The Confidence Game

Jeff Fischer, the newly elected president of the International Diamond Manufacturers Association, says that today in the diamond industry, “while we’re louping our diamonds, the consumer is louping us.”

This sense of being continually under a not-always-flattering spotlight pervaded the recent Antwerp Diamond Conference on consumer confidence. Everyone agreed that consumer confidence is not only the most important factor in a diamond purchase but also the most vulnerable.

“We will be judged on our failures rather than our successes,” noted Gareth Penny, managing director of the Diamond Trading Company, in the event’s keynote. “Trust cannot be won overnight, but it can be destroyed overnight.”

“There is a hardening of attitudes from the consumer,” added Tim Dabson of De Beers’ consumer confidence department. “They are no longer happy with, ‘You can trust me.’ Now they say, ‘You have to show me.'”

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Perhaps not surprisingly from an industry still reeling from the p.r. nightmare of conflict diamonds, a lot of the talk at the conference involved social and political issues. But there also was considerable discussion of treatments and, especially, synthetics. Penny even called the latter “one of the greatest challenges this industry has ever faced.”

Among the conference’s main discussion points:

  • Treatments and synthetics. Everyone agreed that the way to handle these two issues—from a gemological standpoint—is through the twin doctrines of “disclosure” and “detection.” HRD even announced something of a breakthrough with the latter: a stapler-sized detection device that’s cheaper and handier than previous models (see sidebar).
    Yet for all the disclosure talk, some suspected that not everyone is listening. “I see a large amount of synthetics being sold without disclosure, unless we’ve seen a huge jump in the supply of strangely colored diamonds,” said De Beers marketing director Stephen Lussier. “There is very little disclosure, and that’s a mad thing to do in a $60 billion industry.”
    An even thornier question is whether synthetic diamonds will cut into the market for natural ones. The industry is already brainstorming ways to handle that.
    “If synthetics start to seriously compete with natural diamonds, then clearly we will step up our marketing programs,” Penny noted.
    To some extent, that’s already started. De Beers’ recent annual report has the words “natural diamonds” emblazoned on its cover. Its recent event in Venice was called “Diamonds: Nature’s Miracle.” Clearly, they are trying to tell us something.
    Lussier admits all the talk of “natural-ness” is the result of the new non-natural competition, but he says it’s not a bad message to deliver regardless. “It makes people feel good about diamonds,” he said. “It’s something that is in the back of people’s heads, but we have to bring it front and center.”
    “Why is a diamond valuable in the first place?” he added. “Why do you spend $10,000 on something [so small]? Not because they are shiny. Because people believe there is an inherent value in the natural rarity of the product.”
    Peter Meeus, managing director of HRD, which sponsored the event, argued that “the natural aspect of diamonds is linked to the emotional aspect. No two natural diamonds are alike. All synthetic diamonds are the same. We are the real thing. We are Coca-Cola. They are Virgin Cola.”
    Expect De Beers to keep emphasizing this message, although Lussier says it won’t be able to do it alone—another admission that De Beers is no longer the sole major force in the industry.
    “An area like consumer confidence is a collective issue,” he said. “It won’t be effective if just one company [handles] it. We don’t feel it’s our role to do everything.”
    The most eyebrow-raising comment on synthetics came from Dan Ben-Ary, marketing consultant with Israel’s YYY Industries. Ben-Ary noted that Louis Vuitton, manufacturer of famed leather handbags, also sells a plastic version. “Maybe if this industry was like other industries, we would be looking forward to synthetics,” he said. “In all other industries, they feel if you can’t beat them, join them.”

  • What should the labs do? If there was any point of controversy in all this, it was over how the labs should handle treatments and synthetics.
    Meeus gave a speech that strongly urged all industry labs not to grade synthetics or HPHT stones. “Grading them creates confusion over whether there is a difference between natural and non-treated diamonds,” he said. “The brand identity of diamonds is strengthened if labs only grade natural, non-treated diamonds.”
    Arthur Beller, president of the Beurs voor Diamanthandel, the Antwerp bourse, agreed. “How many people outside the trade know what HPHT means?” he asked. “And if you are the customer and you buy an E-color stone, and then you find out it was really once a brown stone, what does that do for consumer confidence?”
    Meeus acknowledged that his lab does currently grade HPHT stones but said it is willing to stop if GIA does as well.
    GIA and EGL USA—the only U.S. lab to grade synthetics—did not respond to requests for comment.

  • The ethical quandary. The increasing importance of social/political/humanitarian issues was shown by the multiplying number of ethical “seals of approval,” from Rio Tinto’s Business Excellence Model to De Beers’ Best Practice Principles. In fact, one piece of news at the conference was the attempt by Jewelers of America to synthesize all of the programs into one.
    Called the “Early Adopters Initiative,” it sets up a working group to try and coordinate all the various efforts on social responsibility, particularly for diamonds and gold. In addition to JA, entities involved in the original discussions include Cartier, Tiffany, De Beers, Zale Corp., Rio Tinto, Signet, and ABN-AMRO Bank. JA hopes to get other entities involved as the initiative develops.
    JA executive director Matthew Runci is not sure where the initiative will lead but thinks it’s something for which there is a real need. He notes that some manufacturers now have to comply with several different ethics codes from suppliers and vendors.
    A lot of these codes “may inadvertently be at cross purposes,” he said. “A manufacturer could be overwhelmed by having to understand and comply with all these different requirements. This seemed to be an opportune time to establish some sort of baseline principles for the industry.”
    He noted that while the entities involved have their own individual ethics codes, anything that hurts the industry ultimately hurts everyone.
    “While each of these companies may work hard to protect its own reputation, they would still pay a price if the product’s integrity is called into question,” he said.

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