De Beers Defends Policy Toward Small Dealers

By ROB BATES, SENIOR EDITOR -- JCK Online, 11/1/2001 2:00:00 AM

In a meeting with representatives of the World Federation of Diamond Bourses, De Beers stressed that its "Supplier of Choice" strategy is not meant to harm small dealers.

The WFDB recently met with De Beers to address concerns that "Supplier of Choice" will axe small and medium units (SMUs) from the pipeline. The meeting grew out of the recent presidents' meeting in Idar-Oberstein, Germany. (See "Protecting the Pipeline," JCK, Sept. 2001, p. 110.)

In its presentation, the WFDB argued that SMUs are an integral part of the business, noting that they supply the trade with extra capital and expertise.

"These smaller and medium-size units absorb goods which are often not economically viable—or not of sufficient interest—in the hands of the large sightholders," said a WFDB statement. "Their disappearance will make it more difficult for the large players to optimize revenues and efficiencies."

De Beers responded that, while it doesn't intend to cut small players from the pipeline, the industry's structure does need to be "streamlined."

"We need … to encourage strategic alliances within the pipeline from manufacturer to retailer, to work together with our suppliers and customers to create efficiencies and economies of scale," said a statement sent to the WFDB. "But that does not mean the demise of the SMUs. Most smaller and medium-sized firms add value to our business, provide flexibility, and make an important capital contribution. It is from their ranks that the large companies of tomorrow will spring."

The statement noted that ultimately the market—not the DTC—will determine the fate of these companies: "There is a trend towards consolidation in all industries, and this trend is likely to increase in an uncertain economic climate. This is precisely why we believe that individual companies—large, medium, and small—need now to adapt and to seize the opportunity to put their business on a new footing and meet the challenges that the changing world presents."