The industry must meet consumer confidence challenges and promote itself more in order to keep diamond demand strong, Philippe Mellier, CEO of the De Beers Group, told a packed Mandalay Bay Surf Room in his presentation “Perspectives on the the Diamond Industry” on May 30.
He said that diamond jewelry demand grew 7 percent in the U.S. and 18 percent in China. He also argued that the industry still missed a few opportunities.
For example, the industry does not have as many brands as other businesses.
“With diamonds, we have not seen the brand competition that has elevated other industries,” he said. “Think how the battle between Apple and Samsung has captivated the public.”
He maintained that the industry does not advertise as much as other industries.
“Think of how many Apple commercials you have seen in the last year, compared with how many commercials you have seen for Apple diamond jewelry,” he said. “We believe the time for investment is now.”
He said the entire industry needs to be mindful of consumer confidence.
“We have the chance to present an increasingly polished image to consumers as we become more transparent,” he said. “The diamond industry needs to become more like a normal luxury industry.”
Mellier and Lussier offer “Perspectives” from De Beers
Forevermark CEO Stephen Lussier also presented the results of research into the U.S. market, which remains by far the world’s leading consumer of diamond jewelry, claiming 40 percent of overall diamond demand.
“America may be a mature market; it has been increasing its market share,” he said. “And it remains nearly three times the size of the next largest market, China. For the foreseeable future, America will be the place that makes the diamond market tick.”
Lussier said the market has seen a “strong comeback” since the recession, with growth in diamond jewelry sales outpacing the five years preceding the recession.
He added that his research shows that diamonds remain three times more popular than any other type of fine jewelry. Yet, other consumer goods are testing the fine jewelry sector.
“We are generally holding our own,” he said. “I’m concerned about the experience sector, and the electronic category is challenging. We need to be conscious of that.”
But Lussier thinks diamonds are well positioned for the future, since they’re connected to the eternal quality of love.
“The basic need that we meet will be there,” he said. “Our challenge is to be able to keep that basic emotional benefit connected to that need.”
He broke up the diamond market by segment. The single woman self-purchase segment, which represents 13 percent of the market, has increased in volume but decreased in average price. The married woman saw a decline in volume, but an increase in price, which he attributed to increased income stratification.
“We have lost the lower-income consumer from the gift-giving segment,” he said. “The economic recovery in America has not been even. Some people have recovered quite nicely, but lower-income groups are still hurting, and that is hurting their ability to spend.”
But the best news was from the bridal segment, which he called “extraordinarily strong,” particularly regarding diamond engagement rings, where the statistics show a strong increase in volume and average price. He attributed that to more people getting married due to the end of the recession.
He added that because people are waiting longer to get married, brides are older and more affluent. There is also a greater length of time between a couple’s engagement and their wedding. “That means by the time you get to the wedding, you are over the pain of the engagement ring and are ready to spend again,” he said. “If you sell someone an engagement ring, please don’t think that’s it. Because that is the easiest incremental sale to make.”
Lussier said consumers are five times more likely to report buying a branded engagement ring than 10 years ago.
“Young consumers want something that they perceive to be differentiated, that has some emotion to it,” he said.
Online sales account for 18 percent of diamond jewelry pieces acquired—up from 14 percent in 2011, according to De Beers’ research. Online is also the main channel for prepurchase research.
In a question-and-answer session, Mellier said he was not worried about synthetics, explaining that De Beers’ research has shown that people prefer natural diamonds, and that its equipment can detect all lab-grown diamonds. But he said that diamond recycling is more of an issue, and the fact that people don’t receive full value for their stones is “awful” and could turn people off to the industry.
Responding to a question about supporting generic marketing, Lussier said that he thinks demand is best grown by competing brands, though he later added that brands are best supported by a company with scale. He also suggested that industry entities might work together to spread the “diamonds for good” message.