| Pitch to diamond consumer may get rewrite |
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| Author: www.nationaljewelernetwork.com / By Victoria Gomelsky
7/19/2009 3:30:22 PM |
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| This "Byzantium" diamond pendant by Jewellery Theatre in Moscow might best be pitched as a modern classic, diamond marketing experts say. |
| Las Vegas--Jewelers who arrived in Las Vegas at the beginning of last month expecting to see a bloodbath were disappointed.
Business was spotty, but based on the trade's exceedingly low expectations, the Couture and JCK shows--held at the Wynn and the Sands Expo Convention Center, respectively--were deemed a success.
Now for the bad news: Issues of cash and credit (or, more accurately, the lack thereof) continue to plague the global diamond trade. Case in point: Upscale diamond designer Michael Beaudry filed for Chapter 11 bankruptcy protection just days after participating in the Couture show.
If analysts are to be believed, he won't be the last to do so. Cutting centers, in particular, have been hard hit by the sagging economy, India chief among them. That's due in large part to the nature of Indian goods. Because so much of the country's diamond production is geared toward fashion jewelry and not bridal (the only category that's holding up in these rocky times), the Indians have been forced to lay off scores of workers. Those familiar with the market predict that as much as 25 percent of the Indian diamond manufacturing industry will not survive the crisis.
It's becoming clear that Mumbai's diminished diamond workforce might be just one of numerous changes wrought by the great recession. The reality is, when an economic recovery happens, jewelers will find an entirely new type of diamond consumer and an altered industry.
Loosening the pipeline
"The people who are not ready to respond to change are the ones who are [having difficulties] now," Anil Shah, chief executive officer of Venus Jewel, said during a visit to New York following an appearance at the American Gem Society Conclave. The trip marked the first time in six years he'd made the journey from Mumbai to America, itself a telling sign.
"When we found the market was not moving, we reduced polished prices by 30 percent in December and January," he said. "We have to be with the market."
By Shah's account, the strategy allowed the Venus factory in Surat to keep every single one of its 1,500 workers gainfully employed.
"We are the only factory, not [just] in India I think, in the world, that is working 100 percent as usual," Shah said. "We do not believe in the philosophy of hire and fire."
Employees at De Beers, along with those at other producers, have not been so fortunate. In April, the miner confirmed that it cut about 25 percent of its United Kingdom staff, or approximately 100 positions, in the Forevermark, Diamond Trading Co. and De Beers Group functions.
Crucially, De Beers also cut production, placing its entire Botswana operation on hiatus for 50 days beginning in February. On April 15, the mines at Jwaneng, Orapa and Letlhakane opened back up for business, leaving the fourth and smallest mine, Damtshaa, shuttered for the remainder of the year.
"A retailer might think, 'How does that help me?,' and the key thing is that it provides confidence and reinforces the value of diamonds in their inventory," Stephen Lussier, chairman of De Beers Botswana, says.
The tactic seems to have worked. As of early April, diamond inventories have reportedly come unglued, with everyone from the Gemological Institute of America to diamond manufacturers pointing to small but encouraging bumps in business.
"We'd all like to think we hit bottom," says Ronnie Vanderlinden, principal of Diamex Inc. and secretary general of the International Diamond Manufacturers Association. "Now we have to make our way up."
Clawing back the profits that were lost to the recession will require more than just hard work. Many stakeholders in the diamond business insist that what's needed is a brand new marketing regime that acknowledges the post-recession consumer mentality.
"A lot of diamond people are having an identity crisis," Rapaport Group Chairman Martin Rapaport says. "The role, relevance and value of diamonds are being questioned by a new generation of consumers."
Lussier believes the best way to promote diamond sales in the future is to position diamonds as gifts of love and items of enduring value.
"Unlike many things you buy that will become disposable--even a Mercedes eventually becomes worthless--a diamond lasts forever," Lussier says. "It's about finding new ways to get that across, rather than how glamorous it is or how impressed everyone will be."
Incidentally, Lussier says De Beers would be "supportive" of promoting larger, special diamonds as investment vehicles if the industry could use that angle to create new demand.
Core values, core staples
The most obvious beneficiaries of the enduring value message are diamond jewelry classics such as studs, solitaires and pendants, so expect a big promotional push around these types of items come fall, when the DTC launches its fourth-quarter initiative, which Lussier says will "firmly tap into the gift-of-love sentiment."
Non-gifts of love, on the other hand, have been left out in the cold.
"It's really hard for more fashion-forward designers to find their audience right now," says Sally Morrison, director of the Diamond Information Center. "The core staples will be important."
No retailer needs to be reminded that fashion jewelry has taken it on the chin this year. One way to transcend consumers' aversion to anything "trendy," Morrison suggests, is to reposition the more fashionable but still familiar diamond jewels in your possession as "modern classics." She cites micro-pavé pieces, diamond hoops, three-stone and Journey jewelry as contenders.
"It has to be telegraphed to consumers that investing in diamond jewelry will last forever," she says. "It's another part of that 'fewer, better things' idea."
Retailers might also borrow a page from luxury retailer LVMH Moet Hennessy Louis Vuitton, one of the few companies to actually see an uptick in revenues this year, driven largely by the iconic Louis Vuitton brand.
"They focused back to key basic product lines," Lussier says of Louis Vuitton. "They put a real effort into sales training to make sure their people understand the new consumer mood. They articulate product attributes and product value rather than counting on the brand to do the work for them."
The shift away from the intangible to the tangible, from experiential retailing to good old-fashioned products, reflects another truism of the post-recession mentality: Generic products that are well-made and fairly priced are triumphing over their branded, premium-priced counterparts. Even consumers who still consider themselves affluent realize they can't afford to waste money on well-packaged but insubstantial goods. Bells and whistles are nice, but consumers today see right through them.
"They need to be given a reason to shop," says Greg Furman, founder and chairman of the Luxury Marketing Council in New York. "They need to be engaged, to be courted, almost in a traditional, medieval, courtier sense. Marketing initiatives need to be directed to court them. That's a key part of the strategy for luxury brands."
Amid signs that the economy has, indeed, made a turnaround, the sell promises to get easier. Tom Bodenburg, chief economist at Unity Marketing in Stevens, Pa., predicts "an uptick in luxury consumer spending once the recession has played its course, as some affluents will relieve pent-up demand for luxury goods."
The latest industry indicators suggest this might already be happening. Rapaport reports that prices are stabilizing, confidence is improving, rough-diamond prices are increasing and demand for bridal goods under a carat remains strong.
Even the Indians seem to be getting back on track, he says--all of which bodes well for the all-important fourth quarter and every quarter thereafter.
"In the long run, diamonds are going to become increasingly rare," Lussier says. "They are precious and in the decade ahead, there will be more of a focus on their rarity and value, which creates some interesting opportunities for couture jewelers." |
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