Diamond Pipeline Impacts You

Things that happen in the diamond pipeline have a direct impact on independent retailers, manufacturer Hertz Hasenfeld noted in a Wednesday talk on “Independent Jewelers and the Diamond Pipeline.”

“The old pipeline has changed dramatically,” he said. “The new pipeline favors the mega-mining companies selling to mega-cutting companies selling to mega-retailing companies. The deck is stacked against independent jewelers.”

He noted that today there are retailers, like Tiffany, that have cutting facilities and mining companies that own retailers.
He said that this has an impact on things like availability. “There are goods coming into the pipeline, but, for many jewelers, they are still hard to find,” he said. “There are shortages in many areas. Three-carat-plus across the board have just about disappeared.”

He noted that the market today was somewhat contradictory. “We had a weak fourth quarter, a weak first quarter, and yet diamond prices keep going up.”

He said this is because “foreign diamond demand is outpacing the U.S. The U.S. is rapidly losing ground to developing and stronger economies in China, India, the Middle East, and Europe.”

The weak U.S. dollar is also a factor. “While we are complaining about diamond prices going up, your European and Canadian counterparts are laughing,” he said. “They are buying goods better than they ever did.”
noted that the president of Alrosa recently proposed that the diamond industry no longer trade in dollars. “That will send our prices through the roof,” he said.

There also are new manufacturing costs because of producing countries’ insisting on indigenous diamond manufacturing. “My opinion is this will go away,” Hasenfeld said. “Anything that is not ruled by economics won’t last.”

Independent retailers also are affected by changes in diamond advertising.

“Without De Beers priming the pump, where will advertising come from?” he wondered.

He noted that De Beers is now investing in the Forevermark, its proprietary mark. “It is right now being sold in every country besides the U.S., but I think it will eventually come here,” he said.
 
In many ways, he said, the “deck is stacked” against independent jewelers. With supply tight, suppliers in the United States are focusing on key accounts. “Less inventory becomes available for spot purchasers,” he said.

But he noted that jewelers “can’t walk away” from their diamond business, since it represents 50 percent of their business.
To “restack the deck,” he said, jewelers should “focus their buying” on a smaller number of suppliers. “If you are dealing with 10 suppliers, no one knows your needs.”
 
In addition, there are “riches in the niches,” he told his audience. “Become important in a certain niche,” he advised, adding that jewelers need unique products that weren’t available elsewhere. “Available only at is a powerful phrase,” he noted. “It separates you from online competitors and it allows a greater margin. The point of a niche product is you are no longer selling a commodity. And if we move away from the commodity, all of a sudden we can all make a few more bucks.”

He advised retailers to become important to their suppliers, which includes calling them first consistently. “When you have an open to buy, spend it with them,” he said. “Don’t jump ship for 1 percent. That percent will end up hurting you, because you will have 15 suppliers, and you will not be important to any of them.”

He also advised not to take five stones for one memo call, and, when you have a memo stone, to get the unsold stones back to him quickly.

He noted that while there are a lot of stones listed on online services, in the end using them as a prime source is risky, because “availability is uncertain and quality assurance is nil.”

He also noted that the industry relies too much on price lists. “The only true price information is testing and calling,” he said.