News from All Diamond

Follow the latest insights shared by All Diamond in memory of Ehud Arye Laniado and access all articles written by Ehud Arye Laniado

Creating Crystal Clear Value for Diamonds

Creating Crystal Clear Value for Diamonds

The Mercury Crystal Clear™ value for diamonds that I developed as chairman of Mercury Diamond, a diamond pricing consultancy, is focused on making the value of diamonds crystal clear and transparent. It is based on the conviction that diamond buyers today lack sufficient clarity about what they are buying and paying for in order to ensure that diamonds are also considered an asset.

Diamonds are associated with emotions and giving, yet they are also considered an expense. The Mercury Crystal Clear™ framework adds a strong rational approach to the emotional expression of love, thus transforming the concept that buying diamonds is an expense into a valuable asset which can be part of a wealth preservation plan, passed down to the next generation thus embodying both love and financial value.

The missing link for considering diamonds as a means for wealth preservation is the knowledge and the understanding of how to determine the price of a diamond and who determines that price.

Most people are familiar with the 4cs. The crucial element in obtaining an accurate valuation of a diamond and enjoying both the emotional effect and the knowledge that you have acquired a valuable, long lasting asset, is the realization that various irregularities exist in the process of evaluating the price and can create differences in value between two similarly graded diamonds with the same 4C characteristics.

Once this understanding is achieved, diamond buyers will be able to make an educated purchase and can better determine the price, which return can potentially contribute to their wealth preservation. It can also influence the accuracy of translating polished diamond prices into rough diamond prices as it should be in a well-functioning market

The Mercury Crystal Clear™ framework was developed with this deep economic understanding. Within the framework, I developed an irregularities table which enables buyers to have as much information as possible on the offered product.

Equipped with this information and knowledge diamond buyers will get the most accurate and transparent diamond prices available. This will help to regulate the prices of diamonds and to enable buyers to discern between different types of diamonds.

It is time for new ways

In the past diamonds were promoted in a world where luxury items were few and completely out of reach of most people. Starting in the 1940s, diamonds were sourced mainly from one company which created a fantastic marketing campaign that fit the era perfectly.

De Beers set and led the strategy from mining to marketing with the aim of generating sales while maintaining the value of diamonds. It did this by first gaining the public’s trust and then by encouraging purchases on an emotional basis. The mining giant was very successful with this strategy. One of the advantages of the campaign was the relative scarcity of other luxury goods in the consumer market.

Their campaign was appropriate for the time and did not discuss the diamond’s characteristics at all. Over the years, disclosure of information slowly expanded and in addition to size and shape, two more characteristics were brought to the consumer market: the modern color and clarity scale.

Those were necessary developments. They came as the times changed and the industry understood that adapting was necessary because people wanted to know more about what they bought; they asked more questions and the differences in price needed to be explained. The times continue to change. Today, access to luxury items is far greater, as are the number of brands. Consumers continue to ask for more information about what they buy and that includes provenance, issues relating to ethics, labor treatment and much more.

We cannot be conservative and must adapt to the changing market and consumer. We need a new message fit for the new era or we may miss our opportunity all together. We must change the perception that a diamond is only an expense for a jewelry item. Because of its rareness its value can appreciate, changing from an expense to the purchase of an asset!

We should share what we know about the diamonds with consumers – where they are from, what is the price impact of white inclusions versus black inclusions, the importance of the location of inclusions, and anything else they want or need to know about a diamond before making a purchase. The buying process must be as transparent and informative as possible.

Only if we take this approach, and roll with the times, we will regain consumer confidence in diamonds and their willingness to buy diamonds with their hard earned money. This is the starting point of getting them to buy diamonds not only as jewelry but also as a possible safe haven for a rainy day, a way to hedge against inflation and a way to spread risk. Part of this process, as I stated in the past, is to explain the inherent rarity of natural diamonds.

Imagine a safe deep under the surface of the planet. It takes a serious effort to bring it to the surface and crack it open and reach the diamonds inside it. But inside the safe there is an even deeper section, one that contains the most prized diamonds of all – top color, top clarity, 1 carat and larger. These goods are the rarest of them all, and they should be appreciated as such.

To create a new message, we need to come together as an industry, unite to create a new path forward, jointly and uniformly through every section of the industry. In the past each company specialized in a specific area and was active almost exclusively in that area. Today, without a clear custodian of the market, each company feels compelled to try other areas which leads to loss of energy, capital and human resources in the process. Unfortunately, the fragmentation is such that the public is hearing many different and contradictory messages which is potentially confusing and maybe even deterring them.

When a major supplier states that their branded diamonds are ethically sourced, what are they saying about diamonds that came out of the very same parcels, even polished at the same facilities by the same manufacturers, but sold without the branding? Isn’t this sending a confusing message?

In addition to the many grading labs, two new ones opened to the industry in recent months. Each has its own standards, and they don’t fully overlap resulting in different quality diamonds getting similar grading from different labs. This is very confusing to consumers.

The practical steps we need to take include, first, confronting current views of diamonds; that De Beers is a monopoly, a “syndicate” that controls the flow of diamonds and therefore their price. They are not! Many think that diamonds are mined in conflict and war ridden areas and are therefore all “blood diamonds,” but that is not true either. Do a quick search online and see how much negativity there is about diamonds, and hardly anything positive. What are we doing to change all that?

Why not form a single, unified set of standards for grading diamonds and eliminate more confusion and sources of mistrust? There are also several price lists, providing benchmark prices. They don’t reflect real, transaction prices of the goods in the market. At a time of growing transparency, shouldn’t we have an accurate list, one based on transaction prices? Consumers can easily find prices of houses, cars, perfumes and laptops, so why not diamonds? Such a list will increase confidence and serve as a basis for checking price appreciation at any time after buying a diamond.

 b2ap3_thumbnail_1_20160425-100548_1.png

After all, consumers don’t know that there can be a large difference between the list price of two diamonds graded to the same 4Cs?

Another point to take into account is the channel of sales. Are retail stores the only way to bring diamonds to the public? Is it optimal? Maybe for low-cost and price point items, but that is only part of the market.

In what other sector is a million, million and a half dollar item sold in store fronts or online? Can you imagine a person strolling into a store, spending a six- or seven-figure amount and then strolling out to get a latte across the street? Especially if the product lacks total transparency? Diamonds should be sold in a supportive environment, with clear regulations, easy access to every piece of information about the diamond and a host of data about past performance, explanations on advantages and disadvantages of each item.

Don’t we need to form the S&P or Moody’s of the diamond industry that, under regulation, will rate, recommend and standardize the assets we call diamonds? Imagine a system that adds to the standard 4C categories an extra layer that takes into account the grading certificate comments and irregularities, and provides a specific price for each possible combination. Wouldn’t that reflect consumer need for clarity more accurately?

I can go on about the different components, but suffice it to say that if we are to build a new message for today’s consumer, we need to create a new level of understanding of diamonds and provide a new framework for marketing them to consumers.

 

We need to offer a unified message that overcomes current consumer perceptions, transcends the industry’s fragmentation, and reposition diamonds. They should not be viewed as an expense, but as an asset. To do that we need to be far more transparent, give consumers every piece of information they are looking for, provide them with detailed price lists that are based on transactions, not general benchmarking, and reinforce the knowledge that diamonds are rare and go far beyond jewelry!

The views expressed here are solely those of the author in his private capacity. No one should act upon any opinion or information in this website without consulting a professional qualified adviser.

A Tour of the World’s Largest Diamonds, Part III
A Tour of the World’s Largest Diamonds, Part II

By accepting you will be accessing a service provided by a third-party external to https://www.ehudlaniado.com/home/

SUBSCRIBE TO NEWS BY ALL DIAMOND

ARTICLES TRENDING

The diamond industry pipeline starts with mining, then rough trading, manufacturing, jewelry setting and finally retailing. It may look like a short and efficient journey, however it is anything but t...
We have seen how the industry has undergone significant changes over the past 20 years and how smaller companies have emerged to play an increasingly important role in supplying rough diamonds to the ...
It might surprise people to know that there are only around 50 active diamond mines in the world. These mines never seem to be found on the outskirts of major cities. Instead, they are usually located...
When I discussed fancy brown diamonds in last week’s article, I stated that unlike other fancy color shades that are extremely rare in nature, brown diamonds are plentiful and therefore command much l...
In the last two decades, much has been said about an impending demand vs. supply imbalance in the diamond industry. Huge mines discovered over the past 40 years are nearly mined out, some argue, and n...
A major diamond rush, located in Lüderitz (in the former German colony of Deutsch-Südwestafrika - German South West Africa) is among Namibia’s most famous diamond sites. In 1907, the Germen railroad w...
When most people hear about diamond mining, they think of South Africa, where diamonds were discovered in 1866 in the Kimberley region. A 15-year-old boy discovered the now-famous 21.25-carat Eureka D...
Copyright © 2020 - ALL DIAMOND - In Memory of Ehud Arye Laniado - All Rights Reserved.   | Privacy Policy | Terms of Use