Over the past decade or so, we’ve seen demand in the diamond industry staying at a relatively stable level.
There has, of course, been notable growth in new markets for the diamond industry, such as China. But even so, there’s been a feeling that the diamond world needs some major changes to facilitate significant growth.
Oversupply in diamond industry?
We can certainly explain some of the investor reticence in this alternative asset class with a level of oversupply of diamonds in the supply chain.
Pair this with lacklustre marketing efforts and a level of pessimism from investors due to changing consumer demand, and it’s not difficult to see where the challenges have been.
However, there have been several changes spearheaded across the diamond industry over the last couple of years that are changing the picture.
New trends accelerated by the pandemic
Consumer demand for pretty much everything has changed since the pandemic hit the world.
Sustainability, online sales, a more engaged consumer demographic and concerns over ethics are all coming together to force change in the diamond market.
And I think that these changes are informing the trends we can expect to see increase over the next few years.
Mining rough diamonds sustainably
The drive for sustainability is transforming just about every meaningful industry sector.
And while people may not immediately equate the diamond market with sustainable initiatives, they may well be surprised.
Aside from being the obvious right move for the future – not only of the sector but of the world – from a business perspective it’s absolutely vital to keep up with consumer attitudes.
Do consumers demand sustainable diamond jewellery?
There has definitely been a shift towards this. And those of us in the diamond industry and jewellery market must understand that we need to appeal to people’s emotions.
To continue to appeal to these changing consumer demands, research shows that the diamond industry must appeal to their emotional perspectives.
A diamond is forever, but it also must now be sustainable to match global demand.
How the mining industry is answering the call
The diamond mining industry is ideally placed to capitalise on the green credentials that already exist throughout the process.
As anyone who works with mined diamonds knows, the majority are discovered in kimberlite rock. If you’re wondering what the significance of this is, you may be interested to learn that kimberlite is able to naturally absorb extremely high levels of CO21.
And as lowering CO2 emissions is absolutely key in the global drive towards sustainability, this is one of the most exciting developments within the industry.
De Beers and the kimberlite carbon capture process
De Beers has been co-developing this carbon capture project (called CarbonVault) for around five years.
The project could feasibly mean diamond mining becoming carbon neutral. There’s even a chance to work towards net-negative emissions – something that has huge potential for any mineral mining industries.
Carbon-neutral diamonds will go a long way to bringing consumers back on board with natural diamonds – think what that would do for diamond retail sales. Check out this podcast to find out more.
Increased provenance tracking of diamonds
Another key trend we’ll see in the diamond industry will be improved provenance tracking.
So, when a customer goes to buy a diamond engagement ring, for example, they will be provided with detailed provenance down to the specific mine it came from.
Provenance tracking initiatives are becoming more and more important in the diamond jewellery market, and therefore in the diamond industry as a whole.
New tech makes it possible to provide tracking that is trustworthy, trackable and accurate – something that just wasn’t available.
Tracking provenance from de Beers to Tiffany & Co
Although to start with, it’s likely that this kind of provenance tracking tech will be mostly available from the kind of companies that sell large, centre stone diamonds.
Eventually, this will filter through the industry as global demand for more sourcing information ramps up.
Not only does it offer relevant information in a ‘story form’ for the buyer, it also proves to that it’s sourced from a natural diamond rather than conflict diamonds or blood diamonds.
People are far more aware of these issues than they were even 20 years ago, and every piece of diamond jewellery should be proven to be separate from conflict diamonds.
World’s supply chain will be more disciplined
One of the biggest challenges for the diamond industry over the last decade has been an oversupply.
Levels of upstream supply have been too high – that’s those directly from mined diamonds sources. This is what pushed prices up to record highs at the start of the last decade.
However, more recently, we’ve seen more disciplined business from both the mid-stream (manufacturers) and upstream suppliers.
Deleveraging of diamond industry inventory
This began pre-2020 but was definitely sped up due to the pandemic.
Major providers of mined diamonds have lowered production and markedly improved flexible contracts with buyers of rough diamonds.
In addition, De Beers group has changed its structure so that it allocates large rough diamonds more efficiently to buyers.
All of this should mean that global supply of diamonds remains with those that can add the most profit value.
Growing consumer demand in China
The strength of the demand for diamonds and the willingness to spend on them is increasing in China.
Even with all of the economic uncertainty and prolonged lockdowns of Covid-19, people in China want to buy diamonds in ever increasing numbers.
Diamond sales in China have just risen for the fourth quarter in a row. According to myriad major jewellery retailers over the same period, there has been growth in the double-digits.
Diamond market must be flexible and forward thinking
This is obviously partly driven by the growing middle class who are choosing luxury products, including polished diamonds, engagement rings, synthetic diamonds, lab grown diamonds, and who are paying attention to the carat value, provenance, and value of the diamonds.
Compared with the amount sold in more developed diamond markets, China seems to be largely unaffected by external socio-economic concerns.
The biggest gem-set jewellery in China is Chow Tai Fook. The retailer is opening new retail outlets at a steady level, regardless of the pandemic.
In comparison, the biggest jewellery seller in the US, Signet, is closing stores as it restructures.
Innovation in online sales
A trend that certainly isn’t specific to the diamond industry, the shift towards online sales due to the pandemic, will continue to ensure that e-commerce grows.
Jewellers who were able to adapt to eCommerce sales during the pandemic succeeded in taking diamond jewellery sales away from those who couldn’t.
Prolonged lockdowns around the world proved that buyers of diamond jewellery are perfectly willing to buy stones without seeing them first.
Resilience into the future
There have certainly been a raft of peaks and troughs within diamond sales over the years.
However, despite this, there is no doubt that it remains resilient and adaptable.
Diamond jewellery is always going to appeal to consumers, and as long as the sector shifts to match their changing demands, it will remain future-proofed.
Consumers want diamond jewellery, whether it’s an engagement ring or any other piece, that is free from conflict diamonds, ideally made through sustainable mining practices and has a provable source provenance.
Diamond sales and the jewellery market will continue to adapt throughout 2022, and these trends will continue to ensure its longevity.
James Sanders is an entrepreneur and MD of London Diamonds.
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