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!
http://janosconsultants.blogspot.com/2015/05/the-top-10-issues-for-2015-1-three.html
http://janosconsultants.blogspot.com/2015/06/the-top-10-issues-for-2015-2-second-of.html
http://janosconsultants.blogspot.com/2015/06/the-top-10-issues-for-2015-3-third-of.html
Though I did not say it directly, my contention at the time, when I noted that we were facing a "paradigm shift" in the very nature of the diamond business, was that it was inevitable, logical and unavoidable. De Beers, among all the diamond mining companies, was the only one with a developed marketing division, and an apparent wish to survive the end of large scale diamond mining. Rio Tinto, currently the third largest source, will step out of the business within 10 years. Alrosa, Botswana and Namibia are a bit further away from exhausting their resources. None of them apparently seek to have a position in the diamond business once their mines are played out.
In that regard, De Beers stands alone. At the better end of the diamond market, it has wholly owned stores under its name; a brand in Forevermark; an effort to capture diamonds being recycled; and now a first entry into the mass market with the only product that could replace declining supplies of natural diamonds with something that is close. No, Moissonite and CZs will not do. In sum, we could look at all of this as a three-pronged offensive aimed at becoming the dominant power, once again, in the diamond business.
Anyone who thinks that De Beers' objective in using MMDs starts and stops at fun body jewelry is, in my opinion, very mistaken. Barring disastrous geo-political catastrophes, the world's population will grow and will continue the expansion of newly affluent and rich publics. As demand for jewelry grows along with stronger demographics, the need for greater supplies of "diamonds", however we define them, will mean that well-established suppliers and manufacturers of MMDs and MMD jewelry will have the biggest market opportunities. De Beers wants to be number one in that situation, and if that requires expanding it selection into larger diamonds, even into engagement rings, it will do so in a timely manner - and with little hesitation.
De Beers is building for the future - its own future. We cannot blame them for that. It is the very nature of commerce. For those in the industry that still believe that De Beers should be protecting its traditional clients, I say it is time to realize that that position is untenable and completely unrealistic. Yes, De Beers will, of course, continue to do whatever it can to sustain the natural diamond business as it still has huge investments and interests to protect. DPA is a good example of that. And it will continue to seek the highest prices it can get, with sights or not, and at the fastest rate possible.
But this is a new day, one in which the legitimacy of MMDs as a viable product is here. However it turns out, the New De Beers will be, in time, very much unlike the old one.
I have many observations on the impact of Lightbox, and on the possible repercussions. I'll save those for next time, as there are too many to cover here. Feel free to contact me if you want to see early drafts.
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!
http://janosconsultants.blogspot.com/2015/05/the-top-10-issues-for-2015-1-three.html
http://janosconsultants.blogspot.com/2015/06/the-top-10-issues-for-2015-2-second-of.html
http://janosconsultants.blogspot.com/2015/06/the-top-10-issues-for-2015-3-third-of.html
Though I did not say it directly, my contention at the time, when I noted that we were facing a "paradigm shift" in the very nature of the diamond business, was that it was inevitable, logical and unavoidable. De Beers, among all the diamond mining companies, was the only one with a developed marketing division, and an apparent wish to survive the end of large scale diamond mining. Rio Tinto, currently the third largest source, will step out of the business within 10 years. Alrosa, Botswana and Namibia are a bit further away from exhausting their resources. None of them apparently seek to have a position in the diamond business once their mines are played out.
In that regard, De Beers stands alone. At the better end of the diamond market, it has wholly owned stores under its name; a brand in Forevermark; an effort to capture diamonds being recycled; and now a first entry into the mass market with the only product that could replace declining supplies of natural diamonds with something that is close. No, Moissonite and CZs will not do. In sum, we could look at all of this as a three-pronged offensive aimed at becoming the dominant power, once again, in the diamond business.
Anyone who thinks that De Beers' objective in using MMDs starts and stops at fun body jewelry is, in my opinion, very mistaken. Barring disastrous geo-political catastrophes, the world's population will grow and will continue the expansion of newly affluent and rich publics. As demand for jewelry grows along with stronger demographics, the need for greater supplies of "diamonds", however we define them, will mean that well-established suppliers and manufacturers of MMDs and MMD jewelry will have the biggest market opportunities. De Beers wants to be number one in that situation, and if that requires expanding it selection into larger diamonds, even into engagement rings, it will do so in a timely manner - and with little hesitation.
De Beers is building for the future - its own future. We cannot blame them for that. It is the very nature of commerce. For those in the industry that still believe that De Beers should be protecting its traditional clients, I say it is time to realize that that position is untenable and completely unrealistic. Yes, De Beers will, of course, continue to do whatever it can to sustain the natural diamond business as it still has huge investments and interests to protect. DPA is a good example of that. And it will continue to seek the highest prices it can get, with sights or not, and at the fastest rate possible.
But this is a new day, one in which the legitimacy of MMDs as a viable product is here. However it turns out, the New De Beers will be, in time, very much unlike the old one.
I have many observations on the impact of Lightbox, and on the possible repercussions. I'll save those for next time, as there are too many to cover here. Feel free to contact me if you want to see early drafts.
Comments
The launch will be to consumers to build brand awareness, but Lightbox will be sold through retail stores soon thereafter.
We could make a rough comparison between the advent of junk diamonds 30 years or so ago, and the advent of MMDs over the last decade or so. Both serve to widen the market by providing great price points. But the big difference is that MMDs can be very high quality "diamonds", something that can't be said for junk. That difference presents an entirely different equation: Do I really want tp spend lots more money for stones that are ancient, or will I be happy owning a beautiful piece of jewelry, and put the rest of the money into my retirement? Women, being far more practical than men, will, I believe, pick the latter. Hang in there, Hedda, no matter what, we are in for a ride.