Canadian jeweler and diamond industry analyst Mel Moss explores a core dilemma concerning the value proposition of diamonds. It is a dlemma the diamond industry has yet to resolve, leading to confusion and false expectations among consumers: how can a diamond be presented both as a luxury product and a price-based commodity? "Some in the diamond industry are pushing hard to promote generic diamonds as a commodity that can be traded transparently in futures markets, commodity exchanges and as a wealth preservation asset", writes Moss. Yet when the value of a diamond is reduced to the result of a financial transaction with the - mainly misguided - expectation of return on investment, it loses its longstanding appeal as an emotional investment, as well as its luxury value: all those less quantifiable apects such as image value and the conveyance of social status. "Promotion of price over the concept of 'luxury value' causes the end user to depreciate the luxury quotient. The lesson is that commodity drains the value from luxury."
Moss explains: "There is a grey area for diamonds with reference to commodity and luxury because diamonds are a commodity at the rough and manufacturing level but have been traditionally marketed as luxury at the consumer level." What happens when consumers walk into a store armed with a Rapaport price list and Internet quotes is that, "Commodity pricing collides with luxury value." This ultimately leads to consumers denigrating the value proposition of diamonds, indignantly, and often triumphantly, declaring that the investment proposal of diamonds is a lie. In effect, consumers pursue the lowest price point possible for an average quality diamond and then cry foul when that diamond does not appreciate in value over time.
Viewed in this way, more apt comparison in this context would be consumers buying a quality smartphone or reliable hatchback and then complaining when its value depreciates: if one approaches diamonds as a commodity, they will behave that way. Unlike a smartphone or a hatchback, of course, one can enjoy a diamond until the end of one's days, or pass it on to a child who is likely to cherish it and extend the gifting cycle for generations. One can argue there is added value in that. On the other hand, "Truly rare diamonds have performed well as an investment vehicle." Rare, high-value diamonds are likely to appreciate. "This is one of the few instances when luxury and commodity work! Rare pinks, blues and celebrity jewels have done extremely well but these are very rare situations. To propose that diamonds that are less expensive are a good investment is nothing but sheer folly!"
Concluding, Moss writes: "[The diamond] Industry is struggling with the traditional concept of marketing diamonds as a unique one of a kind luxury or grouping them into categories and selling them as a generic commodity ... So, how should diamonds be marketed? What is the value proposition of a diamond and how do diamonds as a category move progressively into the future? I don’t believe that our industry can clearly and accurately answer these questions and I see that as a very big problem!"