The global diamond industry will require a new narrative and a rebranding to secure its future, a new report has warned.
The Dubai Multi Commodities Centre (DMCC) states in its ‘Diamonds Changing Forever’ report that the global industry is at a “major inflection point”.
Prices are steadily decreasing, profitability is in decline and access to finance is restricted, placing the industry under significant pressure. The rise of laboratory-grown diamonds (LGDs) and technological disruption in the form of automated manufacturing and grading, raise further challenges for the road ahead.
“Consumer preference is shifting, the supply and demand of rough diamonds is imbalanced, and access to finance is proving increasingly difficult for many traders. Furthermore, advanced technology and automation has ushered in a new wave of disruptive change that has challenged traditional business models. The combination of these factors has created a sense of confusion and uncertainty in the market . . . ,” says DMCC executive chairperson and CEO Ahmed Bin Sulayem.
The report highlights how automated manufacturing is set to drastically change the diamond supply chain. Technology makes it possible to take a mined diamond, cut and polish it, set it in jewellery and sell it to a consumer on the same day.
Technology for the automated grading of polished diamonds is also in the final stages of development, which will reduce the time it takes to make accurate and consistent assessments. These developments will sharply reduce production times and DCMM believes that the shorter pipeline will translate into lower inventory, lower bank financing and lower costs. This should remove polished price distortions caused by stocking and destocking in the mid-stream market.
DMCC points to the popularity of LGDs as another major disruptor in the diamond industry. Many believe that in order for the two categories to co-exist, they have to be positioned differently. The report notes that should the LGD industry continue to compete with diamonds, rather than complement them, LGDs are unlikely to find their niche and that will be to the detriment of the whole industry.
DMCC’s research highlights that in order to secure sector growth, the industry must work together, embrace innovation, harness technology and focus on the value proposition to customers.
The report identifies four necessary steps for the international diamond industry to take collectively in order to secure its future: ‘Develop a new narrative’; ‘Refocus on branding’; ‘Differentiate the product’ and ‘Surpass competition in retail’.
The new narrative should show new consumers that each natural diamond is inherently unique, while demonstrating the long-lasting benefits to local communities, DMCC states.
While luxury brands often sell at a premium, the value of polished diamonds sold in jewellery decreased by 13% since 2011.
“Many of the diamond-related brands launched over the past few decades are in fact simply logos. Having a brand represents a promise that is both exclusive and desirable. The industry needs to further establish brands that do not just sell jewellery, but sell emotional connections.”
To differentiate the product, DMCC says retailers have to identify a unique niche. “Many of today’s jewellery retailers are simply selling an increasingly commoditised version of crystallised carbon. In doing so, they end up fighting a pricing war to survive and causing consumer confusion.”
In its final recommendation, the report looks at the diamond retail industry and states that it has been slow to adapt to the wider retail environment, particularly given the rise of e-commerce. Retailers need to offer more than a place to purchase jewellery, they need to provide a community and a unique purchasing experience – something that e-commerce cannot deliver.