India is changing the market for diamonds

Americans shopping for Valentine’s Day this year are being swamped with offers of diamonds at prices low enough to compete with a bouquet of long-stemmed roses, The New York Times reports.

Kay Jewelers, one of the largest mall- based diamond sellers, is advertising diamond rings for $99 that are inscribed with the words “I Love You,” the newspaper reports. Wal-Mart is selling diamond heart necklaces for $99. And Kmart has diamond stud earrings for $49.

Although diamonds for under $100 began making their way to market a decade ago, the scope and quality of low-end offerings has exploded in recent years, the newspaper reports.

“Ten years ago it was a totally different market,” Roy Albers, the diamond and precious stone buyer for QVC, told the Times. “Five years ago there was the diamond tennis bracelet for $200 and that was it. Now there are tons of new setting techniques and fashion product is more affordable. The pendant and earring business is very big, and of course the nonbridal diamond ring business is huge.”

Most of the stones that are fueling this discount boom are not of the caliber of the gems that once earned diamonds the sobriquet of “a girl’s best friend.” Rather, they are often cut from smaller, less perfect stones that were once ignored by the industry, the newspaper reports. Such stones are known in the industry as Indian diamonds, because they are cut and polished almost exclusively in that country. India cuts high-quality stones as well, of course, but with its low labor costs, it has built itself into a diamond powerhouse largely by tackling stones that have not been financially worthwhile for European, American and Israeli cutters to bother with.

“India has fueled the democratization of diamonds,” Rob Bates, senior editor for Jewelers’ Circular Keystone, a jewelry industry magazine, told The Times. “Dealers there like to say that they did for the diamonds what Henry Ford did to the car.”

The new accessibility of diamonds is a comedown for the rocks that were once synonymous with royalty and extraordinary wealth, the newspaper reports. For nearly 130 years, De Beers, the cartel of diamond miners in South Africa, managed to keep diamonds an expensive luxury by strategically suppressing production, hoarding diamonds or buying up supplies from other mines to keep them off the market. De Beers also almost single-handedly transformed the sparkling bits of compressed carbon into a universal symbol of enduring love using the advertising slogan “Diamonds Are Forever.” They were also objects to be coveted, particularly by women. As Marilyn Monroe, playing Lorelei Lee in “Gentlemen Prefer Blondes,” put it, “I just love finding new places to wear diamonds.”

Twenty years ago, diamonds came in two varieties: fancy and industrial grade. But in the 1980’s, enormous deposits of diamonds discovered outside of South Africa, most notably in the Northern Territories of Australia, began making their way into the international market.

Many of the newly discovered diamonds were tiny or oddly shaped, and sometimes were even tinged brown. In most countries, where labor costs are high, cutting and polishing such gems, which often yielded a final product no bigger than a pinhead, was prohibitively expensive.

Yet trained stone cutters in India have been able to work on the lower grade diamonds and make them marketable through repeated cuttings, shapings and polishings, the Times reports. “Other countries like Israel need soft stones and perfect size” because labor is so expensive there, Amal Jhaveri, president of the Indian Diamond and Color Stone Association, which is based in New York, reportedly said. “Labor- intensive jobs are not hard for us.”

While most Indian diamonds are not the flawless jewels that inspire cat burglars or royal jewelers, they are perfectly real. “These are not the best quality,” William E. Boyajian, president of the Gemological Institute of America, reportedly said. “but they are completely diamonds, with all the inherent properties of diamonds.”

Indian jewelers bristle at their reputation as peddlers of down-market goods, but it is clearly this low- end business that has made them the world’s biggest source of polished diamonds. India now exports 80% of the world’s polished diamonds as measured by number of pieces; measured by value, however, it accounts for only 55% of that polished market.

While high-end diamonds have managed to keep their appeal and value here in America, Indian diamonds have had a major impact, the newspaper reports. The diamond market, once only for the wealthy, now resembles the car market: a model for every price.

Specific figures are not available showing how much sales of low-cost diamond jewelry have grown. But individual retailers report a sharp increase, the newspaper reports.

Wal-Mart revamped its jewelry section to focus on selling diamonds en masse in 1995. Diamonds that sell for around $100 are now the cornerstone of the chain’s $4 billion in annual jewelry sales and account for 2% of Wal-Mart’s overall sales, the newspaper reports. It is an evolution that could not have happened without Indian stones.

While Indian diamonds are most crucial for big discounters like Kmart and Wal-Mart, they are probably driving down prices across the board. “In the past few years the quality of the stone cutting and manufacturing in India has really improved,” Harriet Schreiner, a spokeswoman for Kay Jewelers, the nation’s second-largest mall jewelry chain, reportedly said. “It has become a large market for diamonds, and when we buy there we pass the savings along to the customer.”

The ability of Indian cutters to make more and better diamonds available to the American market is only likely to increase as dealers there move into areas previously dominated by countries with higher cost structures, such as cutting signature-shaped diamonds, for example, and actually setting diamonds into the final pieces.