It is no secret that since De Beers stopped shouldering the promotional burden for the diamond industry more than a decade ago, investment in category marketing has steadily declined. The Diamond Producers Association (DPA) was created a couple of years ago, but by their own admission their efforts alone are not enough, and more funds are needed. Two weeks ago, Shashin Choksi, a second-generation diamond trader from Antwerp and director of Swati Gems, together with his son Siddharth Choksi, who has held a number of internships in the diamond and jewelry industry, penned an opinion piece published by Rapaport to address this very issue.
Entitled "An Urgent Call to Invest in Marketing", the father-son duo laid out an ambitious strategy to inject the diamond industry with significantly more marketing funds to be used to the benefit of all in the diamond trade; namely, by imposing a small fee on all diamond exports. "We must collectively work to restore the appeal of our product among consumers," they write. "We must reinvent the way the industry tackles marketing, and to do that we need to increase our budget radically." Their missive sparked considerable discussion and left some questions unanswered. The Diamond Loupe had the good fortune to catch up with them in Antwerp.
The Diamond Loupe: Many in the industry have lamented the lack of marketing for the diamond industry in recent years. Yours is the first structured approach I have seen outside of the DPA. Did you draw on a model from another industry in creating your budget proposal?
Shashin & Siddharth Choksi: Unique problems call for unique solutions, and given the diamond industry’s incredibly unique industry dynamics, we feel it requires a custom approach. So, no, we did not model ourselves after another industry.
The figures outlined in our marketing proposal are drawn from decades of practical experience in the field, and are made to remain affordable for each individual, whilst still accumulating sufficient funds to properly launch a series of custom marketing campaigns aimed at reviving the fading lust for our product. Many have criticized the DPA over the years for their seemingly ineffective marketing efforts, however few realize the extremely scarce resources they have had to make do with, thereby severely limiting their potential from the onset. Thus, rather than setting ourselves up for failure, we must collectively chip in to stand a chance at seeing any tangible results.
In the end, the sole purpose of introducing this marketing contribution is to combat stagnation at a macro level and to revive the confidence for the future generations of diamantaires. Such a marketing effort is inevitable; it has to happen and hopefully sooner than later. Unfortunately, we fail to inspire the consumer each time we slash the prices of our luxury product. It is and remains our responsibility to point out the rarity of each facet and create desirability.
Let’s be honest, which other luxury product still holds the vast majority of its value after years, even generations, of wear, joy and pleasure?
TDL: If the industry would succeed in raising the kind of money you suggest, how would it be collected, distributed and by whom? How would it be overseen and regulated?
S. & S. Choksi: Whilst we can appreciate the concerns regarding the deployment of the funds, we think our primary focus should be on raising the much-needed capital in the first place.
With regards to the collection process, we see the World Federation of Diamond Bourses (WFDB) playing a crucial role here; it is imperative for them to introduce and enforce the proposed fee system on all diamond exports worldwide. In fact, our plan essentially relies on the support of the WFDB, whose reach and influence over our industry will dramatically ease the launch of our proposed marketing initiative.
The way we see things panning out can to an extent be compared to the Kimberley Process Certification Scheme, where miners and companies in diamond-producing countries must adhere to the norms of the KP certificate to be permitted to export the raw materials, i.e., rough diamonds. Similarly, we see this as a virtually seamless extra step in the exporting process, where a minor marketing fee will be added to the export value of the goods [for details concerning the fee, see the link to the article above]. However, as mentioned before, this fee will be imposed exclusively on exports, thereby exempting all domestic transactions.
Plus, once the WFDB gets involved, they will undoubtedly see the importance in our collective efforts, which in turn will likely result in them taking a greater interest in the initiative by, for example, incorporating some of their own ideas, methods of working, etc. Furthermore, getting the WFDB’s support and seal of approval will stimulate all the bourses around the world to adopt and help improve our proposal.
To address your point of oversight and regulation, we will certainly need to get professionals on board to help us with this enormous task, as this indeed isn’t something the DPA or any other organization within the diamond trade for that matter can manage on their own. With that being said, we will only be able to appoint the right people once sufficient funds are raised to afford the hires. These people, preferably external to the diamond trade, will oversee the capital allocation and manage all generic marketing efforts.
In our opinion, we believe a so-called 'board of representatives' structure would be ideal to lead this marketing fund, by which we mean a structure that would allow each major stakeholder to select one person to represent them at the table. For instance, the largest miners and the largest producing countries along with the WFDB would be allowed to elect one person each, who together would oversee the fund. This would not be dissimilar to how the G7 functions in international politics. Of course, the exact distribution of the overseeing team would have to be worked out and discussed later.
TDL: Your proposal reminds me of calls for investment in green technology. Everyone thinks ‘something’ should be done, but few seem willing to pay the price now for benefits in the future. Do you agree with this parallel, and what could be done to overcome resistance from companies that do not think it will benefit them?
S. & S. Choksi: Great question. It must be made crystal-clear to all players just how crucial this is. It’s almost as simple as ‘marketing or bust’. If nothing is done, we are heading toward an even greater slump while other sectors in the luxury space continue to grow.
Reviving an entire industry is a costly matter, and no single player should be responsible for footing the bill when everyone benefits, so it seems only fair that all players, small and large alike, proportionally contribute to restore the repute our product once had. On the other hand, if we as a collective remain passive, it is unlikely that the smaller players will survive, given the agonizing stock losses the industry has experienced lately.
Similarly, as the diamond industry represents a significant slice of the GDP of several diamond-producing countries, each time the value drops, said countries suffer severely as it directly affects their national budgets, thereby potentially causing tremendous issues at a macro-level. The same logic applies to the large mining companies, who will unlikely be able to continue profiting the way they have done for the past few decades if we don’t do something to push demand for diamonds.
So far, bankers have poured a seemingly unlimited sum of capital into the trade and the miners benefitted like none other as they charged premiums. However, now, as the money tap tightens and the funds dry up (inter alia due to a rising number of frauds and bad investments outside the trade), we strongly believe that these miners will opt to support generic marketing, especially considering the amount of money that has been 'invested' in initiatives like “Forevermark”, which was pushed by De Beers with over US$100m annually, and yet could not convince the public.
In their own words, they [De Beers] have categorically stated that “less than 1% of the world’s diamonds can become Forevermark…”, which is staggering considering they account for roughly 40% of the total diamond output, which begs the question: why isn't De Beers putting as much energy in capitalizing on the other 39% of their own supply, not to mention the 60% in the hands of the world’s other diamond suppliers?
This is precisely why we must consolidate our efforts in marketing! The participation fee we outlined is absolutely insignificant in proportion to their profits. It is simply investing today for a better tomorrow, because if we choose not to, we will most likely all suffer.
We have been voicing the need of marketing for years; unfortunately it's fallen on deaf ears… It has always been the ‘wrong’ time. In the meanwhile, we all have not only endured massive stock losses, but investors have lost faith in our product, bankers are hesistant to finance us, most mining countries that depend on the revenue of this commodity have had to readjust their budgets, and last but not least, tens of thousands of jobs have already been lost. And yet we are looking and waiting for an opportune time?!
So, when will it be the ‘right’ time?
Rather than pointing our fingers at others who should contribute on the marketing cost, we must accept that we, the manufacturers and traders, need to participate too!!
TDL: Considering the difficulty the KP has in reaching agreements across all diamond-producing countries, would it not be extremely difficult to get them to contribute to such a scheme which could be seen - in their eyes - to mainly benefit retailers? If one refuses, others would certainly follow.
S. & S. Choksi: We guess this is why people say, ‘hindsight is 20:20’, because we all know the sheer importance of the KP certificate in our industry today and should therefore take the establishment and implementation of the KP as a learning process for how not to handle crucial innovation.
Sure, there may have been a number of problems when setting up the KP certification scheme, but years later it has given legitimate miners and mining countries something tangible to prove to the world that they are ethical and follow the best practices. If this were in jeopardy, many countries would suffer. Nobody on their own can fight off all the NGOs that falsely claim ‘blood diamonds’ are still the norm today, whereas the KP certificate is a proof that this isn’t so; the past is the past and today we can hold our heads up high.
Retailers are facing their fair share of challenges, and if we do not show our support, we fear more of these brick and mortar stores will close shop. The cost of insurance and security aren’t to be ignored, lest we not forget the cost of employment, taxes, benefits, etc. This marketing effort will not just benefit the retailers but the entire value chain ‘from mine to finger’. Once the retailers experience firsthand the benefits of generic marketing, we can ask them to come on board too, but not right now.
TDL: Who would need to get on board first to start the ball rolling?
S. & S. Choksi: A very good question, we believe that the DPA will have to take the lead together with the WFDB, as they are both integral parts of this proposed plan. From there, we would have others join, representing the major stakeholders and contributors in the fund, as explained earlier using the G7 analogy.
TDL: Have you had the opportunity to present your proposal to diamond-mining companies, which would be asked to contribute the most?
Shashin Choksi: I am a tiny player of a certain age with a vision for our future, the youth. It is and remains our duty to leave a better place for them to carry on this beautiful trade.
Lately our market leaders have been troubled about how they should compete against some of these fraudsters who never intended to repay their dues or loans in the first place, and the big miners now have to combat the unknown, CVD or lab-grown diamonds.
For most of my career I have worked with a board to develop my ideas, two of which have materialized into legislation: firstly, the “law against seizures” as we knew in +/- 2006-2008, and secondly, the “Carat Tax” in Antwerp, which is a costlier but, in my eyes, fairer taxation system for all parties. I would prefer to develop the idea along with our stakeholders, the organizations representing us, before approaching the diamond mining companies and countries, as we manufacturers and traders need to impose our participation.
TDL: Do you believe it is possible to appeal to the global diamond industry as a collective that needs to work together in the interest of all? Are there other industries that do this?
S. & S. Choksi: Each and every company will have to participate, and with the support of the WFDB we can ensure that this happens. It is rather simple, if they refused, they would not get their membership in the local trading hall. Without having a membership at a local trading hall, they would not be able to practice in this trade, as we all are aware that every trader must be member of its local bourse, where all members have to abide by the by-laws.
In these difficult times where a lot of injustice is taking place, the local bourses are doing their utmost to protect their members as per the law allows. Antwerp has often been a trendsetter, and other industries have taken us as an example. In fact, many companies in different countries requested their local government to copy our Carat Tax. (see, for ex., here and here).
And, regarding the point of whether there are other industries that adopt any similar strategies, perhaps there are, but as mentioned earlier, the diamond industry is a unique one in plentiful ways and therefore deserves and requires unique approaches.
Shashin Choksi, director of Swati Gems bvba, is a second-generation diamond merchant from Antwerp, with over 40 years of experience in the industry. Shashin is also a dedicated husband and father of three.
Siddharth Choksi holds a degree in business administration degree from IE Business School and currently works at a venture capital fund in Amsterdam. Since a young age he has undertaken a number of internships within the diamond and jewelry industry, gaining exposure to the various stages of the trade's supply chain.
Photo: Shruti Mehta @DiamondsandAntwerp