Diamond Notes

U.S. Diamond Sales Jumped 9% Last Year

U.S. retail sales of diamond jewelry were up 9% in value terms in 1998, according to De Beers. That’s the seventh year in a row sales have risen. When finally tallied, diamond jewelry sales are likely to top $20 billion for the first time ever.

“The American market has been a very strong one for us,” says De Beers’ Derek Palmer, who coordinates marketing for the United States. “Most people think this year will continue to be strong, especially with our promotional campaign for the millennium.”

De Beers marketing director Stephen Lussier told financial analysts the diamond engagement ring market showed particular strength in 1998. The average purchase price increased 11%, crossing the $2,000 mark for the first time. Things are also going well in solitaires, the products on which De Beers’ advertising is centered. Sales of solitaire necklaces and earrings increased 20%, or double the overall market trend. Lussier also noted that the sales of carat-plus diamonds rose 15%.

As for 1999, American retailers remain bullish, according to surveys by De Beers, which show independents expecting an 11% increase in diamond jewelry sales by value and the national chains anticipating a 6% rise.—Rob Bates

Diamond Jewelry: U.S. Retail Sales Results

1998 9%
1997 8%
1996 6%
1995 8%
1994 5%
1993 10%
1992 3%
1991 3%
1990 9%
Numbers represent the percentage change in overall retail value from the preceding year.
Source: De Beers

Canadian Mine Signs with De Beers

In a coup for De Beers, the new Canadian diamond mine, Ekati, has agreed to become a charter member of De Beers’ venerable Central Selling Organisation.

De Beers recently inked a “memorandum of understanding” with BHP, an international mining group based in Australia. BHP is the principal owner of Ekati, near the Arctic Circle in the Northwest Territories. The agreement is intended to pave the way to a three-year contract.

The deal is unusual in that Ekati will sell only 35% of its production to the CSO, with the other 65% marketed independently by BHP Antwerp. In all its other contracts, De Beers sells all or nearly all of a mine’s production.

BHP spokesman Gerald Nicholls says the low percentage keeps the mine in compliance with U.S. and Canadian antitrust laws. “[The amount BHP sold] had to be less than 50% [because of the antitrust situation] but enough to make it worth doing,” Nicholls explains.

Many diamond traders, however, believe the CSO eventually will handle most of the rough, either buying it indirectly through third parties (similar to the arrangement with Russia under the Soviet regime) or purchasing it on an ad hoc basis on the Antwerp market.

Ekati, which opened last October, is rapidly becoming a major mine and is expected to produce 6% of the world’s diamond production by value each year for several years. George Burne, general manager of De Beers Canada Corp., calls the deal a boost for De Beers’ “single-channel” system. “It should give the market confidence,” he says. “The agreement shows that we haven’t lost faith in the principles of the Central Selling Organisation, and we will do our best to uphold the future.”

The contract is expected to be finalized by the middle of the year, with sales commencing shortly after. It was stalled for months because of a shakeup in BHP management just before the Ekati mine opened.—Rob Bates and Russell Shor

Brilliance Scope Makes Debut

Instead of talking about brilliance and dispersion in your diamond sales presentations, wouldn’t it be better to demonstrate them? GemEx of Mequon, Wis., has developed a machine to do just that: the Brilliance Scope. Based on spectrometry technology, the Brilliance Scope is a smaller version of a more complicated spectrometer used in the colored gem industry to color-grade gemstones.

“It will change your style of selling diamonds,” says Jesse Avila, manager of Christian Bernard, an American Gem Society store in the Woodfield Mall in Schaumberg, Ill. According to Avila, since his store started using the Brilliance Scope, its diamond sales have increased dramatically. “Initially, I was reluctant to use it,” says Avila, a gemologist and goldsmith who has been with Christian Bernard since 1985. “We all explain the four Cs and hope that the customer understands. Then we ask, ‘So, do you want to buy it?’ ” With the Brilliance Scope, Avila reports, Christian Bernard sales associates don’t have to assume the customer understands. The beauty of the stone is demonstrated on a computer screen.

As you would use a copy machine, you place a diamond on the Brilliance Scope’s glass plate and close the lid. The machine is attached to a computer. With the click of the mouse on an on-screen button, photos of the diamond demonstrating its brilliance and dispersion are captured on screen for you and your customer to view and discuss. To compare that diamond with another, place the second stone on the glass, go through the same steps as before, click on the “compare” button, and watch as the computer places photos displaying each diamond’s brilliance and dispersion side by side. You and your customer will be able to judge which diamond is more beautiful, without getting into a technical discussion.

Presenting cut. Carat weight can be measured, but assessing the rest of the four Cs isn’t as simple. The scale used to grade the clarity of diamonds is subjective. Color grading using master stones is somewhat less subjective but still involves making decisions. The fourth C, cut, has always been described in mathematical terms and until recently has been based on Marcel Tolkowsky’s formula for the ideal brilliant. Presenting this theory to customers has not really helped them decide which diamond actually looks best. The computerized Brilliance Scope enables you to show them a picture of how the diamond reacts to light and compare it with another diamond that, on paper, may seem to be an equal.

Better cut means higher sales. “The initial barrier for diamond customers is the price,” Avila notes. “So some jewelers mark up the price so they can give a discount.” The machine is designed to eliminate this barrier by showing customers the reason for the price.

As Avila has found out, customers want a beautiful diamond, not just a big one. They will pay for quality—if they can see it.

The Brilliance Scope can help demonstrate that two diamonds of “Ideal” proprotions can differ significantly in brilliance and scintillation, and therefore in beauty. Avila describes a recent sale in which the customer compared a 0.85-ct. Hearts on Fire diamond with an “Ideal”-proportioned 1-ct. stone. Both diamonds were priced at $8,500. “We sold the 0.85-ct.—the smaller stone—because the machine helped us prove that the Hearts on Fire stone showed the better brilliance and dispersion,” he says.

Every once in a while, Avila notes, a customer will ask, “What’s the real price?” “ ‘Once you have seen the real beauty of the diamond,’ I tell them, ‘is there a reason why this diamond should be discounted?’ Today, diamonds are sold by visualization, not just by listening to the sales staff talk about the four Cs. Customers see the beauty with their eyes.” And that sells diamonds.

GemEx sells the Brilliance Scope for $11,000. It’s not cheap. But it may be worth the price if it can help you significantly increase your diamond sales.—Gary Roskin

De Beers Begins Internal Review

Since Nicky Oppenheimer took over as chairman of De Beers last year, it’s been a company in flux. First, it separated from longtime sister company Anglo-American. Then it announced its branding initiative (see page 198).

Now, there may be more changes in store. The company has launched a top-to-bottom internal review of its operations, conducted by four teams. They will report their findings to the De Beers board this summer.

The South African investment community is abuzz with speculation as to what it means. The local newspaper Business Day said it could be “the most fundamental shake-up since De Beers gained control of the world diamond trade more than 60 years ago.” Some observers believe De Beers will concentrate on mining and close its marketing arm, the Central Selling Organisation—which some see as a money drain—or spin it off as a separate entity.

But Oppenheimer told analysts, “I don’t think you should get too excited about [the review].… Some of the newspaper reports have sort of suggested that De Beers is going to change the way it does business and become a completely different company. I think that is very unlikely.”—Rob Bates

De Beers’ Web Site to Include Ring Design

Beginning next month, visitors to De Beers’ Web site, www.adiamondisforever.com, can “virtually” design their engagement rings. The new feature lets users select a band type, the shape of the center stone, and side stones. There’s also a database of 7,500 designs, from which users can choose their favorites. Once the user creates the design of her dreams, it can be printed out and shown to a local jeweler or e-mailed to someone as a not-so-subtle hint.

Anne Ritchie, account supervisor for the diamond advertising group at J. Walter Thompson, notes that De Beers’ research has found that “when females have a specific ring design in mind, the man tends to spend more money and buy a bigger quality diamond.”

Ritchie says the Web site is doing well, averaging 525,000 hits a month. The new feature will receive extensive promotion, she says.

Diamond engagement ring manufacturers are invited to submit designs to the Web site. Each design will be identified by a source code. When a customer brings a chosen style to a local jeweler, the jeweler can determine its manufacturer by calling the Diamond Promotion Service. Manufacturers who want to participate in the program can call Rachel Rosin at (212) 210-7725.—Rob Bates

Chinese Delegation Visits 47th Street

The ultimate capitalist institution—a diamond trading bourse—should open in communist China later this year, Chinese officials told New York’s diamond industry leaders.

The officials, including the vice mayor of Shanghai, Zhou Yupeng, recently took a tour of 47th Street, visiting the Diamond Dealers Club and jewelry manufacturer Roberto Coin. “The diamond industry is very interested in doing business with China,” said former Diamond Dealers Club president Eli Izhakoff, who organized the visit. Zhou responded that De Beers’ promotional efforts in China appear to be working. “The young people, when they get married, all want to buy diamonds,” he said.—Rob Bates

C3, Lazare Kaplan Get New Agencies

C3, manufacturer of diamond-lookalike moissanite, recently hired Barber Martin and Associates of Richmond, Va., as its new ad agency. The agency has done work for Nina Ricci, Mikimoto, and Bhurka. Moissanite’s 1999 advertising budget is estimated to be $1.5 million. The company dropped its previous agency, DDB Needham, earlier this year.

In addition, Ideal-cut manufacturer Lazare Kaplan has signed Communications Marketing Action (CMA), New York, to do public relations and marketing for its Lazare Diamonds brand. CMA has also done work for Bally, Yumi Katsura, and Platinum Guild International.—Rob Bates

New ‘Evolution’ Ad from De Beers

De Beers is unveiling a new print campaign for women, set to debut this month. The campaign, dubbed “Evolution,” was shot by renowned photographer Albert Watson. It features female models photographed partially in shadow—an echo of De Beers’ TV campaign—along with copy discussing a woman’s emotional attachment to her jewelry. The ads will feature mostly solitaire pieces.

The campaign will appear in this month’s issues of Harper’s Bazaar, Vogue, Vanity Fair, Elle, and other magazines. In July, the campaign will integrate millennium-oriented themes. Retailers can call the Diamond Promotion Service at (800) 370-6789 to locate the source of pieces featured in the ads.—Rob Bates

Diamonds Top Agenda at GIA Symposium

Diamonds will be the prime topic at the Gemological Institute of America’s International Gemological Symposium, to be held June 21-24 at the Hyatt Regency Hotel in San Diego. Some 2,000 attendees are expected at the symposium, one of the jewelry industry’s premier events. The last symposium was held in 1991.

“The goal of the symposium is to prepare people to succeed through all of the changes coming to our industry,” says Dr. Vince Manson, GIA’s director of operations.

The first session will focus on diamond sources and features Argyle’s rough diamond sales manager, Mike Mitchell; Canadian geologist A. Alfred Levinson; and Russian geologist Nikilai V. Sobolev, among others. Analysts Carl Pearson and James Picton will address the market implications of new supply sources and other key indicators of diamond economics.

Key manufacturers from New York, Antwerp, Israel, and India will tell how they’re adapting to the rapid changes wrought by tighter distribution channels. Speakers include Dilip Mehta, who heads Rosy Blue, Antwerp; Shmuel Schnitzer of the Israel Diamond Manufacturers Association; Hertz Hasenfeld, a New York manufacturer; Diamond Dealers Club president Eli Haas; and Dani Shein, managing director of I. Hennig Co., a CSO brokerage house. Two leading Internet traders—Martin Rapaport, publisher of the Rapaport Report and RapNet, and Fred Mouawad, president of GemKey—will address the future of online diamond trading.

World consumer markets will come under the scrutiny of noted manufacturers and retailers, including Helene Fortunoff, president of Fortunoff’s, New York; Hidetaka Kato, chairman of Kashikey, Japan; Ralph Destino, president of Cartier USA; Susan Jacques, president of Borsheim’s in Omaha, Neb.; and Tom Tivol of Tivol in Kansas City, Mo. John Calnon, QVC’s jewelry vice president, will analyze TV and Internet outlets.

In addition to the formal presentations, GIA has scheduled free-for-all panels on diamond branding, diamond cut, and treatment disclosure in a session aptly titled “The War Room.”

The symposium’s keynote speaker is Peter Ueberroth, former baseball commissioner and Time magazine’s 1984 Man of the Year (recognized for the successful staging of the Los Angeles Olympics). Economist Arthur Laffer will discuss business and finance, and technology pundit Don Tapscott will address computer issues. Maurice Tempelsman, chairman of Lazare Kaplan International, is the speaker for the closing ceremony.

Reservations for the symposium can be made by calling GIA at (800) 421-7250, Ext. 4406, or by visiting GIA’s Web site at www.gia.edu.—Russell Shor

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