Soma Bhatta (SB): How has the De Beers Group tackled pandemic to support its global diamond supply chain?
Stephen Lussier (SL): The year 2021 has been one of the most successful in the history of diamond trade, according to me. While tackling the pandemic, we were required to close mining operations to keep our staff safe. With retail closing too, De Beers sold diamonds of about US$ 50 mn during a span when it usually makes US$1.5-2.5 bn worth of business. We didn’t sell diamonds that people didn’t want to buy.
As a result, retail demand returned stronger. After lockdowns were lifted, consumers returned to shops and retailers were interested to sell while cutting centers were still closed. This cleansed the polished as well as the diamond inventory pipeline even as diamond jewellery with dormant demand for perhaps a decade were sold out. Such a situation continued throughout 2020 and the first half of 2021 when the second lockdown took place, albeit with lesser damage due to the efficacy of vaccines. 2021 registered an average 20-25% growth as compared to business in 2019. The United States registered 30% growth, China had 20% growth and India, 10% growth. These double-digit figures were unusual from such mature markets.
SB: What are the key reasons behind such unprecedented growth?
SL: There were direct and indirect reactions to the pandemic that grew the market. Stock markets recovered pretty strongly. Savings rates were historically high in the US. High savings prompted expenditure in diamond jewellery as tourism and entertainment sectors nosedived. E-commerce thrived during lockdowns and when strictures eased, business returned to physical retail even as online business continued. The new-commerce channels have increased online diamond jewellery sale permanently. There has been a lasting shift in the way consumers navigate online-offline channels to final arrive at the buying moment.
Additionally, the experience of pandemic changed people’s perspective towards life. Partners grew appreciative of each other and individuals wanted to celebrate even small moments- diamond jewellery became the most loved choice. Finally, the wealthy began buying a lot more luxury goods and services to maximize life, which has also helped the diamond industry gain significant market share.
SB: Please comment on the price rise in diamond in the wake of this growing global customer base.
SL: Price growth is a condition spurred by very high consumer demand, low inventory levels and low rough supply. De Beers Forevermark is positive about the developing scenario of Indian diamond industry. Income growth plays a huge role. Urbanisation is also important as it changes demand from gold in rural regions to diamond in cities. Also, the impact of e-com is reflecting in domestic market, so price growth reflects the upward rise in diamond demand.
SB: How unique is the Indian diamond jewellery market?
Mark Jacheet (MJ): The diversity in markets and consumer behaviour in India can’t be seen elsewhere. On the one hand, we have gold for investment across society, and have the unmatched love for uncut and polished diamonds and gemstones. So, two diametrically different demands of jewellery have coexisted in India. Here, business is a lot more relationship-based as compared to transaction-based business in the West. So, De Beers Forevermark is keen to learn the evolving landscapes of diamond jewellery and grow the Indian market.
SB: Code of Origin is considered to usher in a new-era for Indian natural diamond industry. However, the amplification of efforts in India and The Middle East has not been as expected. What is the plan ahead?
SL: It’s a mammoth project. We are still at an early stage of the program. We are refining it based on the market learnings. The Code of Origin is meant to reassure the consumer about the source of the diamond. In a world were origin and provenance are becoming integral to doing business ethically, Code of Origin will become a strong differentiator for our partners.
Consumers would like to associate with products do good to the world. Our commitment to protecting the environment and partnering with communities is stronger than ever. For example, we promote female diversity in workplace and aiming to become carbon neutral by 2030.
SB: How has the Indian diamond market improved over the last few years?
SL: The average size of diamonds has increased dramatically. From below 15 pointers to 21-23 pointers being sold regularly, this is a positive sign that our retail partners are experiencing pan-India. India is in a head-on competition with China, which claims the second spot in diamond business for De Beers Forevermark after the US. Tier 3 and 4 markets in India have performed brilliantly last year, thanks to digital evolution. The transformation that Indian diamond jewellery partners have undergone to modernize their product is what makes this an interesting market.
SB: De Beers is promoting both natural and lab-grown diamonds. Is LGD a threat to natural diamond industry?
MJ: The markets for both categories are diverging and will continue to do so. Within a year, price of polished diamonds has risen upwards of 20%, while that of LGDs have dropped by 55%. As technology improves and production rises, prices will decline, making these two very different categories.
In India, players who have mixed natural and LGD in one retail outlet during the early onset of LGD boom are taking corrective measures because of the reputational damage they faced with a customer looking for real value in jewellery. Indians in particular attribute immense importance to real value of gold and diamonds. Prices of LGDs depend on production rate, for which it doesn’t provide the price stability over time. In terms of symbolic value, natural diamonds have always amplified rarity, uniqueness and preciousness of a loved one. One can’t wish for that from LGD.
Courtesy: Retail Jeweller India News
