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Adapt or Perish!
Changes Required To Survive
By: Diamond World News Service
Aug 4 2015 5:42PM
Reference: 11766  

In the turbulent times, when diamond industry is going through what looks like a never-ending tunnel, visionaries from the fraternity try to see the light. Be it the sky-rocketing prices of rough diamonds, shrinking profitability of manufacturers, consumers’ disinterest in diamonds or banks’ apprehension regarding lending to our trade, we are facing one of the toughest times on a global scale.

But, we are survivors and we will survive. There are a few changes and methods that we need to adapt. The industry leaders have chalked out a plan. They share their suggestions and thoughts with Preeti Srivastav to impart hope and vision amongst our readers.

The journey of diamond from beneath the layers of earth to the hands of a satisfied consumer has been labourious, dramatic and a glamorous one. Cashing on the various layers of human psychethe diamond industry rose to unachievable heights, however, the same psyche—of being influenced by advertisements—has now seemed to boomerang and has brought little despair to the industry. The latest reports from the inside the industry paints a worrisome picture of the market, where every layer—right from producers to retailers—is struggling, as one change leading on to the other is having an unwanted effect on the industry. However, leaders from the fraternityare optimistic and believe that the grim situation is turning the industry into a more corporate, organised and profit-making industry. So, it is time for the industry to move on and adapt to change.

Ernie Blom, President, World Federation of Diamond Bourse
The greatest strength of the industry is that we admit to our mistakes and learn from it. We know it well that lack of generic promotion has slowed down the pace of the industry. Hence, World Diamond Mark Federation is working to ensure diamonds are again on consumers’ radar. Younger buyers do not regard jewellery as an obvious purchase. We have fallen behind the curve over the past decade when it comes to persuading consumers, younger ones in particular that diamond jewellery can and should be among the items to benefit from their disposable income. There are occasions beyond engagement and wedding to buy diamonds and we need to point at those opportunities.

The most immediate change required is that the manufacturers must stop buying rough goods at prices that are not worthwhile to them. In addition, producers need to understand that we are partners together in this industry. They need to take a long-term approach. We also need to understand the concerns of the banks and in turn they should understand that we need some time to adjust to these new conditions.

Alex Popov, Chairman, World Diamond Mark Federation
I truly believe in evolution where strongest and smartest survive. The days of no collateral credit, low rough prices, high yields and opacity are over. The transformation from a traditional supply chain to a modern one happened in other luxury product industries a long time ago. In our industry too, the next logical development is that of producers morphing themselves into brands that will eliminate manufacturers and traders form the supply chain. Every crisis forces people to rethink their business models and to take painful decisions – from restructuring to disinvestment.

We as an industry and as a part of world economics, need to abide by the same rules as others, we must know we are not special. Everybody seem to agree with the idea of generic promotion. But factors that hold us back are—many industry operators still expect that the change will come from outside, having unrealistic hopes from the Diamond Producer Association (DPA), the attitude of being conveniently preoccupied with short-term problems - such as the current fad and fancy of profitability, an almost inherent distrust shown by diamond people towards newer ideas or people who think outside the box. Add low self-confidence to the mix and here you get the idea why the blame game is all about all sorts of ‘outside’ factors.

All three layers of the supply chain need to take responsibility of the situation and act towards improving it. Miners should understand that playing God is counterproductive. Manufacturers need to think about mergers and cooperating and be more assertive. The WFDB and IDMA need to finalise quickly all compliance and other regulatory issues and open the trade to public scrutiny.Retailers are at the frontline and are most open inventive segment and this needs to be encouraged. The fourth pillar in the industry which comprises labs, banks, credit institutions, logistics companies, research, equipment manufacturers, exhibition and media—needs to be little more sensitive towards the industry. We need to learn from other luxury product industry that branding is the king and that we need to have a message for young consumer. The WDM plans to unveil the comprehensive social media campaign this year hoping that other industry stakeholders will join to triple the effort.

Philippe Mellier, Group CEO, De Beers
While the industry recently experienced a lull, we believe that it is working through the issues such as stock and cash flows and we should see a return to balance before too long. We need to aggressively continue to engage consumers with the Diamond Dream, as other luxury categories are competing for a share of wallet. Things such as marketing through digital media channels, branding and retail standards are therefore important to keep younger consumer convinced.

As miners, one of our major areas of focus is investing in new sources of production and this is challenging as it requires us to commit huge sums of capital knowing that it will be many years before we see a single dollar of return. We are currently investing billions of dollars in extending our production capacity at De Beers as we recognise the importance of future supply. We need to improve transparency across the board and encourage financiers to see the industry as a good investment.We need to take issues relating to undisclosed synthetics and treatments extremely seriously to ensure that consumers do not lose their confidence in the industry.

Dr Gaetano Cavalieri, President, CIBJO, World Jewelry Confederation
Quite honestly, we should have learned it during previous slowdowns, that there needs to be more discipline in the industry in terms of rough purchasing policies. First, we need to figure out how to have a generic promotion programme with limited budgets. We cannot blindly follow the business model of other luxury products and industries, where huge amount of money is spent on marketing and promotion by a very limited number of players, who together control the market. That model, if becomes dominant in our market, a large number of the players in our industry will not be able to compete.

The consumer electronic sector is bolder than diamond industry and better placed in buyers’ radar, however, comparing a diamond with the latest phone is not intelligent. We know that in five years’ time the diamond jewellery will retain its value, and quite possibly increase, while the same phone will essentially be worthless. However, we need to learn to change the way we pitch to the consumer.

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