GemThoughts

De Beers has announced the formation of a new company, Lightbox, that will be selling man-made diamonds (MMDs), mounted in earrings, pendants and bracelets - no rings. I will assume everyone has read the details, and heard their rationale for claiming that this move will have little or no impact in the natural diamond industry.  Briefly, they will be selling MMDs in finished jewelry with total weights up to one carat, mounted in silver or gold, and with simple pricing - $800 per carat.  There is no grading of the stones, which are white, yellow, blue or pink; the jewelry is meant for “moments” not “milestones” (like weddings). De Beers has arrived at this moment after a few decades of seeing their business transformed from a monopoly into a commercial venture facing all the pressures of a competitive market.   At the turn of the century, Rio Tinto, with their major mine at Argyle in Western Australia, went their own way, sensing that they would do much better by selling

This past week we saw De Beers introduce Lightbox Jewelry, a full-bore, direct to consumer (DTC) retailer that will exclusively use man-made diamonds (MMDs) produced by their Element 6 division.  The concept is neatly packaged to offer a basic selection of body jewelry at moderate prices.  The DTC approach is intended to circumvent the entire traditional channels of distribution established by De Beers over the last century, in an effort to demonstrate that this is just a low-end, low-value product aimed at an under-served public.  De Beers claims that it will only benefit its existing clients by demonstrating how much more valuable "real" diamonds are. This move cam as no surprise at all to me. There are many gaps and holes in this plan, and I will try to outline them in future blog posts. To begin with, I posted three times in 2015 with my views on the subject.  Here are the links to those blog posts, as it would save me time repeating the points I made back then!

Suppliers are regularly in turmoil over how to respond to the significant shifts in distribution and consumption.  It should be noted that many suppliers are far upstream, and feel the realities of the front lines last. We already see that upcoming technological and demographic changes are causing distress at the retail counter, and we covered some of that in the last blog.  Suppliers have been forced to make changes in their modalities, sometimes painfully.  What factors are at work: The number of retail operations is shrinking, and so are the number of outlets.  That means fewer retailers as customers available. The market has been forced to adapt fully to the fact that the US is a very mature market, and has been way over-stored for a long time. What might have been a more gradual adjustment to supply and demand (fewer stores to serve a stable, slow-growth market) has been radically accelerated by Internet marketing. Internet marketing puts everyone on a service-oriented pl

This year has been, if anything, disorienting.  We keep thinking that things should happen in the same way that they have happened in the past, even given the business cycles.  But somehow, they have not, even though the US economy, and the low unemployment figures, keep telling us that things are all moving in the right direction.  GDP is up, the stock market has hit record highs almost every day until recently, consumers are spending and credit card debt is rising (though that may not be that good!), and so forth.  And yet, the diamond and jewelry business seems stuck in a rut. If we are to develop progressive business policies, we need to look closely at market realities, especially those that we should accept as fundamental, not cyclical, trends.  So here are some thoughts. Retail as we have known it is rapidly disappearing.   We have lived through countless revolutions and evolutions in retailing over the last decades.  This one is different in scale and impact.  Large chain