When searching for poetry a diamond is less likely to emerge as somewhere to find it. Yet to sell a diamond brings out of the seller a unique telling of words of what it is symbolic of. It was in 1947 that De Beers began this art of story telling, attaching to it an emotion which to this day makes a diamond the “true” expression of love.
I arrived in Hong Kong after 10 896 kilometres of air travel from Gaborone to attend the 34th installment of the September Hong Kong Jewellery and Gem Fair, held from the 13th to 17th.
The show ushered a spectacular sparkle of an array of diamond products across a floor space of more than 135 000 square metres in two world class venues: the AsiaWorld-Expo (AWE) and the Hong Kong Convention and Exhibition Centre (HKCEC). AWE showcased the diamond’s rawness in the form of loose stones and gemstones whereas the HKCEC exhibited finely finished jewellery pieces. The interaction I had with six of De Beers’ sightholders (clients) unfolded a narration that extends far beyond the sourcing of this natural stone. What gives a diamond power is not simply that it is unearthed from the deep ends of the soil or sea; it is the emotion embellished to a diamond made to tug deeply at people’s hearts that gives the natural stone its selling reign.
“What are we selling? Actually we’re selling an illusion. How you market this illusion is what counts,” said Paras Mehta, Director of Sales at Eurostar India in eloquently describing what about a diamond that makes it attractive. Eurostar works with four types of clients – brands, specific jewellery manufacturers, big retailers, some distributors – which means that it is involved in four distribution channels; giving it an extensive hand in the diamond value chain.
Mehta regards marketing as an underpinning factor in the industry. “Fifteen years ago we didn’t have synthetics, today we do; marketing is not only important for the industry to sustain, it is important to sustain against synthetics,” he said.
“Rough diamonds don’t sell themselves,” De Beers Chief Executive Officer (CEO) Bruce Cleaver uttered these words when we sat down to untangle the multi-faceted subject of diamonds. Cleaver doesn’t see the buying of a diamond as a random purchase; it is to him “the most emotional purchase you can make”, of which it became clear that such a conviction comes from an intimate knowledge of the poetry in diamonds. It is the storytelling that convinces people to buy a diamond by inciting in them a desire for it.
Cleaver is confident that diamonds will remain an emotional purchase, but he also identifies the volatility and uncertainty currently besieging the industry, introducing what the 2016 diamond Insight report describes as the “new normal”.
He anticipates De Beers to remain the industry name and leader but with a current market share of 35 percent, he raised an awareness that De Beers cannot continue to market diamonds generically as it used to.
Manish Pethani of M. Suresh Company, established since 1968 as a manufacturer, exporter & retailer of diamonds, called for an industry effort to stimulate the desire for demands as the current market conditions demonstrate a lack of it. He pointed to the deficiency of promotional and marketing efforts, which if done will drive demand. “We have to create awareness, without awareness, nobody buys the diamond,” he said.
Often a less told story is the difficult journey that a diamond takes from under the earth until it ends on someone’s finger. Excluding the exploration stage, within the diamond pipeline, a diamond is estimated to take between seven to 10 months before it turns into a piece of jewellery, needing therefore the knowledge and skill of connecting production with demand.
This connection has proven to be a challenge as was observed particularly in 2015. Cleaver put it that “rough diamonds turn into polished diamonds, rough diamond prices are determined effectively only by polished set of diamond jewllery.”
The 2016 Insight report elucidates that traders, cutters, wholesalers, polishers and jewellery manufacturers saw a number of interconnected issues lead to severe inventory indigestion in the industry pipeline, which in turn has affected supply, demand and profitability.
When speaking to Rafi Yerushalmi, Managing Director at Dalumi Diamonds, he highlighted in that regard that demand for polished diamonds had gone softer, adding that it is going down year by year. “It is difficult to defend polished prices,” he lamented. Yerushalmi described the last five to 10 years in the industry as more challenging than the last 25 years to which he anticipates that a lot of people will leave the industry soon as there is no room for so many people.
“Only strong people will survive,” he said. He described strength as the ability of a company to work and fuel the business with its own capital, avoiding the route of borrowing funds from a bank in high volume as that often means the bank dictates to the business what to do. The Insight report validates this as it cites that financing challenges are expected to persist. Cleaver in fact said that De Beers approached its clients and held discussions on the unsustainability of their balance sheets and requested them to produce internationally certified accounts, to which he mentioned the difficulty because clients have operations across a wide geographical area. “It is difficult for clients but it will in the long term make them more bankable, more sustainable,” he said.
Benny Yerushalmi, Chief Executive Officer of Yerushalmi Bros. Diamonds, recounted trends from the past 25 years and shared the observation that the diamond market has changed dramatically.
“Today the pipeline is really short,” he enlightened, adding: “We’re coming to the clients but in the past 25 years the client was coming to us.” He gave as an example that today people can see diamonds sitting at their homes through online advertising. In forecasting future selling trends, Yerushalmi expects it to get difficult to which he said online will become the number one way of selling with less and less stores. In terms of production he foresees that less and less people will be needed with the advent of sophisticated technology.
This, he said, will need more technologically savvy people which creates the need to train people for future production systems. “At the end of the day this unique resource is in the hand of Botswana and De Beers to keep the diamond unique and as a symbol of love,” he said.
It is evident that selling will become very different; this is particularly true in relation to the buzzing age cohort termed “millennials” of people born between 1981 and 2000. The Insight report details insights regarding the interaction of millennials with diamonds across De Beers’ top four diamond markets of US, China, India and Japan. De Beers describes millennials as an age cohort that is much more interested in experiences and in bilateral conversations on social media, less interested in status, tradition than their parents.
Dov Tannenbaum, partner at Leo Schachter & Company, illuminated in respect to millennials that the market has to develop products that are visibly different than what is presently available. He enthused about the Leo challenge which he described to be in line with millennials.
Tannenbaum discoursed that the story that is told in selling diamonds will in response to millennials have to also include where the diamonds come from. “Millennials certainly in the US are very interested in hearing that; when they spend their money, they want to make sure they’re spending it on products that are benefitting people,” he said. He aptly put it that the days of mass marketing are gone.
When forecasting the future trends of the industry, Tannenbaum anticipated further transparency, specifying that it will not be by measure of the banks or tax authorities but in telling the full story of a diamond.
“The world has reached a point where people are caring about other people; people they haven’t met or seen, so the transparency will be that people want to know where the diamonds are coming from. This is one of the reasons we’re so committed to Botswana. This will play right into Botswana’s hands,” he explained.
Sandeep Kothari, Managing Director at KGK Diamonds BVBA, fluently illustrated the nature of the diamond business, calling it a “personalised business”.
“There’s a lot of emotion involved, a lot of passion, a lot of energy, a lot of communication; it’s a people’s business, that’s where the happiness comes from,” he expressed. Kothari shared his view on diamonds that the message of love is the biggest message and if it can be delivered effectively, it will prove to still have a lot of value.
He regards millennials as an important age cohort to communicate this message of love to, which in part secures a solid future for the industry. Kothari also noted the importance of transparency as something that millennials appreciate. “Now you have to ensure that the consumer is informed and convinced to buy a piece of diamond jewellery. Convincing millennials is more difficult than it was to their parents to purchase diamonds because they have so much more options to spend their disposable income on. We also have to be aggressive in our approach, be in front of them, the use of social media is an effective tool,” he said.
Gareth Mostyn, De Beers Chief Financial Officer (CFO), offered invaluable insights into the industry as the whole to which he expressed that “it is not realistic to only look to De Beers anymore,” suggesting that the industry has to do what it can in partnerships. He highlighted that consumers today demonstrate a brand consciousness which means that they express a desire to buy or be seen with a particular brand. “It is clear that branded diamond propositions are going to be successful,” he said.
He vehemently expressed that the diamond industry needs to innovate, citing examples of new product designs and bringing in automation. Innovation, he said, will be unlocked by the power of partnerships and collaborations.