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Las Vegas 2019: Guts without Glory

Las Vegas 2019: Guts without Glory - Edahn Golan

When hit, we instinctively flinch. Close our eyes for a moment, crunch, and maybe turn sideways a little. But in a fight, that is the wrong thing to do. You’ll get hit, suffer and lose. Guts without glory. Every boxer knows that when a fist is heading in your direction, the smart thing to do is hit right back. It throws off your opponent, who is usually pretty open at that point, and this has a great psychological impact.

In a fight, your goal is more than to remain standing. You want to win. No matter what, even if the cost is an occasional blow. To win, you may need to suffer some pain, so hit back, don’t stop attacking, don’t flinch.

The diamond industry used to be a prize winner. It was young, feisty, fast, hungry, well financed, and had the ultimate sponsor. But at more than 100 years old, it’s a little tired, has less energy, bouncing back is tougher, the slower response time does not allow it  to hit back when a blow is sent in its direction.

Is the diamond industry an aging fighter losing its stand? A few recent events, including the just concluded trade shows in Las Vegas, may provide an answer.

Las Vegas Show Was Mixed

Nearly across the board, diamond traders reported slower sales compared to last year. They arrived with very low expectations, but even those that were positively surprised by the volume of activity had to admit to limited sales.

Diamond traders reported slower sales. Yet branded diamonds were in better demand than their non-branded counterparts.
Sales of caraters and below in typical commercial American market goods were the better selling items, though prices were reduced to generate business.

Large goods, 10 carats and above, continue to suffer, and the decline in prices is not just ongoing. Their prices sank more than usual.

In between these two extremes, branded goods were in somewhat better demand than their non-branded counterparts, signifying the rising importance of provenance, name and the promise of higher quality that a good brand knows to provide.

For jewelry, the story was different. Demand for lower cost jewelry was good and business was brisk. At the other end, high-end jewelry did very well, as those exhibiting at Couture can attest. The issue was with items retailing for $1,000-$5,000. Here, exhibitors reported a mix of demand with no clear favorite.

Diamond-set, dog-shaped, gold rings at JCK 2019.
It Was a Dog Day for the Diamond Trade
Lab-Grown Are a Different Story

The young fighter in the ring is the upcoming lab-grown (well, factory-grown, really) goods. Demand was strong across the board. They also raised a lot of interest. In their short history, they have been mainly sought after by retailers who use larger LGDs as center stones for in-store setting.

Low cost jewelry did well and high-end jewelry did very well. The issue was with mid-range items retailing for $1,000-$5,000.
At JCK this year, specialty jewelry retailers showed a lot of interest in LGD melee. And they bought a large amount of it. The reason is the growing trend of employing bench jewelers at their shops. Independents realize that being able to provide custom work is a great way to offer differentiation. Having a small stock of low-cost small goods is needed for such an offering.

Guts without Glory is the Bigger Picture

Diamond traders are natural born fighters. You can’t be a trader without an instinct to go for the kill. Without it, you are weeded out pretty quickly. Clearly, traders have guts.

Glory is a very different story. Glory demands more than character. For glory, we need the right story at the right time. Sometimes, it’s pure serendipity. Often a smart player builds it over time. It’s usually about winning. Yet a lot hinges on framing the narrative.

For diamond traders, its guts without glory. They fight, use their vast experience and years of knowledge; yet today, in the current market, it’s not enough. Some are tired, some are less focused, some forgot how to frame the narrative, others have lost the killer instinct. Yet most of all, the diamond trade is a little too wrinkled and battered. It is simply not as handsome, and does not ooze bright new promise like the fresh new contender in the ring.  

The new kid is feisty, hungry, and has successfully framed the narrative to their advantage. The leadership position is up for grabs.

A Loss of Confidence in the Inventory

In practice, many diamond traders and manufacturers have entered the LGD arena. This at a time when their inventory has hit a high, prices are on a multi-year decline, the banks are not coming to their rescue, and profitability remains low. In addition, manufacturers feel that miners are not adjusting prices down in time and that generic marketing is not as productive as they wish.

Diamond traders seem to have lost confidence in their inventory. It indicates a lack of hope in the future.
Above it all is the desire to sell the polished diamonds they have, and they are not rushing to replace them. They reduce prices to generate cash flow or as part of a timed process to leave the industry all together. They seem to have lost confidence in their inventory, as one astute trader pointed out. And that is the saddest part. It indicates a lack of hope in the future of polished diamonds as we know it today – at least in the short term.

Looking Ahead

The diamond industry needs to leap into the fight with fire in its eyes and determination in its guts. It’s taking the blows anyway, so it might as well rise to the occasion. If it won’t, it will lose for sure. The industry needs to win back support for the fight to result in a win. It needs to win over consumers for sure, and bankers as well. Retailers are starting to lose their faith in diamonds too, and it’s very important to turn that around ASAP. Without the backing of specialty retailers, there is no way to win back consumers.

Most importantly, the diamond industry needs to regain its belief that it can turn the corner. No one ever won a fight without believing in themselves.

The Golan Diamond Market Report - Q3 2019
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Comments 6
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      Author
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      Author

      Thank you. The natural diamond midstream is finding that LGD is getting the kind of favorable press that naturals used to have. To regain its standing, the natural diamond sector requires a shift in the way it thinks.

  1. I love Edan’ articles. I think he is one of the smartest analysts in the business. However I have to disagree with him on why the diamond industry is in trouble. People blame LGD, Millenials, innovation , lack of Advertising, Origin of diamonds, Financing.. BLAH BLAH. There is only one thing to blame ONLINE E-TAILERS. People like myself refuse to buy diamonds for stock because, when I quote a price, client tells me they found it 20% cheaper on Blue Nile. I tell them a story, I have spent over 300K in renovations, I have FB page, Instagram, and pinterest. I pay over 1000/ month to have SEO optimize my web page. ALL OF THAT DOESNT WORK.. The clients now show up with Smartphones and compare prices during my phone presentation. STOP THINKING THAT Blue Nile it innovation and technology. ITS A MARKET DISRUPTOR… SIGHTHOLDERS should stop sending their feeds to ONLINE GUYS or GIVE people who outright buy lower prices than BLUENILE or JAMES ALLEN. Just in time inventory VS people who actually buy stock should have a bigger price difference than just 2%. That 2% is not enough for people to hold stock.

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      Author

      The arrival of online retailers has changed the retail landscape for sure. At the same time, diamond traders and B&M retailers must take into account that, some 20 years after the fact, online business is here to stay. The practical approach is to offer quality, branding, unique designs, and a story that allures consumers. Those are the components that allow larger margins.

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