Diamond Profitability Decline Is The Fate Of Diamond Industry
2002: Diamond Profitability Decline Came Due to Dealers’ Carelessness
(Excerpts of a letter from Steven R. Martin, a prominent Chicago wholesale jeweler:)
"I wrote many letters to jewelry publications years ago, warning the industry that if they continued to treat the diamond as a commodity, that diamond profitability would continue to decline. Of course, the industry continued to do so, and diamond profitability declined, leaving the dealers with only themselves to blame.
"The front page (of the last Diamond Registry Bulletin) had an article about how the numbers alone on the diamond don’t tell the whole story and how the dealers complain about the customers who give them the "specs" of a stone. This article was immediately followed by notice of a Diamond Dealers Club auction inviting dealers to buy stones through a broker. Are these dealers, who are buying diamonds sight unseen through brokers (buying by the numbers) the same ones who are complaining that their customers are giving them numbers that they want on diamonds?
"The point I have made for many years is that the industry has created its own problems marketing the diamond as a commodity. Now, 10 years later, as they have realized what they have done, they create the branded diamond. Will this work? I don’t think so for two main reason: one, I don’t believe any company has enough money and marketing clout to create a strong enough brand; and two, I don’t think there is enough perceived difference to the customer to pay for the brand.
"I believe that De Beers has no interest in what happens at the retail end for a variety of reasons, some due to the shortsightedness and some due to lack of marketing acumen. (Yes, I still make a nice living. No, I don‘t want my daughter in this business.)"
The Diamond Registry responds
We agree with Mr. Martin’s point that diamonds have become too much like a commodity, and some years ago we published his drawing of a "diamond vending machine" which accurately portrays how some people buy diamonds today with a click of the mouse.
This has, of course, affected the profitability of everyone in the diamonds pipeline, but especially the retail jewelers.
We also agree with Mr. Martin on the subject of branded diamonds’ limited value to the consumer. However, we take issue with what he says about De Beers having no interest with the retail end. In fact, De Beers are entering the retail end because they have far sighted business acumen.
As for the auction at the Diamond Dealers’ Club, it requires that a member to put in the bid, but any jeweler can register to view the goods.
Regarding Mr. Martin’s daughter, we believe that, if she is interested, there will always be opportunities as an independent jeweler, if not, she could always have a career as a jewelry executive with De Beers’ partner LVMH.