The Diamond Insight Report 2022

THE FUTURE IS ARRIVING
For millennia, natural diamonds have been the ultimate symbol of love, strength and connection between two people. This continues in modern times, with consumer desire for diamonds being incredibly enduring in the main consumer markets around the world despite a range of recent global challenges.

\ However, while the allure of diamonds continues unabated, how people interact with each other – and with products and brands – is changing and more rapidly than ever before. Social and technological change has been accelerated in recent years by the Covid-19 pandemic, geopolitical events and evolving societal attitudes as younger generations make their mark on the world. Many of the consumer trends the diamond industry has been observing and anticipating for some years – the desire to shop more sustainably, wanting to know where and how diamonds are sourced and the preference for ecommerce – have become an embedded part of the diamond acquisition journey. As a result, considerations such as provenance, brand and digital presence now sit alongside traditional attributes of design, quality and price when people choose diamonds

Expected developments in digital technology will further put consumers, wherever they are in the world, in control of how they research diamonds and interact with brands. A melding of the physical and digital worlds is now a way of life for most consumers. Smartphones have transitioned from a once luxury product to an essential enabler in our daily lives, including in developing economies, in China the number of smartphone users is expected to increase over the coming years from 670 million in 2020 to 1.3 billion by 2026. In India the number of smartphone users in 2021 was 750 million and is estimated to reach once billion by 2026. This always connected' lifestyle is most pronounced among Gen-Z-the next generation of 'digital native' adults who increasingly expect a seamless, personalised and even immersive brand experience. So while it may be a given that a compelling omnichannel marketing strategy is a must for any brand today, the emergence of Web3 and the metaverse – and their until-now unimagined possibilities – has the potential to be a game-changer, presenting new opportunities and considerations for brands and retailers.

The convergence and acceleration of these trends place the diamond industry on the cusp of a new diamond world – one which presents an immense opportunity along with major implications for how brands and retailers must engage with current and future generations of diamond consumers.

These are tomorrow’s big spenders. While Gen Z accounted for only four per cent of luxury purchases in 2020, by 2035 its share could grow to 40 per cent. It is therefore critical for retailers and brands to capture the hearts and minds of this generation.The key question for the diamond industry is: how to ensure the availability of transparent, trusted and sustainable branded offerings that resonate with new generations in an increasingly digital world? This report seeks to explore that question and share insights to assist diamond trade participants in adapting to the forces shaping the new diamond world so that diamonds maintain and grow their place as enduring symbols of celebration and connection. In doing so, it provides an analysis of four separate, but interconnected megatrends that will have fundamental implications for the industry’s future.

While millennials represent the largest cohort of diamond buyers today, it is the even younger Gen Z that will shape the industry’s future. Understanding the preferences and attributes of Gen Z – who desire and aspire to own diamonds but who expect to engage with the category in vastly different ways when compared to previous generations – is essential for all industry participants. De Beers Group has worked with specialised agencies and undertaken surveys with Gen Z to understand what motivates them. This work found that the unique traits of Gen Z adults are that they tend to be self-expressive, competitive and optimistic. Entrepreneurship and personal achievement are important to them. They are more likely than other generations to aspire to diamonds as a mark of success (60 per cent versus 54 per cent overall), with nearly two in three (64 per cent) seeing diamonds as an attribute of personality strength – compared with an average among all consumers of a little over a half (56 per cent). Diamond marketers should look to communicate this symbolism of diamonds when engaging with Gen Z. Another very important, even defining, characteristic of Gen Z is its relationship with the digital world. As digital natives who have grown up in a world where technology is a way of life, they expect full integration of physical and digital (i.e. phygital) when they shop and interact with brands. These are tomorrow’s big spenders. While Gen Z accounted for only four per cent of luxury purchases in 2020, by 2035 its share could grow to 40 per cent. It is therefore critical for retailers and brands to capture the hearts and minds of this generation.

Affluent And Self-Purchasing Consumers are more Likely to buy Branded Diamond Jewellery

Diamond brands are more sought after by high-income consumers than others. In the US, nearly three-quarters (74 per cent) of diamond jewellery acquisitions by women with incomes of $150,000 or more were branded, compared with an average of nearly two-thirds (65 per cent) for all income categories. Among the different reasons for purchase – bridal, gifting or self-purchase – it was the self-purchase category where brands were most prized, accounting for 73 per cent of acquisitions.

((Local And Independent Brands Are Gaining Share

While there is a clear difference between acquisitions of branded and non-branded products, there are also some noteworthy distinctions within the branded category overall. In the US, the smaller US local designer and retailer brands most increased their growth between 2019 and 2021, reaching a 30 per cent share of acquired pieces. This compares with a share of 17 per cent for the international luxury diamond jewellery brands (the likes of Cartier and Bulgari) and 13 per cent for the international designer brands (the likes of Gucci and Chanel)

In China, the majority of brand acquisitions were those of Chinese retailers (66 per cent by volume), with international brands representing seven per cent and other brands 12 per cent. If brands are now established as key drivers of diamond jewellery selection, what can we discover from the methods that consumers use to conduct their research and make their purchase?

volume still taking place instore, online is an increasingly critical part of the diamond acquisition journey, especially when it comes to researching designs and brands and particularly among the younger generations. This combined use of physical and digital channels in consumer purchasing patterns – known as phygital – is a defining feature of the new diamond world, where a dedicated and compelling omnichannel strategy is business-critical.

The Preference For Online Is Not Just A Pandemic-Era Trend
The question facing retailers as the world started coming out of lockdowns was: is online shopping for diamonds here to stay? Latest research shows that the answer is yes. Looking at the broader jewellery category in the US, Mastercard SpendingPulse data for the past four years shows that online purchasing of jewellery in the eight months to August 2022 reached 37 per cent of all jewellery store sales, slightly above the 2020 full-year share of 36 per cent and well above 2019’s prepandemic level of 25 per cent. It can be expected that holiday gift purchases during the last two months of 2022 will see this share increase further. But regardless of whether the ultimate purchase is made in-store or online, natural diamond jewellery acquisition increasingly includes a digital journey, with about half (49 per cent) of all acquisitions now researched online compared with around three in 10 (29 per cent) in 2015.

Jewellery Research
The following table illustrates the different methods consumers use to research diamond jewellery. While 18 per cent of pieces physical jewellery stores, this is now virtually on par (17 per cent) with using the internet to select diamond jewellery designs, showing just how important it is for jewellers to present their range online, as well as offline. For one in six pieces (16 per cent) acquired, the purchaser even uses an online search to find a jewellery store, highlighting the importance for retailers to maintain a wellmanaged internet presence, not only with optimised search results, but with a variety of designs on show, as well as having their sustainability credentials positioned front and centre.

The Phygital Retail Experience
What does this mean for the traditional retail experience? As many as six in 10 online shoppers (60 per cent) are happy to buy diamonds online without seeing the physical product, but for 54 per cent of consumers, the possibility of seeing the product in-store gives them greater confidence to buy online. This point is reinforced when we consider the split between the use of physical and digital in the complete shopping journey, from research to acquisition. While two in five consumers still solely use the traditional method of researching and buying in-store, one in five consumers now uses only digital for both parts of the process, and two in five use a mix of physical and digital – phygital. We can expect the move towards greater use of digital to increase further in the coming years, emphasising the need for brands and retailers to recognise that omnichannel marketing is a must.

In China, the picture is similar, albeit on a smaller scale. Using digital to conduct research of diamond jewellery before acquisition increased from one in four (25 per cent) in 2018 to two in five (39 per cent) in 2020. Online acquisition has grown in China too but remains much lower than in the US: it stands at four per cent in 2022, compared with one per cent in 2016. There is every reason to believe that this trend will not only continue but gather pace.

conscious of the environmental and social ramifications of their purchases – the impacts on planet and people. Values are becoming the new markers of status in luxury as consumers seek to align their purchases with products and brands that signal to the wider world their own values and priorities. Where previously a product’s origin (French champagne, Italian leather) was the marker of status and value, increasingly, it is how products are sourced and what a brand stands for that are driving value differentiation.This presents an immense opportunity for the diamond industry. With its decadeslong track record of creating meaningful and lasting socioeconomic benefits for the people and places where diamonds are discovered, the industry has a compelling platform on which to engage with a new generation of consumers whose priorities extend beyond the traditional considerations of price, quality and design.

New Research Reinforces the Desire for Sustainability and Ethical Assurances
New research commissioned by De Beers Group in 2022 among more than 18,000 US women reinforces that sustainability considerations remain top of mind for consumers and are having tangible impacts on their purchasing decisions. This latest research also highlighted that, beyond environmental and social sustainability, trusting ethical business practices behind a diamond’s journey to retail is increasingly important.

More than one-third of women (36 per cent) specifically look into the ethical credentials of the diamond jewellery brands they are considering purchasing and around half (51 per cent) say they would not buy diamonds if they knew they were not ethically sourced. In addition, 40 per cent of women say that knowing about the positive impact of diamonds on local mining communities would make them more likely to buy diamonds.

As might be expected, these concerns are not evenly spread across age groups: it is younger consumers who are driving the demand for more transparency and integrity. Compared with older generations, Gen Z and millennials are more likely to research the ethical credentials of the diamond jewellery brands they would consider buying and are more likely to buy diamonds if they are informed of their positive impact.

Younger Consumers are More Likely to Seek out Ethical Assurances when Buying Diamonds
Reassuringly for the diamond industry, a considerable proportion of consumers already understand that diamonds benefit the nations where they are sourced and processed. In he US, this accounts for 49 per cent of women overall, while awareness is higher among Gen Z (52 per cent) and Millennials (53 per cent). However, these findings also demonstrate there is significant opportunity for the diamond industry to further reinforce its ethical and sustainability credentials to consumers through prominent and digestible information, both in-store and online. When it comes to the specific ESG factors that play a role in consumers’ choice of diamond brands, the two most influential factors for women in the US are preserving wildlife around diamond mines and sourcing from conflict-free zones. Nearly two in five women (39 per cent) gave these considerations their highest importance rating. In China, just over one in five women (22 per cent) place a top influence on ethical and ESG factors (e.g. worker welfare, impact on the environment and transparent supply chain) when choosing diamond brands. For Gen Z, this is even more relevant with 28 per cent ranking it as their most important consideration.

The Provenance Imperative
Provenance has been a focus for the diamond industry for almost two decades, beginning with the Kimberley Process (KP) in 2003, designed to stem the flow of conflict diamonds around the world. Since then, the Best Practice Principles (BPPs), introduced by De Beers Group, went beyond the KP protocols to require compliance with a broader set of ethical, financial and governance best practice standards for the company’s supply chain; and in 2005, the Responsible Jewellery Council (RJC) was established, creating a similar set of standards (the RJC ‘Code of Practices’) for its members across the entire jewellery value chain. The evolution of social concerns has increased the number of consumers who want assurance about the impact their diamond has made on people and the planet. While it has long been common for purchasers to request grading certificates for the size and quality of a diamond (39 per cent of pieces acquired by US women in 2021), there is a gathering momentum of requests for certificates of diamond origin, with 27 per cent of new diamond acquisitions coming with such certification in 2021. The conflict in Ukraine has further heightened interest in provenance. The consumer response to US sanctions on diamonds of Russian origin shows that one in five Americans are now more likely to look for the origin of diamonds and about one in 10 are more likely to buy diamond jewellery from reputable brands39. Government sanctions, together with a shift in retailers’ sourcing approaches, have made source assurance a rapidly increasing priority for many retailers.

MARC JACHEET CEO, De Beers Brands “In the next decade, the 4Cs will be complemented by the 3Ps – provenance, purpose and partnership. Where provenance becomes key – both as a sign of quality and through end-clients wanting to know they are part of a story that creates positive impact for people and the planet.”Fortunately, the diamond industry has been developing provenance programmes for several years, often enabled by new technologies such as blockchain. Such programmes can give retailers – and consumers – the confidence they require. Beyond assurance of origin, provenance programmes can also inform consumers about the positive impact their diamond has helped create on its journey to them. In doing so, diamond jewellery brands have a significant opportunity to respond to the consumer desire for this information and drive value differentiation by bringing a diamond’s story to life through digitally enhanced storytelling.

The popularity of brands in diamond jewellery and diamonds continues to rise. Asked whether the diamond jewellery acquired in 2021 was branded or unbranded, US consumers say that two thirds of all diamond jewellery acquisitions were branded.

This is double the proportion seen in 2015 and represents almost 80 per cent of women’s diamond jewellery sales by value In China, brands accounted for an even higher proportion of acquisition value, at 85 per cent in 2020. Once again, Gen Z is a driving force behind this trend. Threequarters of diamond jewellery purchases in the US in 2021 by Gen Z were branded, compared with two-thirds for Gen X and only a little more than one-third for Baby Boomers. In China, brands represented 79 per cent of diamond jewellery pieces purchased by Gen Z This trend of growth in branded diamond jewellery is only set to continue, as it is underlined by the fact it is the younger generations who most acquire branded products. Brands are more important to the younger generations as they contribute to their sense of self-worth and desire to express individuality. The importance of brands to Gen Z in helping them build their own personal brand as part of their individualistic and competitive nature was discussed in more detail in the 2018 Diamond Insight Report. Since the younger generations tend to highly prioritise issues of climate change and social justice, acquiring brands espousing such values can enhance their own personal brand.

VIRGINIA C. DROSOS Signet Jewelers, CEO “Our connected commerce presence ensures that we are uniquely able to meet our customers’ needs whenever, wherever and however they want to engage. Relevance plus readiness is a powerful combination.”When tailoring their online offer, jewellers need to be aware that in 2021, half of online diamond jewellery acquirers in the US (50 per cent) were aged 18 to 34 and more than half (54 per cent) already owned several pieces of diamond jewellery. This means that the online offer needs to include a good range of designs and brands which will appeal to a young audience, many of whom already have a rich diamond jewellery box and are looking for uniqueness.

The success of an online retail offer also depends heavily on the retailer’s ability to deliver the product quickly – nearly half (47 per cent) of online acquirers claim they buy online only if the piece is available in stock to be delivered within a week. Consequently, retailers need to ensure that the purchase and shipping service they offer online is every bit as good as its in-store counterpart.

The Future
Looking to the future of online diamond jewellery sales in the US, over twothirds of online acquirers (68 per cent) intend to continue buying diamond jewellery online, as they are quite comfortable with this channel. The proportion of online purchases of diamond jewellery remains much larger than pre-pandemic and is a feature that’s here to stay. A compelling, user-friendly and seamlessly integrated omnichannel experience is therefore essential for all diamond jewellery brands and retailers to meet the needs of their end-clients in the new diamond world.

Demand for NFTs has expanded considerably in recent years, notwithstanding high levels of volatility common with cryptocurrencies (the currency most used to buy NFTs) which led to a decline in 2022. Despite this, luxury brands continue to test and invest in the space, with several high-profile NFT ‘drops’ taking place over the past 12 months from the likes of Tiffany & Co, Dolce & Gabbana and Nike (through its acquisition of RTFKT Studios), to name a few. In 2021, Morgan Stanley estimated that luxury NFTs could become a $56 billion market by 2030, out of a total NFT market size of $240 billion. When it comes to the metaverse, while still nascent as a concept, enthusiasts claim it will revolutionise the way we live our lives as we find new ways to connect to people, places and objects in parallel worlds – melding the physical and digital in previously unforeseen ways. It is expected there will be many metaverses existing in tandem in the future, serving the needs of various communities in the same way there are a variety of social media platforms today. Forecasts for the future potential of the metaverse are astonishing. McKinsey estimates that the value of the metaverse could reach $5 trillion by 2030. It also states that more than $120 billion in investment had flowed into the metaverse in the first half of 2022, and that 27 per cent of users active in the metaverse had made a purchase – highlighting the metaverse’s potential as both a virtual playground and shopping mall. The technologies behind the metaverse are developing at great speed, including augmented reality (AR), head-mounted displays, AR Cloud, Internet of Things, 5G, artificial intelligence and spatial computing. According to statistics published by Influencer Marketing, there are expected to be more than 1.1 billion mobile AR users globally by the end of 2022, and 1.7 billion by 2024, making this a prime and still relatively untapped opportunity for luxury brands and retail jewellers.

CONCLUSION
As we enter the new diamond world, it’s clear that the traditional considerations for marketing diamond jewellery – design, quality, price – are no longer sufficient given consumers’ changing preferences and behaviours. Industry value growth will depend on meeting the evolving needs of new and existing generations in relation to what they want diamonds to say about themselves and how they now go about researching and acquiring them. The effect of geopolitical events and a zeitgeist where priority is placed on societal and planetary welfare is that the industry must use all the technological and communications resources at its disposal to give consumers the evidence they require of a diamond’s ethical credentials. Underpinned by technology, the means now exist, through provenance programmes like Tracr and De Beers Code of Origin, to give diamond consumers the reassurance they seek about a diamond’s journey from discovery through to store. However, it’s one thing to act responsibly, deliver a meaningful and lasting impact for the people and places where diamonds are discovered and have the mechanisms in place to provide such assurance, but it’s another to ensure that this story is properly understood. So, it’s incumbent on brands and retailers to make this information readily and transparently available, bringing together the growing consumer desire for valuesdriven purchases, trusted brands and digitally-enabled storytelling into a compelling downstream proposition. Given phygital is increasingly becoming a way of life for many consumers, particularly Gen Z, brands and retailers need to ensure that their processes for fulfilling end-client needs through digital channels are every bit as engaging and resourced as their traditional systems. Trust in e-commerce, which has been building over time, must be nurtured by ensuring that goods are shipped quickly and backed by high-quality customer service that matches that in other competing industries. The diamond industry cannot afford to rest on its laurels. It must continue to innovate and embrace new technologies if it is to remain relevant to a new generation. With the advent of Web3 and the metaverse on the horizon, this is all the more important.

There is no shortage of opportunities when it comes to natural diamond jewellery. However, it is essential to capture the hearts and minds of younger consumers, who represent the next major cohort of diamond buyers. Trade participants will benefit from monitoring and tracking changes in technology and consumer behaviour in relation to how today’s consumers shop and interact with brands and adopt what is right for their individual businesses.