Adapt or Perish!

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.

Internally, we need a collective restructuring. A situation in which the mid-range of the chain of distribution pays cash for its rough supply, and then provides terms of payment to its buyers, while operating at the lowest profit margins in the pipeline, would appear unsustainable. Each layer of supply chain is able to operate as long as the other two exist, and that means that it is imperative for all that a sense of equilibrium is achieved.

Rajesh Lakhani, Director, Kiran Gems Private Limited
The need of the hour is deft management of key business functions like—rough purchase, manufacturing and sales. A macro look of the industry reveals lack of liquidity coupled with lack of generic marketing as factors responsible for current situation.We need to be proactive, anticipate customer needs and requirements and accordingly satisfy the same. Also, keeping ourselves updated with the latest technology is imperative. For any industry to function smoothly, there needs to exist cordial relations between the operators in that industry. At present manufacturers are struggling to retain profits as globally the demand for diamond jewellery is strained. Besides, the surplus of rough as well as polished diamonds in industry is squeezing profit. However, it won’t be correct to say that only a particular section of the market requires an urgent revamp at this juncture. Miners, manufacturers and retailers will have to collectively re-think their business strategies and come up with decisions that will befit all.

Vipul Shah, President, Gem and Jewellery Export and Promotion Council
The diamond industry needs to address few issues like—correcting the price of raw materials to follow the price of the finished good, regaining the confidence of the consumers; addressing the differentiation between natural and synthetic diamonds, creating awareness among consumers; upgrading detection technologies and differentiating synthetics at the IT HS code level; introducing more stringent Kimberley Process; marketing of diamond as a category; regaining the trust of the financial institution and banks that offer credit to the industry, etc.

It’s good that we know our drawbacks and we, the council, have been putting every effort to make the stakeholder aware and bring the issues in forefront. The world is changing fast, it is more about taking action that yield results and generic advertising needs to be done on high priority.

Internally,the miners, manufacturers and retailers, all three will have to work in tandem as per the requirement of the end consumers. During the meet of diamond exporting companies recently held at Bharat Diamond Bourse, it was decided that companies would exercise self-discipline in import and purchase of rough diamonds based on their inventory and demand for polished diamonds.

Also, a co-ordination committee of the trade bodies would organise consultations with representatives mining companies, bankers and the government to discuss necessary steps to handle the current crisis.

It is very important that the three stakeholders share insights on a daily basis about the production, manufacturing and sales figures, which would help them to be more cautious and not run into any major crisis.

In this digital world, people experience products and its features from the comfort of the desk/home before buying them. Consumers are bombarded with different options like—price, features and comparison.

The diamond industry needs to make diamonds accessible, and make diamond an option when consumers plans a gift for someone. So, presence in digital space is the most immediate change that the industry needs. In fact, a few big diamond companies have already taken the e-commerce route to woo their customers.

Raj Mehta, Director, Rosy Blue NV
It is not for anyone to teach how to do business, but it is for everyone to understand that the business isn’t working in the way it is today. Blame game is not healthy for any industry, so we need to check ourselves before blaming others.

Externally, we lack generic marketing and internally, we lack planning. This industry needs to execute marketing at consumer level and bring back all the possible occasions and celebrations of life and connect it with diamonds. Product placement is also important to begin with, so we need to strategically place our products in the vision of consumers while they are doing what they like, for example, watching movies. More than the brand highlight, we need to highlight diamonds now.

The whole supply chain needs to redress. So far, only the retailers have been successful in implementing a long-term sustainable business plan. However, manufacturing sector needs urgent attention. Manufacturing needs to be aligned with demand and not supply, in order to keep sanity and sustainable business models.

Conclusion: It is evident that the industry needs to work on the aforementioned issues to get back its lost lustre. The generic promotion, tapping young consumers and adapting to change are some of the key issues. The industry must realise that their product is valuable and not them; hence they need to put the product in the limelight and remain backstage to see the profit flowing.