Diamond Wars; And The Winner Is Not Natural!

By middle October 12, 2019 18:46

Diamond Wars; And The Winner Is Not Natural!

It’s getting harder by the day to believe that synthetic diamonds are not damaging the market for natural gems despite evidence that the diamond leader, De Beers, might have kicked a very expensive own goal.

The latest clue pointing to trouble in the market for natural (or mined) diamonds came yesterday in a Forbes story that reported a plan to sell laboratory-grown diamonds in Bloomingdale’s and Reeds Jewelers.

While there is not much new about synthetic diamonds what is significant about the Bloomingdale’s and Reeds plan is that it is being promoted by De Beers via its lab-grown diamond business Lightbox.

A model showcases a 10.64-carat purplish pink diamond

Until now Lightbox diamonds, and the man-made material can be called diamonds, have only been available via its website or pop-up promotions.

De Beers has consistently argued that low-priced Lightbox diamonds target the fashion accessories sector and do not compete with its mainstream gems destined for high-quality jewelry, especially the engagement-ring market.

But that differentiation could be more in the minds of marketing executives at De Beers than jewelry buyers who are being told that it is virtually impossible to tell a natural gem from a Lightbox diamond – which it is.

De Beers believed that if didn’t take a lead in the fast-developing market for synthetic diamonds someone else would, but the risk was always the Lightbox would become an expensive example of cannibalization

The second clue that all’s not well in the traditional diamond business can be found in a consistent pattern of declining sales by De Beers to its traditional buyers in the diamond cutting and processing industry which then sells to retailers.

Earlier this month, De Beers reported a 39% fall in sales at its latest sales event, that followed a 44% fall at the previous sale compared with a year earlier.

The latest meeting with its customers saw De Beers book $295 million in sales, down from $482 million at a similar offering of diamonds 12-months earlier.

An uncertain global economy and political upheaval in important markets such as Hong Kong were blamed for the decline in sales.

But if that’s the case then a third clue pointing to deep problems at De Beers can be found in the latest revenue figures from LVMH, the world’s biggest luxury goods group which sells high-end products such as Louis Vuitton bags, Krug and Dom Perignon champagne, and Bulgari jewelry.

In the three months to September 30 LVMH lifted sales by 17% with “good progress” made in Europe and the U.S. and despite some difficulties in Hong Kong.

The important point in comparing the performance of LVMH with that of De Beers is that it is precisely what De Beers does in planning its diamond marketing campaigns by pitching them against rival luxury products.

As if declining diamond sales at a time when an arch-rival in the luxury goods markets isn’t ringing a warning bell that everyone at De Beers must be able to hear there are problems of synthetic gems moving up from the fashion accessories sector into high-end jewelry, and the entry of other synthetic gem makers now that the technology has been mastered.

De Beers could argue that if it hadn’t launched Lightbox it would have lost control of the diamond business.

The irony is that Lightbox has made man-made diamonds an acceptable alternative to natural diamonds leaving De Beers to wonder whether it has helped create a monster which might permanently change its 131 year-old business.


Courtesy: FORBES


By middle October 12, 2019 18:46
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