When De Beers talks, sightholders listen. And when De Beers officials directed sightholders to become better marketers, they were heard-loud and clear.
A few months later, virtually every sightholder JCK contacted had marketing plans ready or in the works. Some have hired public relation firms or advertising agencies, or set up full-fledged marketing departments. One had brought three marketing consultants onboard since the summer.
Not every sightholder is thrilled with De Beers’ new plans. Some big clients earn several times more selling wholesale than they could on a “brand.” But with persistent rumors that De Beers will prune its list, they view cooperation as a matter of survival. As a sign of the diamond giant’s seriousness, it made each sightholder give a 90-minute presentation and fill out extensive questionnaires on their company’s history and its future. Many think these presentations will determine whether a sightholder retains its position on De Beers’ magic list.
Alan Campbell, a manager in De Beers’ newly formed sales and marketing division, doesn’t deny there will be some changes when De Beers finishes evaluating the information in July. “I wouldn’t rule out [dropping people], but no decision has been made as to what extent the list has been changed,” he says. “We are going through a rigorous assessment process, and I would expect change. It’s important that new blood come in.”
All this has caused considerable anxiety-particularly the new emphasis on marketing. “Many sightholders are in a state of panic and confusion,” says one sightholder. “For most of them, this is a new concept. It’s not right for all of them. They are going to make a lot of mistakes and waste a lot of money if they are not careful.” Campbell, however, argues that sightholders are showing considerable initiative. “Many have marketing skills, but they were never defined as such,” he says. “We have been swamped with all sorts of good ideas. It’s difficult to keep up with them all. We have a lot of things waiting in the wings.”
The new mind-set is mostly welcomed by American sightholders, who always were considered more marketing-oriented than their comrades overseas. “They are telling us to think out of the box,” says Stuart Samuels of Premier Gem. “They want to get us thinking out of the realm of ‘buy rough, certify it, sell it, next.'” But some privately worry that if the U.S. economy sinks, all the marketing talk won’t mean a thing. “This will be a big flop if the market doesn’t hold up,” says another sightholder.
Fine-tuning the concept. De Beers announced the new thinking with great fanfare in July, but some sightholders think the company has fine-tuned it somewhat. It’s now telling clients to target “mom-and-pops,” rather than bigger chains, which already do extensive marketing. And while De Beers this summer spoke of jewelry stores full of brands, some feel it’s curbed its earlier enthusiasm and is asking sightholders to run any brand ideas by it.
Campbell says the company was just misunderstood. “The interpretation has been that all sightholders must suddenly start advertising campaigns and create brands,” he said. “We never actually said that. We don’t want to turn a good diamond manufacturer into a bad jewelry manufacturer.” He notes that branding is not suitable for every company. “We are interested in the principle of competing brands on the market, but whether the sightholders [should] start those brands is debatable,” he says. “We have companies that have $400, $500 million annual turnover. Those people are in a much better position. Branding is a specialized process that requires a great deal of resources.”
De Beers may even use its own resources to help companies along. It’s considering a quasi-co-op scheme whereby it would match sightholders’ advertising dollars. This would not only increase the amount of money on the market but also give De Beers some control over the advertising’s content-a prime concern for a company that zealously guards its product’s image.
Whittle the middle? De Beers’ new plans are causing anxiety in other sectors as well. The company now requires clients to have what it calls “efficient routes to market”-meaning they should deal more directly with retailers and jewelry manufacturers. To many, this means one thing: eliminating the middlemen.
Even without De Beers’ initiative, middlemen have been in a precarious position lately-given the Internet, tight profit margins, and the overall trend toward consolidation. “Eighty percent of my business is already direct to retailers,” notes sightholder Stuart Samuels. Still, while consolidation was taking place before De Beers became interested, the company’s prying eyes could accelerate things, says veteran industry watcher Jeff Pfeffer of the diamond and jewelry division of Bank Leumi. “The traditional diamond broker is in a dying business,” he explains. “You see a store in Iowa. Israeli sightholders have visited that company as well as Indian and American companies. Fifteen years ago that never happened.”
No one is predicting that middlemen will become extinct. “You’re always going to need them for larger, special stones,” says Ben Moeller of sightholder E. Schreiber. “You can do a program with a retailer for 1-ct. stones. But not with 10-ct. D-flawlesses.” In the future, however, middlemen may have to either consolidate or drop out. “There will always be middle people, but they will be the bigger, savvier type of middle people, and they will be much fewer and farther between,” predicts New York sightholder Sheldon Kwiat.