When is the diamond industry going to stop crying?
No profits, no profits, no profits!
How many times have we got to hear the lament?
If business is that bad, why not try another career? Why not sell something else? Or, better yet, why not see what you can do to make business better?
A few people have thrown in the towel, whether by choice or because of financial pressure. But there are still an awful lot of people selling diamonds, and basic economics tell us that some of them must be making money – maybe not as much as they’d like, but certainly enough to keep food on the table. And pay for winter vacations in Vail or St. Martin?
Dealers and wholesalers are the most consistent complainers. Retailers, at least in the United States, aren’t always happy with their diamond jewelry margins, but quite a few still manage to get keystone on a $10,000 item. By anyone’s count, that’s not a bad profit.
Who’s to blame for all those profitless sales? The chief villain, say many dealers, is De Beers. De Beers, they complain, isn’t releasing the assortment of goods that generates profits.
There’s probably some truth in the charge. But in spite of a self-imposed reduction in sales, the company isn’t in danger of running into a cash bind and is steadfast in its stated mission: manage the market for the long-term benefit of all in the diamond chain.
Perhaps a more instant problem is that too many people are selling diamonds, something that has led to cut-throat price competition. With demand in the Far East in a deep freeze, that competition is getting more lethal as dealers seek out anyone who will buy their goods – mostly U.S. retailers and manufacturers.
The cure here is simple enough. Reduce the number of diamond sellers.
Of course, that’s already happening, though not as much as it should, say some key industry observers. It seems the trend will resemble what we see in U.S. jewelry retailing: large, well-financed, and professionally run firms will survive and prosper, as will small, entrepreneurial specialists. Attrition will come mainly in the middle, among firms that have no particular lure to develop new customers or keep old ones. In diamond terms, these are companies that have very little to offer other than discounted prices.
But the diamond industry needs to do much more than thin its ranks. Those firms that want to grow successfully and profitably – and here I’m focusing on the U.S. market, though some of what’s applicable here is applicable in any market – must pay more attention to business basics. This means building better alliances with their retail customers.
It’s ironic that over the past three or four years a number of important dealers, some sightholders among them, have been urging retailers to do just that – be more important to fewer suppliers. Yet during this time the retailers, by and large, have been more successful than their suppliers. Our own study, based on the JCK Retail Panel and published in this issue, shows that jewelers’ diamond sales are slightly more profitable today than they were in 1995.
The truth is that it doesn’t matter whether it’s a supplier or a retailer who urges more diamond business partnerships. The critical issue is to put words into actions, to the benefit of both parties. Retailers must buy more for service rather than for price, they and their suppliers must show more loyalty to each other, and both must cooperate more on how to do a better job of selling diamond jewelry to the consumer.
JCK panelists who report the most profitable and satisfying diamond business repeatedly talk about quality, service, and meeting customer needs. This doesn’t mean they won’t bargain on price to make an important sale. But their sales are far from built on price alone.
Many dealers might be able to dry some of those tears if they turned more to their jeweler customers for answers to their problems.