De Beers Launches Supplier of Choice 2

The Diamond Trading Company recently unveiled Supplier of Choice 2, a policy that modifies many aspects of its industry-changing Supplier of Choice program.

The basics of the new policy are:

  • A need for a more cooperative partnership with sightholders

  • Greater emphasis on ethical business practices

  • Twelve-month extension of ITOs (intentions to offer), which estimate sightholder allocations

  • Simplified application process to become, and remain, a sightholder

  • Greater human involvement in the selection process, which was run mostly by a computer under SoC I.

The new direction was generally welcomed by sightholders. “It’s a big step forward,” says Hertz Hasenfeld of Hasenfeld-Stein. “It restores the human element, which was definitely missing. I think they are going to be more sensitive to the sightholder.”

The DTC says that under the new system, it will not tell sightholders how to run their businesses.

“Our message to sightholders is simple: Do what you do best, and do that excellently,” managing director Varda Shine says. “If a diamantaire produces a mediocre advertising campaign or mediocre jewelry, or runs a mediocre retail business, then that part of the diamantaire’s business will inevitably be assessed as being mediocre.

“This is not—and never has been—about everyone doing everything in order to score well under SoC,” Shine adds. “What do we mean by excellence? Having a sustainably profitable business that stands out from the crowd. How you do that is up to you.”

Some clients were alarmed by Shine’s comments that the company’s market share is down to 40 percent, since basic math—as well as the DTC’s newfound commitment to Southern Africa—dictates that many people on the list could be cut after the next selection. Smaller sightholders feel especially vulnerable. While many were not fans of SoC 1’s computer-based system, they thought it was at least somewhat fair. Now they worry that the more subjective selection process in SoC 2 will be less so.

“Their market share is definitely going down, and their goal is to have fewer and stronger sightholders,” one client says.

Shine tells JCK she “doesn’t know” what the diminished market share will mean for the sightholder list. “There’s no magic number,” she says. “As always, the list length will be a result of our selection process, and not a parameter of it.”

She adds, “Smaller sightholders and new applicants have nothing to fear if, in their chosen areas of excellence, they really are world-class experts.”

De Beers also reiterated its commitment to adding value and efficiency, which many take to mean increased marketing and selling directly to retailers.

“Marketing is absolutely intrinsic to SoC, but this does not mean that, for example, every sightholder must be an expert in consumer-facing advertising,” says Shine. “By marketing … I mean the whole management philosophy of structuring your business to stand out from the crowd by understanding your customers’ needs and then meeting them profitably. Under that broad definition of marketing, upstream companies can have great marketing propositions.”

Another sightholder notes that the focus hasn’t gone away, but it won’t be so much of an imposition as it was under the old system.

“Sightholders were doing a lot of crazy stuff under Supplier of Choice,” he says. “There were some people who did anything in the world to get into certain retailers, anything to look good to the DTC. A lot of sightholder money went down the drain on poorly conceived projects, and none of that would have happened without Supplier of Choice.”

But he says SoC 2 is not “all the way back to basics.”

“This is an industry that was very complacent. Supplier of Choice shook that up, but it went to an extreme. Now it’s back to the middle. They are saying, ‘Do your niche, do business as usual, but don’t be asleep at the switch either.’”

Shine says there is still “much more” to announce about SoC 2, adding, “This is obviously still very much a work in progress.”