De Beers’ dramatic pruning of its client list shows there is no longer such a thing as “a sightholder for life,” DTC executive director Gareth Penny told JCK in an exclusive interview.
The industry is still reeling from De Beers’ decision to axe 20% of its list—as many as 35 sightholders, including some of the most respected and well-known companies in the industry. The company now has fewer than 100 clients.
The move has caused a furor in Antwerp, Israel, and New York, all of which lost sightholders.
“We are angry [and] do not accept it,” Peter Meuss, director of HRD, the Antwerp promotional group, told South Africa’s Business Day.
Penny says the negative reaction was not unexpected. “This is not an industry that is used to change,” he said. “There are other industries where relationships between customers and suppliers are dynamic and change a lot.
“It is the commercial right of any company to choose its customers,” he continued. “The idea that if you had a sight for 40 years, you will have it in perpetuity, is not part of Supplier of Choice.”
He also noted the DTC had to balance sightholder needs against the availability of the most desired stones.
“If you are applying for large-gem, high-quality material, there is just a small selection,” he said. “We have the absolute best businesses in Israel, Antwerp, and America all competing for 75-pointers and up. You can’t sell what you don’t have, and that required we make difficult decisions.”
He added that De Beers’ “market share is shrinking. We have closed outside buying offices, we no longer have a contract with Ekati or Argyle [mines], and we are making big sales from our stockpile. If we are reducing our stock and reducing our intake, it’s self-evident that we will no longer have the same availability we did before.”
That’s one of the reasons India fared so well in the reorganization, gaining a handful of sightholders while other centers lost, Penny explained. “It’s because of the nature of the material that they polish. We have greater availability in smaller sizes.”
Penny said the DTC carefully considered its clients’ needs based on five key and publicly announced criteria: financial strength, marketing ability, technical ability, distribution network, and market position (or niche.)
But, perhaps inevitably, many wonder whether more ephemeral considerations played a role in the selection process. For instance, two dropped New York companies had principals who, several years ago, had publicly criticized De Beers.
Penny dismisses such theories as “pure fiction,” along with speculation that De Beers is hoarding big stones for its retail chain. He also notes that an independent ombudsman will scrutinize the company’s decisions.
Penny’s other points:
He expressed regret that clients learned of their new status right before the start of The JCK Show ~ Las Vegas. “I am sympathetic to the fact that there was word out in Vegas,” he said. “It was not what we intended nor was it of our making.”
DTC is not worried that dropped clients will sue, noting that any decision can be reviewed by the ombudsman. “People are free to act as they wish, but we have acted fairly and objectively,” he said. “[Supplier of Choice] has been approved after thorough review by the European Commission, a formidable competition regulator.”
He rebutted critics who say De Beers should be more “transparent” in its reasoning for dropping clients. “That’s a case of people being so immersed in our industry that they don’t have a sense of perspective,” he said. “Other companies don’t explain in nearly the type of detail we have why they do business with another company.”
DTC has said that dropped sightholders could reapply for sightholder status in two years, when the first contracts expire. But why would things be different then? “If you are talking about New York businesses, they might broaden the rough supply that they use,” Penny said. “There’s nothing to stop companies from buying the goods and sub-contracting them out in China. Some people have already gone that route.”
In any case, he doesn’t expect future re-evaluations to be as earthshaking as this one.
“Volatility is not in our interest, but we have to balance that against the need to keep the whole thing dynamic,” he said. “But I wouldn’t think in two years [it will be like this]. This is a bit of a watershed.”
The dropped sightholders will continue to receive their allocations through the end of the year.
De Beers’ Diamond Trading Company (DTC) this month kicks off a print advertising campaign for its latest product—the right-hand ring.
The campaign is based on the premise that women assign different meanings to their right and left hands.
“The left hand for a woman is the place for a ring that symbolizes partnership, relationship, love, and commitment,” explains Diamond Promotion Service (DPS) executive director S. Lynn Diamond. “The right hand is for self-expression and her individual style.”
One sample execution puts it this way: “Your left hand lives for love. The right hand lives for the moment.” The ads end with the tagline, featured in every ad: “Women of the world, raise your right hand.”
The ads will appear this fall in national shelter, beauty/fashion, and luxury lifestyle magazines.
So far, most retailers and manufacturers have embraced the trend, if only because the DTC’s three-stone jewelry campaign was so successful. But many were unhappy about the current designs.
One aspect of this campaign that makes it different is that the DTC is looking to manufacturers to generate the designs, offering only the following guidelines:
The diamonds should be set in a north-south position, instead of east-west like engagement rings and three-stone pieces.
The rings should feature negative space between the diamonds.
Each ring should feature a diamond of 20 points or more.
Diamond says the right-hand ring promotion is meant to assign meaning to rings that aren’t three-stones, diamond engagement rings, or anniversary bands. “There is this huge category of rings that have no meaning, concept, or unified marketing message behind them,” Diamond says. “We saw a huge opportunity.”
The target audience is the 30- to 54-year-old affluent, fashion-savvy woman—”the mature woman who’s confident, knows herself, is proud of what she’s worked hard to accomplish, and has most likely experienced marriage and already received diamonds as a gift of love,” Diamond says. Although some may self-purchase the ring, the campaign doesn’t dictate who buys it, Diamond says: “It can be a self-purchase or a gift.”
The right-hand rings will be sold in four categories: contemporary, modern vintage, romantic, and floral.