There are tremendous changes afoot in the diamond industry, panelists said during an educational session on the “New Diamond Business.”
Hertz Hasenfeld of New York sightholder Hasenfeld-Stein noted that De Beers has re-thought its place in the industry and no longer thinks of itself as the industry’s “custodian.”
“When I came into the business, De Beers controlled 80% to 90% of the industry,” Hasenfeld said. “But with their share of the market down, why should they horde diamonds or promote other people’s products? The message we are hearing from them is: `The free ride is over.’ “
Instead of being supply-driven, as in the past, De Beers now wants to ramp up demand. De Beers’ “strategic review” demonstrated how the jewelry industry spends 1% of advertising as a percentage of sales, while other luxury brands spend closer to 10%.
“The reason people buy Proctor and Gamble products is because they spend 11 cents of every dollar on marketing,” he said.
So De Beers now expects sightholders to help bear the brunt of industry marketing. The most important thing for the industry, in De Beers’ eyes, is to think more about the consumer.
“Marketing has to begin with the consumer idea or need,” he said, “and profits generated by meeting the customer’s needs or desires.”
For all the changes, Hasenfeld noted that much stays the same-including De Beers’ commitment to spend millions on generic advertising for diamonds. He advised retailers to run “a defensive diamond business” and concentrate more on promoting diamonds than buying them. “There is no such thing as an out-of-town price,” he said. “You call twenty dealers and you will make maybe half a percent.”
He advised jewelers to instead develop a relationship with a few vendors and to buy steady assortments, rather than random amounts of different goods. He said that vendors should provide retailers with memo programs, brand support, technical support, and virtual inventory for Web sites and special promotional events.
Mark Moeller of retailer R.F. Moeller in Minneapolis said that jewelers have to fight the trend toward “commoditization” of diamonds by “adding value” to their products. But he acknowledged that some customers do buy only on price, and sometimes you have to “let them walk.” He said that retailers have to look at their store as their brand, and he noted that the industry is currently “over-branded.”
“It’s like we’re over `trade showed,’ ” he said. “This industry tends to go from not enough to too much very quickly.” He said retailers should instead look to companies that support the jewelers’ existing brands.
Jeff Fischer, head of New York’s Fischer Diamonds and of the Diamond Manufacturers and Importers Association, spoke about the industry’s efforts to contain the issue of “conflict diamonds.” He noted that the industry and Rep. Tony Hall (D-Ohio) are backing two rival bills, but he said there are more similarities between the two approaches than there are differences. “We remain hopeful that we will be able to bridge the two approaches,” he said. “We are at a crossroads where things are either going to be worked out or going to escalate.”
He added that the actor Martin Sheen has agreed to be a spokesman for and make commercials about the campaign. One commercial, backed by Christian group World Vision, recently aired in Washington, D.C. “Jewelers need to be able to explain the issue confidently,” he said.
When asked how many retailers had heard from customers about the issue, an overwhelming majority raised their hands.
Moeller agreed that retailers should learn about the issue. “It has the ability to destroy all our businesses,” he said. “Don’t put your head in the sand. Even though these diamonds are only 4% of the world’s diamonds, that’s 4% too many.”
JCK senior editor Rob Bates moderated the panel.