographics.  Another question is money.  The DPA reportedly has put in some $15 million, to get this rolling, but getting money from the trade over an extended period is a real question.  It will take a lot more than that to reinvigorate the image of diamonds, I'd say at least ten times as much.  In the New America, I suspect, people will be keeping their wallets closed.  Money goes further in these days of social networking, but will this new message carry?

Here we are, months later, and I sense no impact from the DPA initiative.  And when the subject is raised at various industry get-togethers, I see eyes glaze over.  People involved in the program made a point of saying this is not a short term blast, and that it will take time, maybe a couple of years, before the effort is full-blown and showing results.  OK, we are patient, and we will wait and see.  But frankly, I can't seem get very energized by this program.

For one thing, the message is so subtle as to beg explanation.  Rarity in diamonds starts at stones of a few carats.  But jewelry is composed overwhelmingly of small stones, of which there is tonnage.  Of course that factoid will not be publicized.  So is the message that rarity is the important aspect, or that "real" is the important aspect?  (I needn't add that an MMD of eight or ten carats is also rare, at least for now, and some say it is real.)  I guess DPA is pitching both, not an easy chore.

I do not watch much TV, or dabble much in social media, but I have not seen anything from DPA so far.  Nor have I heard of any retailers, wholesalers, manufacturers, diamond dealers, cutters or traders getting on the bandwagon and putting money into the program, though I imagine there are some.  Could it be that everyone is already working on very thin margins, and image programs have no budget lines for them?  Or is everyone taking a wait and see attitude?

Diamond producers fully understand the importance of protecting the diamond image, as does everyone else involved in the business, even those now expanding production of MMDs.  Mines will still be producing for a decade or two, and anything resembling a decline in public interest will be damaging, if not destructive.  We do need to remember that diamonds are still a huge draw, with spectacular prices still being paid for unusual stones and beautifully made jewelry.  But, again, is "real" and "rare" the message, or is beauty, excitement, love and life events the message?  Real and rare no doubt applies in the auctioning of multi-million dollar stones, but can the same motivation be applied in the local store?

The other "bookend" was a special session held in New York to discuss MMDs.  The speakers concentrated on the dangers MMDs present, and the need for all parties to expend every effort possible to assure themselves that they are dealing only in natural stones.  This was followed by presentations on a range of equipment that will make it possible to check all diamonds, loose or mounted for MMDs.  An important sponsor of the event, Sterling Jewelers, has more recently offered to pre-check all diamonds to be used by their vendors.  A good move, as it makes vendors responsible if any MMDs slip through.

I noted to an attendee here that the whole session is a tribute to the creativity, dedication and genius of the criminal mind!  For all our efforts and pleas that everyone up and down the value chain should abide by best practices, the fact remains that the opportunities for fraud are everywhere.  It's a game of whack-a-mole!  Right at the session, some importers noted privately that the problem is out of control in Asia, and becoming almost laughingly so.  One technology company told me that a simple test run at a few stores of an important retailer promptly turned up MMDs mixed in with naturals in low-priced jewelry.

So, yes, we have major retailers like Sterling and others that have the scale and dedication to strictly enforce proper protocols.  But that does not account for the significant portion of the worldwide market.

We can all agree that the efforts being made by the major laboratories and marketers of diamond jewelry are important contributions to the maintenance of an ethical business.  But what I had expected at the conference was an open discussion about the impact of MMDs on diamond retailing, and how to handle it, quite aside of detection.  I wrote at length, in three blogs in May and June of 2015, about the potential impact of large scale introduction of MMDs in the market.  The consequences, even if all of it is done above board, can be severe.  So thorough presentations and discussions on the subject are the least that should be done.  We see none of that, only attempts to suppress the use of MMDs, to keep them out of the bourses, and to claim that they are worthless.  This is ostrichism of the worst sort.  MMDs are a reality that will be a solid part of the jewelry business.

On balance, both these sessions were appropriate and worthwhile.  But both fell far short of leading the industry into the future that is coming at us full speed.




5 comments:

  1. MMDs are here to stay and the industry would benefit much more by developing a sales strategy around them than fighting them. With Boomers aging out of the market and Millennials more interested in experiences than "stuff" (including jewelry)--and all shoppers whipping out their phones to find everything cheaper--anything that gets people into a jewelry store is a good thing. So the industry, up and down the supply chain, would benefit far more by testing all their inventory, positioning mined diamonds as the luxury option and MMDs as the pretty-but-common lower priced option. Otherwise, IMO, we're going to expend a lot of energy fighting with little result. Better to use our unfortunately limited budgets to focus on a smaller, more strategically lucrative audience.

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    1. Thanks Hedda, for your clear description of where we are. There is a real divide between the people in the trenches - manufacturers and retailers - and the "industry leaders." Those in the trenches work in the real world and are adapting to the presence of MMDs. The leaders proclaim the need to excommunicate the users of MMDs, which is pure folly. That will fail, no differently than all the calls that retailers made 20 years ago that they will not buy from diamond companies that sell on the Internet! Nothing worse than sex-delusion.

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  2. All very valid points Ben. Our industry is in a quagmire from the bottom to the top of the "food Chain". The industry is it's own worst enemy. Forget about that we all fell down the rabbit hole when De Beers decided to drop all the funding for diamond advertising and promotion. For get about KP, forget about MMDs. We are all "big" dreamers thinking we all can keep growing and keep making profits in a dwindling market. It's not about Millenials, Gen Xers or any other demographic. The real problem is over saturation of a product. The big retailers are starting to realize that there isn't sufficient business to support 100's if not 1000's of stores. This is how the car companies went bust in the 80's and are now cutting back on production after several years of impressive growth. If the mining companies keep digging and the diamond "growers keep upping their output there will continue to be an over abundance of goods nobody can absorb nor support pricing that allows for the great business word, "PROFIT". Wer will have to wait and see.

    Again Ben thank you for your intelligent and thought provoking words.

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