Lucara Diamond Corp. continues to test and refine Clara Diamond Solutions (Clara), its digital sales platform for selling rough diamonds individually, launching its fourth test run this week. Lucara CEO Eira Thomas and Steve Lincoln, Sales and Marketing Operations Manager at Lucara and Director Sales and Marketing of Clara sat down with The Diamond Loupe to clarify a few aspects of the system and discuss their progress as they gradually expand their trial phase, which commenced in late November 2018. Supply consists of a selection of diamonds from Lucara's Karowe mine and additional aggregated third-party rough diamonds, while demand comes from a select group of large vertically-integrated jewelry houses and global diamond manufacturers.
For those making their first acquaintance, Clara is Lucara's 100%-owned digital sales platform (for a deep dive, check out our interview with CEO Thomas, or explanation below*). It uses proprietary analytics together with cloud and blockchain technologies to modernize the existing diamond supply chain - specifically, by offering an alternative to the traditional sales system of miners selling large parcels of goods, enabling them to sell rough diamonds stone-by-stone, based on polished characteristics and demand. To this point, Clara has held three successful sales, and Thomas considers it "a learning experience. The buyers were initially cautious but soon started broadening their order books. We have received orders in the thousands of stones." Nevertheless, they do not expect to earn any revenue in 2019, focusing rather on getting feedback from users, eliminating any potential flaws and onboarding new manufacturers. They are also expanding their offering: initially focused on goods between 1 and 15 carats in size, in the better qualities and colors, she said recent sales have included stones in the .50 to .70 size range, of DEF quality.
Amazon of the diamond world
"We have had weekly inquiries about getting on the platform," Thomas explains, but they intend to scale up gradually, continuing on a monthly sales schedule for now and moving toward weekly sales in one to two years, and then eventually every few days. Their cautious pace, however, is due to the challenges of working with new technology, not from a lack of ambition. "We see this as the Amazon of the diamond world," Thomas offered, which sounds like they are after total market domination, but she emphasized that Lucara sees Clara as a system that complements existing sales channels rather than replacing them. "We are not trying to blow the [current sales] system up but to make it more efficient. This is not about disruption. It is about market stability." She explained the Clara would bolster manufacturers' liquidity as the 'pull' system it implements eliminates the carrying of excess inventory a 'push' system entails. It also shortens the time from mine to shelf, which is beneficial for price stability.
The disruptive aspect, however, appears to be a concern among the trading community, though she insisted, "Once we explain the potential, people are less concerned." This is a topic she addressed on an earlier occasion: "Clara will not eliminate anybody in the value chain specifically, but certain areas of the value chain will be impacted more than others and the more marginal players will become vulnerable. For example, there is nothing to prevent a secondary trader from taking their goods and selling them on Clara. In fact, we would argue this would be a logical thing to do, and that they can make more money by doing so." She also pointed out the various advantages the platform would provide to diamond traders, not least of which is the provenance transparency it guarantees from mine to possession, providing traders a ready-made story to communicate to buyers.
Their partnership with Sarine Technologies offers further potential for tracing the journey of a diamond, Marketing Director Lincoln pointed out, creating the opportunity to create a bespoke blockchain traceability program. The most practical advantages, however, lie in the technology: the Sarine scan of a rough stone prior to purchase identifies the optimal stone to meet the demand of the manufacturer, maximizing the value of their purchase; the streamlined ordering process enables a stone to be purchased online and sent directly to the manufacturer with a ready-made polishing plan; and, as Thomas notes, the process is "very, very simple to use, buying only what you need, in real time." Finally, she adds, Clara eliminates the expenses of time, travel and accommodation typically incurred in the purchase of rough stones. "Buyers have the right to stay in the office," she concludes. Perhaps the reference to Amazon was not an overreach after all.
* The Clara system works as follows: under an exclusive collaboration agreement with Sarine Technologies, a digital fingerprint of each rough diamond is created and uploaded to the Clara platform with a corresponding asking price. Simultaneously, diamond buyers upload their specific polished diamond requirements in terms of size, cut, color and quality, including their desired purchase price, creating an 'order' within Clara. Clara uses proprietary analytics to match individual, scanned rough diamonds to the buyers' optimal polished requirements. Clara earns the differential between the asking price and purchase price of each match as its revenue and requires a minimum transaction spread to facilitate an optimal match.
Photo: (COLE BURSTON / BLOOMBERG)