Amplify the Message

There is a sense of urgency to promote natural diamonds this holiday season.
With market sentiment notably weak at the start of the fourth quarter, the industry has a glaring need to raise demand for diamond jewelry at the retail level. This would stimulate trading through the rest of the distribution chain, which has experienced heavy declines.

Natural diamonds have lost market share to synthetics, while the trade also faces headwinds from the slowdown in China and US consumer caution resulting from the rise in the cost of living.

It seems the industry has intensified its marketing efforts ahead of the US holiday season. De Beers is collaborating with Signet Jewelers to push natural diamonds, with the clock ticking ahead of its proposed third-quarter rollout. Importantly, their cooperation includes training Signet’s 20,000 sales personnel to talk up natural diamonds.

For its part, the Natural Diamond Council (NDC) has rolled out its “Real. Rare. Responsible” campaign and is partnering with several retail jewelers to use its assets in their promotions.

Considering the difficult state of the market, there’s a lot riding on these campaigns.

The improvement cannot be incremental. Demand needs to rise substantially to make the industry viable again after the losses experienced in the past two years. Otherwise, the trade will continue the downward path that has seen diamonds lose significant value over the past decade.

The marketing efforts of De Beers, the NDC, and their jeweler partners — aligning the message across different segments of the market — are encouraging. And the focus on retail is important given it was arguably at the sales counter that synthetics became entrenched in the consumer consciousness.

However, the aggressive approach will need to extend beyond the holiday season for the messaging to be truly effective. The industry’s engagement with consumers needs to be ongoing and incessant.

The diamond industry appears to have raised its marketing footprint ahead of the holiday season. De Beers and the Natural Diamond Council (NDC) have forged partnerships with various retail jewelers to amplify the virtues of natural diamonds.

The alliance between the major industry marketers and jewelers is an important development that has been lacking in previous campaigns. It aligns the trade’s messaging at the most vital stage of the diamond journey — the point of sale.

The natural-diamond industry has lost market share to synthetic diamonds, with jewelers skewing their message toward the more affordable product. Synthetics were an easier sale to budget-conscious customers and offered jewelers a higher profit margin that was too attractive to ignore.

Faced with plummeting demand, the mining companies — or at least De Beers — recognized they must act and aggressively push the virtues of their product. They’ve also acknowledged they can’t do this alone.

They found willing partners in the major retail jewelers that seem to have returned to favoring natural diamonds. It is likely that they expect retail prices of synthetics to decline in the long term, even if they haven’t yet done so despite the significant drop in wholesale prices. Ultimately, it’s in jewelers’ interest that natural diamonds maintain value and can be relied upon to uphold their dollar revenue.

Partners on Message

De Beers is collaborating with Signet Jewelers, the largest seller of jewelry in the US, “to highlight the unique attributes of natural diamonds to a new generation of US couples,” according to a joint statement announcing the partnership. The proposed program includes a campaign featuring online content, in-store experiences and targeted marketing messages to roll out in the third quarter, which, for retail, ends on October 31. The campaign had not yet been released as of this writing in the second week of October.

More importantly, De Beers will assist in training Signet’s 20,000 sales associates to help educate their customers on natural diamonds. It was at that level that synthetics became engrained in the consumer mindset. The natural-diamond trade will depend on its retail-sales personnel to reverse the trend. De Beers has forged similar partnerships with Chow Tai Fook in China and Tanishq in India, the largest jewelers in their respective markets.

The NDC — which is funded by several diamond-mining companies, though primarily De Beers — rolled out its “Real. Rare. Responsible” campaign, set in Canada’s Northwest Territories, extolling the values of natural diamonds.
Among the jewelers the NDC has co-opted to tap into the campaign in their preholiday marketing are Ben Bridge Jeweler, David Gardner’s Jewelers, Riddle’s Jewelry, R.F. Moeller Jeweler, Sissy’s Log Cabin, Cornell’s Jewelers, Brown & Co. Jewelers, Bijouterie Italienne, and Marquirette’s.

Midstream Pressure

These efforts are vital for the holiday season. However, considering the crisis facing the diamond industry, their impact needs to be long-lasting and significant.

Diamond market sentiment is weak as the fourth quarter begins. Polished prices continue to decline, with the RapNet Diamond Index (RAPI™) for 1-carat diamonds down 4.1% in September and by 21.6% since the beginning of the year (see Figure 1).

In the short term, the industry has tackled the imbalance by curbing supply.
Mining companies have canceled rough sales to allow manufacturers and dealers the opportunity to reduce polished-inventory levels, which remain historically high, as reflected in the number of diamonds listed on RapNet (see Figure 2).

The midstream is stuck with inventory that is difficult to move and is losing value in the current market environment.

Manufacturers have scaled down their rough purchases. India’s rough imports declined 14% year on year by value for January through August, with volumes down 11% (see Figure 3), according to the latest data by the Gem & Jewellery Export Promotion Council (GJEPC). There was a significant drop in July and August.

Manufacturers pulled back on buying rough as demand for their finished product fell at a steeper pace. Polished exports dropped 23% in dollar terms and by 16% by volume during the same eight-month period (see Figure 4). India’s trade of rough and polished have fallen below pre-Covid-19 levels.
The plight of the midstream highlights that the main challenge is a fall in demand rather than being a supply issue.

Somewhat Optimistic Retail

The industry continues to navigate a decline in demand caused by the slowdown in China, higher costs of living in the US that are squeezing consumer spending, and a loss of sales to synthetic diamonds.

There is some confidence for the US holiday season, as the outlook for the economy appears to have improved.

The University of Michigan’s Index of Consumer Sentiment rose 3.2% from August to a reading of 70.1 in September.

“While sentiment remains below its historical average in part due to frustration over high prices, consumers are fully aware that inflation has continued to slow,” noted Joanne Hsu, surveys of consumers director. “Sentiment appears to be building some momentum as consumers’ expectations for the economy brighten.”

The Federal Reserve echoed that reading when it cut interest rates by half a percentage point in September, its first downward revision in four years, according to JP Morgan. The Fed argued that economic activity has continued to expand at a solid pace, while inflation has made further progress toward its 2% goal, even if it “remains somewhat elevated.”

That has fueled some optimism for the holiday season.

Consulting company Deloitte predicted retail sales will increase 2.3% to 3.3% in the November-to-January period, driven by stronger e-commerce growth. Mastercard projected 3.2% growth from November through December, listing “affordable bling” among its outstanding growth segments.

Outlay on jewelry brands that are popular among Millennials and Gen Zs has grown significantly in recent years, “far outpacing spending on traditional brands, which tend to be more expensive,” Mastercard observed.

While that sentiment is encouraging, it is likely referring to labels that are not focused on natural diamonds, such as Pandora and Swarovski.

Still, retail jewelers are quietly optimistic for better returns in the final months of 2024. Signet Jewelers noted that same-store sales in its fashion segment had turned positive for July, August and September.

Ongoing Effort

The hope is that the marketing efforts of De Beers, the NDC and their retail partners will create momentum from these trends and prompt an improvement across the rest of the industry. An increase in diamond jewelry would stimulate polished trading and in turn raise demand for rough.

Yet considering the crisis facing the industry, the upsurge cannot be incremental.

The trade typically receives a short-term boost from holiday sales. Jewelers return to the market in January and February to replace sold inventory, and that tends to stimulate demand for polished and rough. The first-quarter spike was evident even in periods of lower demand over the past two years. However, this temporary rise was not enough to inspire growth for the rest of the year.

The market requires a significant increase in diamond-jewelry retail sales to have a sustainable impact that would uplift diamond dealers, manufacturers and miners. Therefore, the industry’s performance over the next few months should not be the only measure of the category-marketing campaigns’ strength.

The holiday season will be an important gauge of the effectiveness of the campaigns and collaborations, but these efforts should extend beyond that period to achieve long-lasting success. The goal is to reconnect consumers with the idea of natural diamonds, such that it broadens demand across all distribution channels. That will require an ongoing intensive effort and investment.

Main image: David Polak/Midjourney