Brace for Change, The Year of Realignment Has Arrived

The outgoing year was clearly a particularly challenging one. It required diamond industry companies to reconsider their future and created an opportunity to pivot towards reinventing diamonds as a true luxury item. The coming year should be the year of realignment.

In 2024, the diamond industry, from producing countries to retailers, was rattled. Usually, this happens when two large external forces lead diamond consumer behavior behavior to change, specifically, to halt spending. However, the issues of 2024 were almost entirely a result of internal diamond industry miscalculations, and that is what’s driving an industry realignment.

A Wider Issue is No Excuse of Avoiding Realignment

The industry miscalculations included a disastrous assumption that China’s economy would bounce back, mishandling of the introduction of lab-grown diamonds that came to a head, and very poor marketing. These are in addition to longstanding issues such as a very fragmented retail marketplace in the most important consumer market – the US.

Natural diamonds are not alone. Luxury houses are reporting flat to double-digit losses for 2024 as a move away from luxury is slowly taking place around the world.

This is of little consolation if the losses are felt in your own pocket. Nor does it spare the need to draft an action plan to pull the industry up by its bootstraps. Yes, the entire industry should take part in the turnaround effort.

Jewelry is quite a different business than bags or perfumes. The desire for jewelry is deeply ingrained in our DNA. People were making and wearing jewelry before there was even a written language. That is to say, we practically need jewelry.

And yet, jewelry goes beyond diamonds. So while overall US jewelry sales grew in 2024, while diamond jewelry lingered behind.

There is What to Do

Let’s be clear: the solution, although tempting, is not to reduce price. On the contrary, this is a time for the industry to stand firm, especially in retail.

But here lies the problem. Very few manufacturers are also jewelry retailers. So, imposing a strict price strategy that blocks deep retail discounts or hanging signs that shout HOLIDAY SALE!!! is impossible.

Also, it’s not about imposing something upon retailers with the assumption that they don’t get it. At the very least, they understand consumers.

Another challenge for the midstream is to fully understand consumer demand. Most mistake their conversations with retailers are sufficient for understanding consumers. However, this is not the case. Luckily, while more midstream players are now trying to figure out consumers, not enough of them are.

To change this dynamic, consolidation needs to take place. A long-term vision must be drafted and implemented. Also, strategic financial commitments need to be made. Otherwise, managing the diamond supply chain will remain a nightmare.

Are We There Yet?

In the past year, there were a series of steps made towards a deep industry change, a realignment. First among them was Botswana’s decision to move forward and finalize the contracts with De Beers. At the Facets conference in November, President Boko emphasized the importance of their collaboration with De Beers. He said, “our partnership with De Beers continues to strengthen, with negotiations nearing completion.”

De Beers is taking its own steps. Among them are expanding marketing spend, accumulating inventory to not overburden the midstream or Botswana, and de facto reducing the number of rough diamond clients.

The client base reduction is part of a wider trend among manufacturers and retailers. Small manufacturers and retailers have sold out to larger ones, especially if they specialized in a niche. Other companies are going through a phased closure, slowly selling off their goods without any fanfare.

The result is that the largest companies are much larger and represent a growing share of industry activity.

Centers are not exempt from realignment, either. Long-term trends already underway include Antwerp and Dubai in constant evolution, while at least one center is gradually closing down because it did not adapt to the changing business environment. A longer-term realignment is the development of a new center in Botswana.

Botswana President Duma Boko at Facets 2024

Realignment for Repositioning

For the natural diamond industry to achieve its goals, it requires the repositioning of diamonds as a true luxury item: rare, well-designed, exceptionally made, and pricey. By targeting the client base to diamond connoisseurs and aficionados. Diamonds will once again become aspirational. And that requires a realignment.

To achieve the goal of becoming aspirational again, it has to reposition diamonds as a true luxury item: rare, well-designed, exceptionally made, and pricey. The target client base should be connoisseurs and aficionados. A realignment.

To achieve this goal will necessitate moderate realignment over time. Before raising prices, diamond jewelry workmanship and design must be at its very best. The jewelry must be legitimately of the highest quality to justify any price increase.

This will not come without a cost – one that includes further consolidation as well as increased investments in knowledge, tools, and marketing. The future requires us to change. Most importantly, we must keep an eye on and adapt to changes among consumers.

To build on the existing foundations requires a far deeper understanding of how to harness marketing to regenerate consumer demand. There are a whole series of mechanics that can enable this to happen. For example, using data and data analytics (pardon the plug) to find hidden niches, develop opportunities, and observe changes in consumers’ sentiments.

Here’s some good news: a growing group of companies in the industry that already understand the need to make a major shift have actively been moving ahead. These are large and small companies, some well-spoken of and others that are below the radar; some are even underappreciated. But they are the movers driving the most important realignment the diamond industry has undergone in a long time. Hopefully, they will pull the rest of the industry along to realign with them.

Wishing you a turnaround year in 2025.

For more details and specific data on the diamond industry’s realignment, please contact us.

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Photo: Gerrie van der Walt