I’m not trying to be clever. The diamond market is actually very good AND very bad. And that holds true for both polished and rough. I haven’t seen such a bi-polar market since I’ve been in the business. Let me explain.
Decline of Generics
There is currently a gap of 20% between a fine 1 carat H SI1 3X and a poor H SI1 with an almost identical GIA report. The difference? Generic vs. Branded stone.
Generic stones are stones that do not fit into a branded program. This could be because of black inclusions or another negative feature that makes the brands stay away from the stone. These stones have a lower value, or are dropping daily. Why? Because the Internet is full of these diamonds. There are too many of them around, and they are competing with each other at cutthroat margins.
On the other hand, the fine brands, (Forevermark as an example), can’t seem to get enough of these goods, and the prices are very firm. Why? Because these goods are the top end of the spectrum, they are marketed correctly, do not appear on the Internet, and provide decent margins to jewelers who sell them. There may be a fine brand on the Internet, but in the US, it seems to be the exception, not the rule.
I recently read an article in a business magazine about valuating businesses. The point of the article was that a business is measured by how “Amazon-proof” the business is. If Amazon can take away your business tomorrow, it is worth a lot less than if you built a moat around it, protecting it from competitors, Internet or Brick and Mortar.
The rough market is also becoming segmented. Goods that find their way into programs are strong, while goods that end up as generics are weak.
Are successful jewelers still selling generics? Of course they are, but the trend line is becoming more obvious. Brands are beginning to rise, while generics are beginning to lose ground. To support this statement, you only have to look at what’s going on here on 47th Street, which is getting emptier by the day. Dealers that have invented or aligned themselves with brands are surviving; the old school generic dealers are fading very quickly.
Rise of Brands
I just came back from Forevermark Forum. Being an old-ish, jaded veteran diamantaire, I was not prepared to be blown away. But I was. Here is a relatively new brand that managed to make itself “Amazon proof”.
Jeweler after jeweler told me that Forevermark saved their business, and that it is the perfect answer to the Internet competitors.
Forevermark is not the only successful brand, but it does prove that retail can survive and thrive in the Age of Amazon, and that jewelers can build that moat around their business, and potentially thrive, if they reduce their footprint with generics. For many, that might be a tough sell. But, the market doesn’t lie, and it’s becoming increasingly important to differentiate and protect yourself in your marketplace. Finding a brand you can trust, and building a relationship with that brand, is equally as important. But, it can be done! And, when that happens, it will be a win-win for you and your customer.