"Perfect Storm" in the Diamond Retail Industry

Market Analysis
17/08/2015 10:50

Mel Moss, industry activist and President of Regal Imports Ltd., discusses the "perfect storm" of miners cluttering the pipeline with unprofitable downstream endeavors, consumers losing interest and negligible profits for all: "Diamond miners are trying to make a profit, but under current conditions, their profit does not allow any profit for their customers. Diamond cutters are faced with a consumer that is not interested in paying more for diamonds, if they are interested in buying diamonds at all. [Retailers] often compete with their own suppliers for diamond sales and Internet discounting is pushing retailers to accept lower margins. It is a vicious circle with retailers not wishing to make tiny margins on increasingly complicated diamond sales. So retailers either stop selling diamonds in favor of more profitable products or demand lower prices from their suppliers, and around and around we go with no one in the pipeline being able to make money by selling diamonds." 

Expressing the collective frustration of retailers, Moss calls for more cooperation in the industry, "A lot of retailers don’t really sell diamonds. They sell GIA papers and compete solely on price. Miners, in their arrogance, are telling retailers not to sell by price. They recommend telling a diamond story, but retailers are just not swallowing the diamond fairytale. Retailers are increasingly saying, 'Why should I break my ass to tell your story and sell your diamonds when I can sell something else easier and make more money?' Retail apathy is resulting in a decrease in diamond desire. So, demand is falling, consumer interest is waning and everyone is looking for an easy fix. Well, there is no easy fix, and without full industry cooperation diamonds will continue their downward trend."

He notes that, "The old supply chain used to work well, when all diamond players kept exclusively to their position in the diamond pipeline. The old system allowed for profit at each crucial level." Echoing Chaim Even-Zohar's claim that De Beers' efforts to go downstream are not profitable, Moss says that, "not only are these projects losing money, but they are stealing profits from retailers by causing De Beers not to be a team player in the promotion of diamonds as a generic luxury product. Each level of the diamond pipeline used to support the other by promoting the simple principal that diamonds are desirable. Now the merging of different levels is causing weaker sales and lower profits."