In this column, members of the jewelry industry can state their views, wax poetic or otherwise pen their thoughts in slightly longer form than the traditional letter to the editor. We welcome your submissions. Please send them to Letters to the Editor, JCK, 201 King of Prussia Rd., Radnor, PA 19089; fax (610) 964-4481, e-mail gholmes@chilton.net.
Diamond Profits
Diamond manufacturers are complaining that there is no profitability in diamonds. So are wholesalers; so are retailers. But De Beers is reporting record sales and profits. It looks to me like the Titanic is sinking and De Beers owns the only lifeboat.
Martin’s observation: As long as the diamond is perceived by the consumer as a commodity, and as long as the industry presents it to him as such, profitability will continue to elude the diamond industry.
De Beers seems to be very detached from the problems of profitability in the diamond industry. In studying this problem, I have concluded there are some steps it can take to start turning things around for the industry. My primary focus will be on how De Beers can help the industry by changing its advertising. I will also touch briefly on the subject of price lists.
The diamond must be decommoditized as it is perceived by the public. This can only be done with the help of De Beers and its advertising agency. Advertising is a very powerful tool, and the message it brings to consumers must be changed. De Beers’ current advertising program is designed to increase the volume of diamonds sold. Fine, but now let’s address the profitability issue. I think the industry would benefit greatly if it could coerce De Beers into using advertising which enhances the public’s awareness that the diamond is not a commodity. Theme: “Diamonds – No Two are Alike.” Sub-theme: “Trust your jeweler.”
Perhaps if the buying public were informed that no two diamonds are alike, consumers might come to trust their jeweler more. Instead they go through this inane process of “supershopping” at twenty or thirty jewelers for the same diamond, pitting one jeweler against another until no jeweler makes a profit. If retail jewelers increase their profitability, they would have less need to “squeeze” their suppliers and more money would be made at all levels of the diamond distribution chain.
For jewelers who foresee the Internet as a medium which will inhibit diamond profitability, there’s an added bonus in educating the consumer to the fact that color and clarity alone are not the sole determinants of diamond quality. The consumer will begin to realize that he needs the expertise of a jeweler, and that a diamond is not something that can be purchased blindly based on some numbers via a computer.
Price lists: The subject of price lists is a very complicated one which will evoke different opinions at different levels of the diamond chain. However, I want to touch on the subject in one respect and make a suggestion which I believe might help the industry’s profitability. Price lists will probably never go away, but they don’t belong in the hands of the public. There are at least a dozen or more people who produce price lists, yet Rapaport remains the dominant publisher in the industry. One reason is that he was the first to gain a foothold in the industry. But a second major reason is that he is the only one to print what he calls “high New York asking prices,” while all other price lists I know of print actual wholesale transaction prices. The reason that this is significant is that his list, and his list alone, is able to be used by retailers as a selling tool.
In fairness, Rapaport encourages dealers not to give his list out to the public. However, this will continue to happen, and prices will continue to be quoted to the public in terms of “Rap.” The diamond industry and De Beers should petition Mr. Rapaport to print his price list in terms of actual selling prices. Then no retailers would want to show the public this list because they would no longer be able to use it as a selling tool, and, therefore, no prices would be quoted to the public in terms of the Rapaport list.
If this were done, jewelers would still have Mr. Rapaport’s list as a buying guide, but they would be able to increase their profitability when selling diamonds because they would no longer be hampered by the public also having this list. If the public is made to realize, through advertising, that the color and clarity of a diamond are not the sole determinants of price, then any price grid would be meaningless to them anyhow.
These are small steps that, if taken, can help profitability on all levels. But it must be done with the help of De Beers, its advertising agency and Mr. Rapaport. Maybe we need all jewelers who believe that this might help (or have ideas of their own) to send a barrage of letters to De Beers as a wake up call.
No one simple step is going to help this industry, but we must start somewhere. I know of no other luxury industry where so many billions of dollars are being transacted and so little profit is being made. It is time to stop complaining and call on De Beers to take positive steps to help the industry return to profitability.
Steven R. Martin GG, MBA, BSEE President, M. Martin & Co. Chicago, Ill.