A session at Antwerp's Facets 2024 conference sparked heated discussions on how the diamond industry can unlock the value of natural stones and reinvigorate demand. Five industry experts joined moderator Edahn Golan to delve into whether the future of diamonds lies with consumers or investors.
This session, which was a key focus at the conference, highlighted the importance of telling the story behind natural diamonds. Experts debated if commodity investors could become the industry's savior.
One unanimous point was that significant changes are needed to drive more diamond sales.
The Flaws in Retail
To identify current weaknesses, the Natural Diamond Council (NDC) sent secret shoppers to jewelry stores, revealing some concerning findings. One shopper on the U.S. west coast was told a diamond came from Texas. NDC CEO David Kellie shared that a knowledgeable sales pitch about the diamond’s origins and its meaning should have been given. Golan, with his experience visiting high-volume stores, agreed, noting that retailers need to do more to engage customers and tell the story behind their products.
Despite some retailers denying that consumers care about sustainability or traceability, research shows that shoppers do indeed value these aspects. Kellie emphasized that just because consumers don't directly ask for such information, it doesn’t mean it’s not important to them.
Buying a diamond, especially in the $3,000 to $5,000 range, often lacks an enjoyable experience, according to Kellie. "It’s the most beautiful product in the world, yet it’s the worst shopping experience," he lamented.
Education and Marketing
William Lamb, CEO of Lucara Diamond Corp., agreed that educating consumers about a diamond’s provenance is crucial for creating a meaningful purchase experience. "If you don’t understand the story of what that diamond does, how can you create an experience when someone buys it?" Lamb questioned.
Luxury Features That Appeal to Consumers
Olya Linde, partner at Bain & Company, highlighted eight features of luxury products that appeal to consumers, including craftsmanship, status, investment value, and sustainability. Linde noted that companies that focus on more of these elements tend to be more successful.
Diamonds as Investment
Sahag Arslanian, director of Arslanian Group, discussed the investment potential of fancy-color diamonds. These diamonds are exceedingly rare and are considered immune to the threat of synthetic diamonds. Arslanian sees fancy-color diamonds as the ultimate investment class, although he acknowledged they are not for the average consumer in the diamond world.
Cormac Kinney, CEO of Diamond Standard, introduced the concept of exchange-traded diamonds. However, he also warned that the diamond industry must face the reality of declining prices. He compared the diamond industry's situation to the gold sector's 1990s crisis, which was resolved by creating exchange-traded funds (ETFs) for gold-related assets, helping to stabilize the gold market.
Kinney argued that investment demand could be the key to solving the diamond industry's struggles. He believes the industry should capitalize on the rarity of natural diamonds and their potential as an investment asset, instead of relying solely on consumer marketing.
The Battle of Marketing and Value
Both Kellie and Golan disagreed with Kinney’s comparison to gold, pointing out that gold is seen as money and is held by governments in reserve. "There's no other desirable brand that succeeds without marketing," Kellie remarked, pointing to the importance of effective marketing to build brand value.
Linde added that while half of marketing investments are often considered "wasted," the remaining half drives success. She highlighted the critical role marketing plays in creating demand and maintaining the industry's relevance.
In summary, the future of the diamond industry remains uncertain. The debate over whether to focus on consumers or investors will likely shape the industry's path forward.