To say that the diamond industry has been through a rollercoaster ride in the last couple of years would be an understatement. From the industry coming to a grinding halt, mass layoffs, store shutdowns, declining marriages, decrease in rough prices, the industry has rebounded in the last six months from a robust demand for diamond jewellery across the world.

The Indian consumers’ appetite for diamond jewellery has catapulted. When stores started reopening after the second lockdown in June 2021, retailers have had a chock-a-block schedule. Demand for diamond jewellery, especially in the range of Rs. 1,50,000-2,00,000 has been exceptionally high. No amount of cheaper alternatives will replace the desire for natural diamonds, especially to mark important, special occasions and consumers understand this. But, there have been a couple of unprecedented issues that could take the industry back to where it was – acute supply crunch and a surge in polished diamond prices.

Retailers not making profits

In November, price per carat for HI, SI quality star and melee diamonds increased by Rs. 1,500 within a span of a week. As soon as retailers were able to adjust the pricing, the price shot up again by another 10 per cent within a couple of weeks. “The situation is very worrisome. It is not just the fact that the price is high, but the availability is also very low. We are facing major issues in finishing and fulfilling bridal orders. We are not able to pass on the increase in price to the consumer,” says Anand Prakash of Abhushan Jewellers, Agra. Consumers have placed orders after Diwali without realizing the increment in pricing and retailers are forced to deliver goods in the same price, whereas diamond jewellery manufacturers are informing retailers that polished prices are fluctuating every 15 days. “I have not seen this kind of supply crunch in the last 25-30 years,” informs Prakash.

A sudden surge in price will dampen consumer confidence

In India, when people buy diamond jewellery, they want a proper break up of the pricing. They also want the per carat price and certain figure is always embedded in their heads. Some retailers stick to Rs 35,000 per carat while some go as high as Rs 80,000 per carat. and a few stick to the middle range of Rs. 50,000-55,000 per carat. A 10 per cent increase in these prices is difficult to digest. “We keep the same quality, clarity and colour and we are giving the same certificates, but if the price suddenly goes up, it is difficult to justify it. No one expected the prices of rough going up by such a huge margin. This really spoils all our dynamics. We are an exporting company as well for the last 40 years. We have clients across the globe and none of them are comfortable to accept the high prices,” says Shreyansh Kapoor of Kashi Jewellers, Kanpur.

It is not just the fact that the polished diamond prices have increased, it is the way in which they have suddenly surged. Had it been incremental like petrol or gold prices, consumers would have been more accepting of the price rise. “The prices could’ve gone up say by 3-5 per cent every year. And unlike gold, none of the diamond prices is published, so there is no reference point for consumers. So, consumers tend to think that this is all a move by a caucus of jewellers who are trying to fleece money out of the consumers,” opines Kapoor.

Redesigning stock & facing supply-crunch

The consumer is okay with the pricing as long as it falls within their budget. They are willing to spend 5-10 per cent more due to the price increase, but they still want bang for their buck and this poses a unique problem for retailers. “With the rapid increase in price, we have to redesign the entire stock, so that we can fit their jewellery into their budget. We are trying to reduce the diamond weight slightly so that we can offer jewellery in the price consumers are comfortable with,” says Vaibhav Saraf of Aisshpra Gems and Jewellery, Gorakhpur. Aisshpra has a strong merchandise and back office team, hence the supply crunch has not hit them yet, but there is no saying that it wont affect them soon. “Going forward, there could be an issue and we are in talks with our vendors as to how we can manage the issue,” adds Saraf.

Shortage of goods is a real issue - what usually would a month is now taking 45 days to produce. Manufacturers are in a fix as well. Even if consumers have resigned to the fact that there has been an increase in diamond pricing, delayed orders might affect sales. In India, this is the peak season and retailers orders are not getting delivered on time and hence timely delivery to the consumers is not happening.  And with the increase in pricing, replenishing stock in the current pricing also becomes an issue. “There is no retailer in the world who can just live on old stock. One has to keep buying to stay in business and we have to buy newer stock in the new prices,” adds Kapoor.

Looking at the larger picture

The midstream hasn’t seen an exponential jump in pricing since 2011. More than a decade has gone by for the diamond manufacturers as well retailers without any monumental shift in pricing, so a correction was indeed long overdue. The increase in price bodes well not just for the industry but also the consumers. “If you look at the older generation, they didn’t  like investing in diamonds as they believed that there was no return on investment. But now, we are able to explain to the customers that there has been a 10-20 per cent increase in pricing and they are happy to know that they are making a good investment choice,” says Kailash Kabra of KK Jewels, Ahmedabad. When it comes to gold, the prices shot up by 40-50 per cent during the pandemic. There was initial reluctance but people eventually became comfortable with the price. This will be the situation for diamonds too.

Many retailers are also stoked by this situation because they have invested a lot in diamond jewellery and an increase in price also means that they are sitting on good capital. “I think this is good news for the industry. Yes, as retailers we may not make profits for the first couple of months but we need to understand that the consumers will eventually come around. Even if prices were to decrease in the future after the initial fluctuation, it still won’t go back to what it used to be and this is good for all stakeholders,” says Pankaj Seth of Durgadas Seth Jewellers, Amritsar.

Finding the middle ground

Most of the large retailers source loose diamonds and diamond studded jewellery from select manufacturers in India. “I think it would be ideal to find a middle ground to ensure that the pressure doesn’t fall on just retailers. We understand that there is a reason why prices have gone up and a price correction has been long overdue. But only retailers taking the burden of increase in price has a direct impact on consumers – but if the price increase is split between retailers and manufacturers then I think we have got a solution at hand,” reasons Pratap Kamath of Abaran Timeless, Bengaluru.

Educate the consumer

The midstream has to tide through this crisis together but the more important solution at hand would be to educate the consumer, which in turn will also instill a sense of trust in their minds. “They need to understand that diamond is a natural product and comes from the earth. As major mines have been exhausted and production of diamond roughs are becoming lower and lower, availability of good quality roughs will become low and the prices will increase,” adds Kapoor.

It is important to note that to sustain the increase in price, the industry has to work together – cut and polished manufacturers have to replenish roughs responsibly and retailers have to think of innovative ways in which they can sell diamond jewellery at a premium while ensuring that the consumers are getting their money’s worth.