Higher Diamond Prices Will Increase De Beers’ Revenues
2000: Higher Diamond Prices for Higher Profit Margins
As a continuation of De Beers restructuring initiative, they have changed the way they are selling rough diamonds to clients. For the first time in December, a new system of more targeted sales boxes will be put into place in the large gem sight.
In effect, De Beers wants to be a retailer—not a retailer of polished stones just yet, but rather a retailer of rough diamonds in a sense.
For decades, De Beers’ policy has been to sell boxes of rough diamonds which contained a variety of colors, shape and clarity grades. The cutters then had to sort them into categories, eventually selling on the open market what they did not use.
The new system provides to each client only those stones which the client will most likely sell best. For example, a company specializing in selling to the mass market will receive lower-end rough, while a dealer in fine quality goods will receive only those.
Though seemingly more efficient, in reality, it will eventually allow De Beers to charge higher prices. By serving exactly their clients’ needs, there will be no reselling on the open market.
While De Beers says is not officially raising prices to its sightholders as part of this sight revamping, the future will most likely tell a different story.
For the consumer, the change will probably mean an eventual price hike.
Along with specializing the sight boxes, De Beers intends to keep future sights very small. Having reached their $6 billion sales, the company can control the market more effectively—especially given indicators of a cooling economy by keeping the diamond sights small.