Ehud's case for pricing transparency in the diamond industry was made clear in the previous Insight blog. This means making every piece of information about a diamond available to consumers. To help demonstrate how this can be put into practice, Ehud shared his own diamond pricing model, which he used for decades to price both rough and polished diamonds. "Mercury Crystal Clear™ is an innovative methodology for valuing rough and polished diamonds, which I have been developing as principal of Mercury– a rough and polished diamond pricing consultancy", Ehud recounted in October 2015. "Mercury Crystal Clear™ is about making diamonds' value known and transparent, based on the conviction that diamond buyers today lack sufficient clarity about what they are paying for."
Pricing is at the heart of making the case for rarity of diamonds, which in turn is key for restoring consumer demand. Pricing, however, has also been the Achilles' heel of the diamond industry, especially in a context of increased consumer knowledge.
Ehud welcomed the generic diamond marketing campaigns that emphasized the rarity of diamonds. In July 2016, he wrote "The return of a relevant generic diamond marketing campaign is a blessing. 'Real is rare. A diamond is real' is a step forward to changing the current consumer mindset and is naturally inspired by 'A diamond is forever'". At the same time, Ehud realized that in the current market structure, allocating sufficient funds to invest in an impactful marketing initiative is not simple, and suggested a possible solution, "In view of our fragmented sector, diamond players should consider branding alliances to jointly invest in promoting diamonds".
A lot of work is required to create and sustain demand for polished diamonds. As in every industry, it is a task for product makers. Unlike other industries, it was a single producer that took it upon itself. But if De Beers relinquishes this task, who will market diamonds and diamond jewelry?
Ehud always believed that the diamond industry could change its course and generate renewed consumer interest in diamonds. Ehud envisaged three demand directions for polished diamonds, each fulfilling a certain need, each addressing different budgets, and each fitting different economic approaches to buying diamonds. In Ehud's words: "The future vision of diamond consumption should have three parts: The traditional market of diamond jewelry. With a popular price point and made from the cheaper part of diamond production, can compete with other gifts in the shops. The second is that of fine and high-end diamond jewelry. These niche market items are expertly designed and are fit for the bridal and the luxury sector. The third venue, and the one with a growing importance, is diamonds for wealth perseveration - a tool to store value. These diamonds will be bought and treated specifically for that purpose and with a new methodology that is based on the economy of rarity."
Ehud Laniado passed away on March 2, 2019. It is hard to digest this news from someone who made a lasting impression during his lifetime. Ehud's writings on the diamond industry over the years are reminiscent of his desire to share his thoughts on the diamond industry, which remain as relevant today as when first published. Over the last five years, Ehud often discussed the need for the diamond industry to act in unison to address some of its most pressing challenges. As a first step, there is the need to ask the right question, starting with what explains the decline in consumer demand.
It is with great sadness that we confirm the news that our founder, Ehud Arye Laniado passed away on Saturday, March 2, 2019. He was 65 years old.
Later this week, the Hong Kong International Diamond, Gem and Pearl Show will open in Hong Kong, signaling the start of another year heavily populated by trade fairs. In a month, Baselworld will take place. In four weeks between the close of the show in Hong Kong and the opening of the show in Basel, no less than four important, yet more regional, trade fairs will take place. Making the effort to attend a show also means considering the time out of the office, including the missed sales opportunities that being out of the office entails. Which raises a question: is it worthwhile? Attending trade fairs, especially as an exhibitor, is costly, and can run into $100,000. To cover the cost, revenues should cover the cost of goods, the cost of attending the fair plus any other sales-related expenses. Considering that in addition to the regular expenses and the loss of business back in the office while we are away, we need to add the trade fair-related expenses, meaning that we need to make a lot more sales than usual to make it worthwhile. How often does that happen? How does one poor trade fair impact the rest of our trade fair revenue?
Consider the following: diamond jewelry sales are not as good as they used to be. The decent margins wholesalers and retailers used to have on diamonds have shriveled. While luxury sales are growing, diamond jewelry sales are losing market share in the category. Consumers are losing interest in traditional diamond jewelry, opting instead for alternatives such as lab grown. Considering all this, my question to the industry is ‘what are we doing to turn this around?’
Prices of smaller goods, one carat and below, completed six months of price increases in January. Larger goods, however, which suffered from price declines late in 2018, continued to decline in January, according to the Mercury Diamond Global Tracker™ (MDGT™). The price changes were just shy of a single point for those that increased in price, while the declines were more dramatic. The continued price increases among rounds weighing up to 1 carat is a positive trend in the market, indicating a rise in demand among retailers. Furthermore, it provides relief for the long-embattled wholesale sector of the diamond pipeline.