Forecasters merry about Christmas at diamond conference

Speakers forecast a strong Christmas season at the first Rapaport Corp. International Diamond Conference.

Kenneth Gassman, head of Rapaport Research, told the audience to expect a 6 to 7% increase in business this holiday.

“I’ve been talking to a lot of people, and I’m worried that I’m going to be low,” he said. “That’s a great problem to have.”

“The industry had a couple of bad years … but things are coming back strongly,” he said. “The question is not whether the season will be good. The question is whether jewelers will have enough merchandise to meet demand.”

Gassman added that, long-term, the “party is just heating up.”

He noted that 30% of the U.S. population are “baby boomers,” who are loaded with money and love to shop.

Two major retailers at the conference, Terry Burman of Sterling and Ed Bridge of Ben Bridge, agreed with Gassman.

Bridge said that according to consumer confidence surveys, “the more upscale the consumer, the more confident they feel. The stars are aligning for us. It may not be 1999, when you just opened your door and people came in, but it will likely be good.”

Others at the conference, however, expressed concern over other threats facing the industry.

“The majority of people in the diamond industry are scared out of their wits,” said Martin Rapaport, owner of Rapaport Corp. “If you are just going to take certs and flip them on some Internet site, you might as well flip hamburgers. If you don’t add, you might as well get out of this business.”

He added that while he had some reservations about De Beers’ Supplier of Choice policy, the industry may be ignoring other threats.

“Wal-mart may be a bigger threat than De Beers,” he said. “We’re all so worried about the bear that we’re not noticing the snake in our sleeping bag.”

He added that the industry still had work to do on humanitarian issues.

“Do you realize that there are ten year old kids in Sierra Leone mining diamonds for a cup of rice an hour?” he said. “And those diamonds are legal under the Kimberley Process. We have to get our house in order.”

Also at the conference:

• Two producers of synthetic (or “cultured”) gems—Apollo Diamond, Boston, and Gemesis Corp., Sarasota—both expressed a desire to join the industry and work with it to make sure their stones are disclosed as man-made.

“We are very concerned about representation of our product,” said General Carter Clarke of Gemesis. “We do not want our product to be passed off as a natural diamond.”

Bryant Linaies of Apollo Diamond agreed, and said his product will make diamonds available to consumers who could never afford them before.

“We want it to be not only ‘A Diamond is Forever,’ but ‘A Diamond is for Everyone,’ ” he said.

In the same session, Gemological Institute of America president William E. Boyajian said that GIA has “to work harder than ever to stay ahead of technology.”

He said that manufacturers of treatments and synthetics who didn’t disclose could seriously harm the diamond market.

“Consumer confidence is key to the entire diamond industry,” he said. “[Rogue traders] who seek to make a quick dollar by introducing treated diamonds into the marketplace with no disclosure … put at risk the very foundation, the very core of the trade itself.”

He noted the emerald trade almost collapsed when it was beset by undisclosed treatments.

Rapaport expressed similar concerns. “God help us when we can’t stand behind what we sell,” he said. But he added: “Maybe synthetic diamonds are not such a bad thing. Don’t forget cultured pearls came about because there weren’t enough natural pearls.”

• Peter Gross of ABN-AMRO Bank said that the current state of the industry is “not a pretty picture,” with a red-hot market for rough but without commensurate price increases in polished. As a result, he said, polished stocks are being built up unhealthily. Two recent bankruptcies of Indian firms show the dangers of this environment, he said.

• Moshe Leviev of LLD, the world’s second largest rough producer, said that his company is “the supplier of real choice … We are not telling their customers how to run their business. A businessman should be able to chart their own destiny.”

• S. Lynn Diamond of the Diamond Promotion Service said the increasing number of brands in the industry will bring more consumers into the diamond market.

She added: “For those who say that diamonds are too much of a commodity to be branded and don’t have the margins to support a brand, I have two words for you: Coffee. Water.”

She said the industry had to revitalize its stores because shoppers today want shopping to be “fun.”

“We need more creative energy and serious investment in the shopping experience,” she said.

• Dilip Mehta of Rosy Blue said the industry was facing tremendous changes.

The challenge, he said, was for diamond manufacturers venturing into branding not to “invest, not spend” and to find the right partners.

He predicted that there will be more consolidation but niche players will thrive as trend-setters. He added that he expects more frequent diamond price adjustments to match demand and supply.

• Elliot Tannenbaum of Schachter and Namdar predicted that there will be “multiple shocks,” with many companies dropping out or being absorbed into big ones.

“Supplier of Choice [is] a wake-up call to an industry that is falling asleep,” he said. “Had [De Beers] not gone down this road, it would have led the industry down the path of self-destruction.”