Whither Diamond Profits?

Am I the only one who fantasizes that the retail jewelry industry could play tough love with consumers – just tell them diamond retail prices have suddenly gone up 50% across the board? Of course, this assumes consumers or the government would buy such nonsense. Well, it was a nice dream while it lasted.

Second fantasy. What if De Beers came to the conclusion diamond prices are just too high, as consumers have so often stated? It then plays tough love with its producing mines, saying that to keep the market alive, De Beers’ Central Selling Organisation must cut rough prices, forcing the closure of newly unprofitable mines. Nah, I don’t think that dream is going anywhere either.

Who’s the demon in the industry’s tale of dwindling diamond profits? Finger-pointing abounds, most recently by the World Federation of Diamond Bourses and the International Diamond Manufacturers Association. The associations met in late August and each issued resolutions laying the blame squarely on De Beers for failing in its role as Big Brother. They believe, says Senior Editor Russell Shor, who attended the meeting in Singapore, that the CSO should lower at least some rough prices and release even fewer diamonds into the marketplace.

CSO Director George Burne, who also attended the meeting, told delegates that even if the CSO did reduce some rough prices, it was unlikely that sightholders would pass on the savings to its customers – meaning there’s a snowball’s chance in hell of retailers ever seeing a benefit.

Martin Rapaport, who commented on the meeting in his Sept. 5 Rapaport Diamond

Report, says De Beers must begin to seek information from every level of the trade, lower prices to help diamond cutters survive, allow more outside, less costly goods to reach the marketplace and generally go from playing a “strong-hand” policy to playing a “good-hand” policy.

Meanwhile, back at the retail ranch, has any of this helped you to get more profit from diamonds yet? I suspect not. So what’s a retailer to do? You can hold your breath while the big guys duke it out, or you can accept that there are more ways than one to skin a cat.

I’m encouraged to see that many more retailers have stopped listening to the moaning and have started to create strategies to increase profitability in diamonds right at the counter.

Mark Moeller of R.F. Moeller, St. Paul, Minn., stunned an audience of retailers at the JCK International Jewelry Show’s “Diamond Debates” in June when he declared that any retailer who isn’t making a 50% profit on a decent diamond is “an idiot.” Strong words, indeed, and the room audibly gasped. But Moeller has proven it can be done through a combination of sharp strategies, including selling better-make diamonds and convincing consumers of the value-added qualities of better stones.

Another group of retailers who have been quietly fighting back for the last decade are the members of the Independent Jewelers Organization who go along on the group’s wildly successful Antwerp buying trips. Bill Roberts, IJO founder, and Jeff Roberts, IJO president and chief executive officer, recently announced they’ve sold out four trips and have added a fifth to meet demand by members for this program. Though it could be debated whether retailers actually get lower prices shopping at the source (some experts who have been on the trips say not), the big plus on these trips is the message of added value that retailers bring home to their customers. Antwerp is well-known for selling exceptional diamonds of the highest-quality make, and IJO helps retailers play that aspect to the hilt. It obviously works, just as Mark Moeller’s added-value message works.

I’d like to hear from other retailers who have developed strategies to increase diamond profitability at the retail level. Sends your thoughts by e-mail to the address below or fax/mail them to me to JCK, 1 Chilton Way, Radnor, PA 19089, fax (610) 964-4481. You can lick this problem, I am sure of it. And you don’t need Big Brother to do it for you.