Diamonds once ruled the world. A few short generations ago, James Bond films and De Beers advertisers since 1948 assured us that diamonds were forever. Marilyn Monroe sang about how they were a girl's best friend. The precious gemstones became culturally ubiquitous, associated with romance, wealth, luxury, and permanence.
The diamond was the perfect symbol of the American dream. But no more.
Diamonds are now cheaper than they were a decade ago in 2006, while the prices and popularity of more "modern" twenty-first-century luxury items like high-tech gadgets have stayed steady. Over the same period of time, the price of other luxury products like cars, fashionable clothes and shoes, and fine food and drink have risen at above-inflation rates, according to Forbes.
Though economic recovery is on track in the United States, the world's largest diamond market, millennials, would rather spend their hard-earned money on a new iPad or smartphone than jewelry. Diamond mining giants like De Beers, Alrosa, and Rio Tinto have been unable to stop the decline.
"I'm not really a jewelry person," said Catherine Weir, 32, who went shopping with her fiance last month, according to Bloomberg. "It was always diamonds for an engagement ring, maybe for a wedding band and that's it. iPads and things like that are much more accessible."The Wall Street Journal predicted that lower diamond prices and a stalling market may not be a fluke of the recession, but an inevitable and permanent slowdown of the diamond industry that's here to stay.
"Diamonds, until recently, were that rarest of commodities, where growing demand, thanks to a U.S. recovery and rising emerging market wealth, looked set to outstrip constrained supply. No longer. The biggest diamond miners, De Beers and Russia's Alrosa, said prices for the precious stones fell 6% to 8% in the first half of the year. De Beers, owned by Anglo American, has twice reduced production guidance this year to support the market. It has given clients, who commit to buy in advance, flexibility to defer purchases at the company's scheduled sales events."The conclusion is inescapable: the seemingly eternal diamond is losing its allure to many consumers. Demand for jewelry rose a mere 1.9 percent a year from 2004 to 2013, as compared to other commodities like watches, tobacco products, and household goods.
Efforts by the largest diamond producers to artificially raise prices have also been met with failure. Bloomberg reported that in 2015, De Beers and Alrosa faced a serious problem when they tried to push for higher prices and nearly faced an industry-breaking boycott.
"Polishers who buy the raw gems and sell to wholesalers and retailers were unable to pass on the higher costs as consumers balked. A threat to boycott auctions of rough gems by buyers in India, where almost 90 percent of the stones are cut, ended with De Beers lowering prices 15 percent for the year and another 7 percent in January."The plan backfired, and the message was clear: producers could not simply inflate prices and expect consumers to pay up. "The industry is a victim of its own history," Charles Wyndham, former De Beers sales director and founder of WWW International Diamond Consultants Ltd., said to Bloomberg. "Everyone had a pretty easy ride when De Beers had its monopoly. Everybody has got to think how they can turn it around. It requires a huge cultural change."
If diamond giants like De Beers want to survive in the long-term, they have to create customer demand. To do that, they have to reach millennials. To that end, De Beers has been pouring money to the tune of tens of millions of dollars into reinvigorating the U.S. and Chinese diamond markets.
Other signs show that the industry is at a major crossroads, and the big names all know it.
Just last year, Rapaport reported that the biggest diamond mining corporations of the world, including De Beers, Alrosa, Rio Tinto Group, Dominion Diamond Corp., Lucara Diamond Corp., Petra Diamonds Ltd. and Gem Diamonds Ltd., joined together in forming the Diamond Producers Association.
This DPA is dedicated to a revival of the diamond industry and focuses on research and engaging in category marketing, aimed at starting a campaign to revive consumer demand for diamonds. This, finally, may be a solid game plan going forward for the gemstone giants, and for an industry that needs to realize it's living in a new century.
[Photo by Paul O'Driscoll/Getty Images]