A diamond is forever. Right?
Indeed, but does forever bode well for the diamond industry?
In almost all industries there is a concept of planned obsolescence, from the humble lightbulb to the latest Lamborghini. It’s not uncommon for things to become unfashionable or perhaps a new model comes out rendering the older one useless or less desirable. It’s what keeps the consumer markets ticking, what keeps us going back for more. When it comes to diamonds however, a round diamond has remained almost exactly the same for over a 100 years, so can diamonds ever become unfashionable? Will another cut come along and totally diminish the demand for a round brilliant cut?
I was lucky enough to be invited to one of the top diamond cutting facilities in the world at Laurelton Diamonds, a subsidiary wholly owned by Tiffany & Co. A strategic move allowing them to retain the talent needed to cut and grade diamonds to meet their internal demand.
The one thing I took away from that whole expedition was asking the senior buyer to tell me something that might shock me, it could be a statistic or a challenging thought that I might not have considered. He thought about it for a moment and said
“You know the biggest challenge for our industry in the next few decades is the concept of the overground mine.”
I looked at him thinking it was a new mining technique for diamonds rather than the deep mines that are traditionally used when mining diamonds. He asked if I had ever heard of it and of course I replied I hadn’t. Interestingly enough a Diamond is a commodity and as much as one wants to think of it as more than that, it really isn’t and it’s traded on the markets as such. Gold or Platinum are finite resources, there is a limited amount and once you use that up, there is no more. Diamond on the other hand, as rare as it sounds is actually more abundant than one thinks. Sure the gem quality diamonds are rare less than 20%, but essentially it is made from the second most common element on earth, Carbon.
Large mining companies De Beers and Rio Tinto control the release of diamonds onto the market and thus control the fine balance of supply and demand, but as one knows, the age of the baby boomers is nearing an end. This group of consumers was the first to purchase diamonds for engagement rings and make the solitaire diamond ring synonymous with the concept of love forever after. As they near the end of their lives, there will be a larger percentage of engagement rings and diamonds handed down to their children as heirlooms. This simple act of passing down could potentially cause large amounts of people who would normally spend anything from £2000 – £10 000 to consider quite seriously using their parents diamond or engagement ring for their own engagement ring and put the money they save towards the future wedding or other things like a mortgage. The thought is sweet and of course the sentiment behind it powerful. However, what about the jewellery companies waiting for this generation to buy their new rings with their new diamonds. Have they prepared their forecasts enough to see a slight dip?
I believe the large influx of immigrants into western economies from developing nations like MINT and BRIC nations will provide some relief, but the mature home grown markets surely had more disposable incomes as their economies went into overdrive after the second world war. It is this client which will be the most challenging to attract. Perhaps we see companies buy back diamonds which allow the person to use the money towards a new modern design or bigger diamond? I do think there is a market for design agencies to also utilise their design and manufacturing expertise to reset the existing diamonds into newer settings offering some respite…