Diamond Trade and Marketing Crisis
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Diamond Trade Markets Are Trying To Echo Success

1990: Diamond Trade Markets Adopt Opposite Directions to Win Same Goals

March 1998

When De Beers broke with Argyle, they apparently decided to abandon their support for small diamonds and concentrate their efforts on higher qualities and larger stones — even as far as letting the prices of smaller goods drop. But can these two market segments be separated so neatly in the the customer’s mind?

Gary Ralfe, managing director of De Beers, recently commented on the "divergence of prices" that has taken place in the 1990s. Specifically, rough on 3/4 of a carat and up have steadily increased, while the prices of smaller diamonds, as we all know, have decreased in the past two years.

This divergence is no shock to the trade which well understands these vastly different market segments. But to the public, a diamond is a diamond is a diamond, and distinctions of size and quality are not so easily grasped.

For example, when a New York retailer advertises that "diamonds have dropped 20%," some investment banker may get the idea that he/she can get a D flawless stone at bargain basement prices.

A recent article in Business Week headlined: "Cracks in the Diamond Trade: A flood of low-quality gems has shaken De Beers’ iron grip" leads off with an illustration of this confusion: "Step into a Kmart or Wal-Mart Store these days, and you can pick up a diamond bracelet for $29.99 — about the same price as a toaster." The article goes on to say that "So far, the plunge hasn’t affected the pricier fine diamonds shimmering in display cases at Tiffany & Co. or Cartier... But for how long?"

Put another away: Can you save a boat’s upper deck while letting the lower deck sink? Or is this more a case of unloading excess baggage to better the chances of saving the whole ship?

Historically, De Beers has been able to separate industrial diamonds from cuttable diamonds — even in the eyes of the public. (When synthetic industrial diamonds came on the market, the prices of natural industrial diamonds plunged, without triggering any adverse domino effect on gem diamonds.)

Another support for "compartmentalizing" diamonds can be gleaned from the example of the investment diamond bust of the early 1980s when high quality diamond prices plummeted but lower priced jewelry held its own.

Reaching even further back, the prices of full cuts and other small gem stones skyrocketed during WWII when they were needed for the war effort, but plunged right after the war — without affecting the price of larger stones.

So now the question remains whether De Beers can echo the success of its "Small Is Beautiful" campaign of several decades ago — with the appropriate substitution of the word "big" for "small."


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