It appeared in the New York Times and it included quotes by Philippe Mellier, the chief executive of De Beers. Therefore it became quite the topic on social media with US industry “experts” jumping in to comment.
However, judging from their comments—ranging from applauding an e-commerce solution for a single boutique luxury retailer to another pity party over younger consumers choosing electronics over jewellery—it’s pretty clear they didn’t read the story.
Mellier was specifically talking about the diamond industry in the story, which for the past 100 years operated like no other industry on this planet. It received easy bank financing without revealing its financials. It received the money despite selling a product whose value is based largely on documents with methodology as subjective as they are objective, and the exceptional marketing and advertising campaigns by De Beers. And it received funding despite conducting business largely without oversight.
Now with the post-recession economy and new government oversight banks are scrutinizing these businesses the same as they would any other business. They are finding that investing in the diamond industry isn’t a good thing, according to the article, except for those “good companies that are transparent and profitable and are bankable,” Erik Jens, chief executive of diamond and jewellery clients at ABN Amro, said in the story.
De Beers also has tightened the financial requirements for its sightholders.
Mellier and De Beers recognize that “The tension is not coming from demand, which is still growing…. It is coming from the change in the industry.”
The business model has to change, not only because of bank lending, but to be more flexible and quicker to adjust to the marketplace—whether it’s fashion trends, sudden supply-side changes or even geopolitical tensions.
De Beers recognizes this largely because it has to. It is no longer the independent entity that feeds the diamond and jewellery industry with products and marketing. It is now a very small part of a large corporate operation. Its first priority is to its corporate leadership and shareholders. That’s why in many ways De Beers is competing with the industry by launching its own branded retail stores and diamond jewellery brand; and refusing to lower prices for its sights.
But sometimes even De Beers can be its own worst enemy. In the “Executive Summary” of its 2014 Diamond Insights Reports, it sees the top priority for the diamond industry as, “safeguarding and nurturing the diamond dream—that is, the allure that diamonds have for consumers, based on their association with romance and a sense of the eternal, and the fact that they are seen as a lasting source of value.”
The flipside of this is that it also means maintaining the veil over the not so romantic aspects of the diamond industry. In this changing world, nothing has changed so dramatically as the instantaneous way information is spread across the globe. Bad news about the diamond industry will get to people. De Beers and the rest of the diamond industry don’t have a way to respond.