Industry analyst Edahn Golan takes an in-depth look at US jewelry sales trends and sees a lot of indications it is going to be a terrific holiday season.
Reprinted courtesy www.edahngolan.com.
After a roller coaster 2020, 2021 continued the upswing in jewelry sales to a degree few if any expected. Sales in October rose 37%, and we expect holiday jewelry sales to top that and close a fantastic year for the industry.
Lately there has been another avalanche of press releases and media attention drawn to Laboratory Grown Diamond (LGD) producers and retailers who decide to jump on board of the LGD train. Before everybody starts to scream bloody murder, the whole LGD debate, this opinion piece included, is not about one versus the other. The point is precisely the opposite.
Roy Safit (Everledger) provides good reasons why the natural diamond industry is robust enough to cope with the growth of synthetic alternatives.
Lab-grown diamonds have been portrayed as a juggernaut that’s gathering pace in the fast lane of the precious stone freeway. The demise of the natural pearl industry, following the introduction of cultured pearls during the first decades of the 20th Century, provides a stern warning for the diamond industry.
Reprinted courtesy of Paul Zimnisky. Despite relatively stable consumer demand for diamonds in established markets like the U.S. and notable growth from newer markets like China, for the most of last decade the diamond industry has felt apathetic. This can in part be explained by an arguably oversupplied supply-chain, insufficient marketing efforts and a general pessimism towards the diamond business as a changing consumer economy challenges traditional industries.
While the pandemic brought about an unprecedented shock to the whole diamond value chain in 2020, in a way it may also have acted as a catharsis of sorts for an industry that has been struggling to regain footing in recent years, in part due to a misalignment of supply and demand.
According to an opinion piece by Rough&Polished's Sergey Goryainov, the Russian State Repository may be in the process of buying US$ 1 billion worth of (rough) diamonds from Alrosa, the Russian mining giant, to alleviate the pressure on the company as the industry suffers from the COVID-19 pandemic. The author believes that what he describes as a "bailout" for both the industry and Alrosa by the Gokhran is inevitable and necessary move.
In his latest blog, industry analyst Edahn Golan isn't sugarcoating the message, the diamond industry is suffering as the pandemic is exacerbating the long-term downward trend of polished wholesale prices as well as the steep decline in jewelry share of wallet.
Four years ago, I wrote an article on The Diamond Loupe entitled: “Greetings from Underworld – Baselworld 2016 meets (modest) expectations”, a title that left little to the imagination.
By Isi Morsel, C.E.O. Dali Diamond Co.
The diamond industry, from mine to retail, is facing new challenges that are rocking it to its core. Retail stores around the world are closed and that reverberated up the diamond pipeline, bringing wholesaling activity, jewelry manufacturing, diamond polishing, and diamond mining to a complete standstill.
The writing appears to be on the proverbial wall: the Indian diamond industry is careening toward a temporary ban on rough-diamond imports which, if implemented, will effectively bring rough diamond trading to a halt. How can manufacturers survive without rough, you may ask? If Chaim Even-Zohar’s calculations are correct, it is because they are sitting on $1.5-$2 billion of rough diamond inventory already, with another $5 billion in polished ready for sale. The question then becomes: why buy more?
By Russell Shor. Reprinted by special arrangement.
Forty years ago diamonds and gemstones were rocketing in price on a boom the likes of which no one had ever seen before. $50,000 for a one-carat D flawless! I was a newbie back then and dealers were telling me that price was cheap. $100,000? $200,000? per-carat. That was more like it, they said.
Diamond jewelry retail sales in the US soared 20% after 9/11. History shows us that after large-scale disasters and economic meltdowns, there is a tendency to spend on diamond jewelry. History has shown us that it will get better after it gets worse.
- Edahn Golan, from his article, "Ruin to Resurrection, the Perpetual Path"
In his latest editorial, JCK editor-in-chief and industry expert Rob Bates makes a case for a ceasefire between the natural diamond industry and the lab-grown sector.
In recent months the mudslinging back and forth between the two "intimately connected sectors" has reached new heights, which Bates believes will be negative in the long run for the entire industry, natural and LGD alike.
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.
For months now, the news emerging from across the diamond industry has been colored various shades of sombre, with each analysis referring to some version of the same list of issues ailing the trade: falling polished prices combined with excessive polished inventories, a financing squeeze on Indian manufacturers and a lack of profitablity, low demand for rough, economic uncertainty generated by an unstable geopolitical climate ... take your pick. The question Paul Zimnisky examines is whether this all adds up to a 'crisis'.
“I’m actually really excited about it. I think it was a very positive development for the industry. It clearly serves to differentiate the two markets. The synthetic diamond market is not the same as the natural diamond market and they can co-exist ... there’s no store of value in a synthetic diamond. Rather, synthetic diamonds are filling a niche around fashion jewellery and we see it almost as an entry level opportunity for consumers. That’s how we see synthetics and natural diamonds playing together in this market."
- Eira Thomas, CEO of Lucara Diamonds, discussing Lightbox at The Northern Miner’s Canadian Mining Symposium.
The issue of terminology concerning laboratory-grown diamonds has in recent years been a subject of significant debate, deliberation, conflicting guidelines and warnings issued.
Diamond mining stocks have taken a beating in recent years, with most believing there is no end in sight. Post-financial crisis oversupply and rising concerns about the assumed influence of laboratory-grown diamonds have tested the patience and tainted the sentiment of investors in the diamond arena. But the imminent shrinkage of supply and continuing demand for the product is not imaginary. Those who doubt the resilience of the diamond industry and have given up on its ming sector may regret selling low.
Indpendent diamond industry analyst Paul Zimnisky takes an alternative, well-considered approach to recycled diamonds: they could be the shot in the arm the natural diamond industry needs.
In 2014, I wrote that the lab-grown diamond industry was out-promoting the natural. That is even more pronounced now. I don’t get many pitches from natural diamond companies. And some of the pitches I do get are kind of dull. By contrast, I get at least two or three pitches on lab-grown diamonds a week. My Facebook feed is inundated with ads for lab-grown companies. The man-made segment claims only a single-digit percentage of the market, but it appears to be doing an outsized percentage of the marketing ... The fact is, the natural diamond industry made itself vulnerable to the threat of lab-growns. The industry didn’t promote its product for a decade. Everything that is happening now with lab-grown diamonds was predictable. The industry knew they were coming for decades. But the trade also failed to understand that the rest of the world wouldn’t see the two products the same way it does.
- Rob Bates, award-winning journalist at JCK, from his article, "The Lab-Grown Diamond Industry Is Still Out-Hustling the Natural"
Looking towards 2019, independent diamond industry analyst and consultant Paul Zimnisky, who covers the natural and the lab-created diamond industry, has identified three themes that will likely shape the diamond industry, exclusively for The Diamond Loupe. View the pdf verison here.
The recent Federal Trade Commission (FTC) reversal regarding the definition of a diamond would seem to be a landmark decision. In reality, it is much ado about nothing. Since 1956, the FTC has defined a diamond as something natural, meaning from the Earth; now synthetic diamond manufacturers are allowed to use the word diamond to describe their product. Not an earth shattering development, really ... The FTC ruling stipulates that synthetic diamonds must still be described as lab-grown or cultured or in some clear way be distinguished from natural diamonds.
- Fire & Ice Diamonds, opinion on synthetic diamond nomenclature.
Ethics: it's "More than a PR issue!" The Diamond Development Initiative (DDI), a non-profit working to improve the lives and working conditions of artisanal and small-scale miners in Africa, issued a response to the recent decision by the US Federal Trade Commission (FTC) on synthetic diamonds and how it could impact the market for artisanally-mined diamonds.
The Diamond Producers Association recently released a statement addressing the controversial changes the US's FTC has adopted regarding the definition and description of diamonds, among other issues.
Industry consultant Ben Janowski takes an in-depth look at the developments that led De Beers to enter into the laboratory-grown diamond jewelry sector, and what Lightbox may mean long-term for the mining giant. Published in full courtesy of Ben Janowski, who will be lecturing at the Antwerp Summer University program, "From Mine to Finger 2018: A deep dive into the world of diamonds."*
It will be very difficult for lab-diamond manufacturers to protect price as production processes and economics improve. Ultimately, this will result in lab-diamonds becoming more of their own separate product class, maybe not in the realm of 'fashion jewelry', but their own, completely distinct product class from natural diamonds. Lab-diamond companies that build a very strong brand through marketing or proprietary jewellery design will be less susceptible to price pressure ... Price is a lab-created diamond’s greatest advantage over a natural equivalent. Some think it is sourcing and social/environmental responsibility perception, but at the end of the day most consumers vote with their pocketbook. So, a greater discount will lead to greater penetration of the product in the industry and wider customer acceptance ... The biggest threat to the natural diamond industry is decreasing marriage rates and changing consumer preferences of younger generations away from material possessions.
Paul Zimnisky, interviewed by Mathew Nyaungwa, Rough&Polished
"Like it or not, compliance to official requirements for a clear audit trail of one’s processes is now an integral part of a diamantaire’s business. You could say compliance is the 'Fifth C' of the business", writes Pranay Narvekar, partner at Pharos Beam LLP and an independent consultant to the diamond industry.
Grant Mobley, a gemologist and director at Pluczenik gave Harper's Bazaar a primer concerning the distinctiveness of diamonds as compared to laboratory-grown products.
Is it appropriate for the diamond industry to offer mass quantities of loose one-carat diamonds at these events? What is the message we are sending to the high-end consumers who frequent trade fairs, if they see high-end diamond jewelry pieces at one booth, and then loose diamonds in large quantities offered at wholesale prices at another booth? Does this help us promote diamonds as a rare creation of earth or harm those efforts? Isn’t it clear that we are hurting our own business with these actions? Healthy trade is based on daily sales out of the office or at the customers’ businesses, not at trade shows ... The high costs of exhibiting, the difficulty of making the right price, the possible degradation of the positioning of polished diamonds, all require us to carefully consider our trade fair strategy.
- Ehud Arye Laniado, "Reconsidering Trade Shows"
Many laboratory-grown diamond companies describe their diamonds as being green or eco-friendly and use words such as ‘greenhouse’ or ‘foundry’ to try and influence opinion. [Consumers] are also being told that [synthetic] diamonds are real diamonds without the human or environmental impact. This is a misrepresentation. They deceive the consumer, because a synthetic diamond is not worth much at retail value. Millennials are being fed lies, because the gap between reality and marketing is huge.
Sahag Arslanian, Arslanian Group, speaking at the Mining Indaba, from "Millennials being lied to by synthetic diamond manufacturers".
This debate shows the need for the industry to demonstrate the value of its products. The link between a diamond and love is clear and well-established. But while consumers don’t think twice about buying $300 sneakers, or $1,000 handbags, they regularly balk at spending a few thousand dollars on engagement rings. And yet, it takes a lot of painstaking craft to make a ring (of the non-$25 variety). It also takes a lot of effort and money to get diamonds out of the ground. Plus, consumers are buying a product that is intended to hold its value and truly last forever ... it’s clear, many consumers don’t know all that. Perhaps that’s something the industry can think about how to rectify in the year ahead.
- JCK's Rob Bates addresses the stormy internet debate about Kay Jewelers' $24.99 diamond ring
Last month, The New York Times posted an article entitled “Atelier Swarovski Turns to Man-Made Gems”. Jean-Marc Lieberherr, CEO of the Diamond Producers Association, would call this an oxymoron. Gems by definition are not man-made, not to mention the fact that calling them such contradicts the standards of the International Organization for Standardization (ISO).
The vanguard of independent diamond-industry journalism, Chaim-Even Zohar, last week announced his retirement, bringing more than 40 years of uncompromising investigative reporting to an end.
At the start of Positive Week, an initiative run by Positive Luxury to encourage environmental practises in business, Jo Blake, head of communications at De Beers' brand Forevermark, argued that the regulations that govern diamond mining allow the practice to be more eco-friendly and sustainable than synthetic diamonds, which are hardly regulated at all. “The [synthetics] industry is not particularly regulated in comparison to the natural diamond mining," she said.
I’m not here to throw mud at the Diamond Producers Association or its efforts. What they do is great and very much needed. However, I do want to suggest that we need to go beyond general promotion. The augmenting campaigns, those that create a specific desire followed by a specific action, is the kind of marketing we are missing today.
- Edahn Golan highlights need for diamond marketing, wonders if DPA getting consumers into stores.
I am bullish on the future of the diamond business. Three reasons for this optimism ... new discoveries, extending mine life and the increasing demand for diamonds.
- Martin Leake, independent diamond consultant, former head of sales at Grib Diamonds, interview @ Rough-Polished
Currently, the Federal Trade Commission is considering letting the term 'cultured' be added to these currently accepted descriptions of man-made versions, such as 'lab-created' or 'laboratory grown'. The mined-diamond industry is fighting this addition tooth and nail, while the man-made producers are intent upon dropping any reference to 'laboratory created' or 'laboratory grown' in favor of 'cultured' alone ... In the end it's marketing that is going to make or break the cultivated-diamond industry’s potential to disrupt the natural-diamond market ... It’s likely to all come down to a battle over words: cultured vs. man-made, cultivated vs. laboratory-grown. In marketing, perception is reality. The future potential for cultivated diamonds will largely depend upon what the FTC allows them to be called.
- Pamela N. Danziger, market researcher, speaker and author.
Diamond trader and brick & mortar crusader Melvin Moss is back at his provocative best in his most recent diatribe, "The #Diamond Family is Dysfunctional". He argues that major diamond miners producing too much rough at prices unsustainable for the rest of the industry (which deals with underpriced polished) and are extending their reach across the pipeline at the expense of everyone else - particularly retailers. "The diamond pipeline is dysfunctional", he writes. "Miners have a primary obligation to their shareholders.
Innovation is the key to sustained success, even for a traditional industry such as the diamond trade. Successful innovation, however, starts with questioning what we do and why we are doing it.
A new investigative report by Global Witness shows how smugglers are using social media platforms such as Facebook Messenger and WhatsApp to get diamonds linked to the ongoing conflict in the Central African Republic (CAR) out of the country and into international markets. Representatives went undercover by creating a social media profile for a fictitious diamond buyer that claimed to be based in Antwerp but operates internationally. They managed to speak to several dealers who promised easy access to CAR’s diamonds.
JCK news director Rob Bates takes a look at the resurgence of independent bookstores in the U.S. and sees parallels with independent jewelry retailers: "It’s clear the jewelry industry - and in particular the number of independent jewelers - is shrinking. But that’s true of retail overall. And, until recently, it was true of independent bookstores. If you compare today versus decades ago, the number of brick-and-mortar booksellers has fallen. But the independent segment has reversed that trajectory. The number has risen for the last eight years.
Diamond expert, industrialist and industry analyst Ehud Arye Laniado takes an incisive look at the value proposition of synthetic diamonds, taking their producers and marketers to task on their main selling points. Reprinted in full with the permission of the author.
“To me, synthetic diamonds are not diamonds. It is a different product. We don’t know what their value is now or how this is going to evolve. So we are not financing lab-grown at the moment, but we may consider it over time, when it is a more mature product."
- Erik Jens, when asked by moderator Rob Bates (JCK) if ABN AMRO is currently financing lab-grown diamond companies during SRK panel debate with Paul Rowley (De Beers) and Tom Moses (GIA) at JCK Las Vegas
The video is incorrect when it states baldly, “Diamonds can’t be tracked.” True, there is nothing gemologically in a diamond that offers any proof of origin. But there is no reason that diamonds can’t be tracked. Bananas are tracked. Coffee is tracked ... If a manufacturer buys directly from a specific mine, establishing a diamond’s origin should be relatively easy. All it has to do is segregate those specific goods and then make its systems open to audit ... Brilliant Earth, like other e-tailers, stocks virtual inventory. It is also true that the stones it sells sometimes appear on other sites. I wouldn’t call any of that a smoking gun. And I wouldn’t call a company a scam based on one supplier’s purported comments on a hidden-camera video.
- JCK's Rob Bates on the 'Brilliant Earth Diamond Scam" video.
JCK's Rob Bates conducted an in-depth and personal interview with Cecilia Gardner, who recently stepped down after 18 years as president and CEO of the Jewelers Vigilance Committee, a not-for-profit trade association dedicated to compliance with laws pertaining to the jewelry industry.
Continuing the published opinions on whether or not the Kimberley Process (KP) is "bullshit" - in the words of Martin Rapaport - JCK's Rob Bates invited Ian Smillie, chaair of the Diamond Development Initiative, president of the Canadian Association for the Study of International Development and formerly one of the key architects of the Kimberley Process, to respond to Brad Brooks-Rubin's response to Rapaport's original
"The Kimberley Process (KP) is one of the key institutions that the diamond industry depends on to deliver the assurance that not only are rough diamonds responsibly sourced," writes Vinod Kuriyan, chief editor of GEMKonnect and a veteran analyst of the diamond industry, "but that they deliver fair value to artisanal miners and the local communities in the sourcing area." His defence of the KP was prompted by Martin Rapaport's statement on stage last week at the
The diamond industry's famous supply and demand chart - the 'hungry crocodile' - representing its forecast of rising rough diamond prices as production falls to shortage levels, "Not only has never materialized, it oversimplifies the fact that the industry’s 15,000 different categories of diamonds are performing in very different ways," writes Thomas Biesheuvel for Bloomberg.
"Martin Rapaport, chairman of the Rapaport Group, called on India to show reciprocity in its trade relationship with the United States," writes eponymous Rapaport News of their founder's “State of Diamond Industry” presentation at GJEPC's "Mines to Market" conference yesterday, marking 50 years of India’s Gem & Jewellery Export Promotion Council.
Diamond industry analyst Paul Zimnisky, author of the Zimnisky Global Rough Diamond Price Index, provides his thoughts on the recent struggles of diamond mining stocks. Given what is now being widely considered as a recovery and stabilization of the diamond industry last year, an optimistic post-election U.S.
"When I joined the diamond industry 10 years ago, I discovered the significant contribution diamond mining makes to entire regions and communities, through local employment and investments, construction of infrastructure, and development of health and education programs. I would assume that most consumers today are not aware of the contribution diamonds make to the world. Diamonds matter to the livelihood of millions, and they matter to all of us who want to express to our loved ones the sincerity of our commitment. Not all is perfect, but it is good today, and it will be better tomorrow. I take pride in the fact that diamonds make the world a better place."
- Jean-Marc Lieberherr, CEO of the Diamond Producers Association (DPA)
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.
Since the real (forgive the pun) possibility of cultured diamonds being produced economically in volume started to become apparent, the industry has reacted with a completely closed mind ... The good news is that the woeful performance of polished diamonds is at least forcing some people to think, but thinking in the same old box is not going to do much good. Nothing is being aggressively promoted by the industry about the enormous benefits [created by] the vast majority of natural diamond mining, the jobs and wealth it creates in often very impoverished areas of the world. [Critics'] throw-away lines about the mining footprint, which they use to mislead and denigrate the natural product, such as ‘draining lakes’ in the Vogue article, are not challenged and put into a meaningful context.
- Charles Wyndham in polishedprices.com, "A Fake Jerome and real diamonds?"
In his latest Diamond Intelligence Briefs, “Keeping Stock of U.S. Kimberley Process Certificates”, industry analyst Chaim Even-Zohar takes another hard look at the U.S. rough diamond trade and the country’s half-hearted approach when it comes to implementing Kimberley Process (KP) certification standards domestically.
National Jeweler’s Editor-in-chief Michelle Graff made 3 Predictions regarding the retail market for 2017 based on current market trends and the way consumer demand is changing with the times. Retailers, including larger chains, will continue the 2016 trend of closing down. Women’s clothing retailer The Limited announced that they were closing all their stores and operating strictly online.
The diamond industry is changing, and the global environment in which we operate is changing too. There is a constant and inseparable interaction between the two. We must continue to evolve ... The diamond industry should change its traditional approach towards consumers. My proposed new approach towards current and future consumers is one based on openness and transparency. For most consumers, the diamond mining and manufacturing process is opaque. If we become more open about how diamonds reach the consumer, we will change the consumer’s perception of the diamond industry and of diamonds themselves. In my opinion, it is transparency that will transform end consumers’ behavior and bolster their confidence.
- Ehud Arye Laniado, from his "Year-End Wrap Up: How the Diamond Industry Can Move Forward in 2017"
Reflecting on the impact of the Trump election victory on the future of the diamond trade, particularly on the U.S. and India, independent industry consultant Pranay Narvekar writes in GJEPC's Solitaire International that America's share of the global polished diamond market - already the highest by far at 45% of total value - should only increase in the coming years, while the strength of the dollar and other expected policy moves will only exacerbate uncertainty throughout the trade.
"The ethical aspect of trading does not weigh more heavily now than in the past. It remains as critical as it has always been. Indeed, we may be confronted with a more inquisitive public than in the past, but our focus on ethics has never changed. People who intentionally misrepresent their product are criminals and must be treated as such. Diamonds must continue to be traded, as in the past, responsibly and ethically. The challenge is for the synthetics producers to find their own niche not by denigrating diamonds but by praising their man-made product in, and I stress it again, a both responsible and ethical manner."
AWDC President Stéphane Fischler on ethics, synthetic diamonds and the Antwerp diamond industry in an interview on Rough & Polished
The diamond and jewelry trade will benefit as the new policies create a more prosperous middle class and greater numbers of wealthy consumers. Global uncertainty will also increase demand for investment diamonds as a store of wealth.
- Martin Rapaport, Chairman of the Rapaport Group, on his positive view of Trump presidency for diamonds & jewelry.