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The Case for Transparency – Culture

The Case for Transparency – Culture
For years, I’ve been advocating transparency in the diamond industry, specifically regarding price. The motivation was to elevate the industry by making it more easily understood to outsiders, such as consumers, investors, banks, and more. By describing the why, the how, and the impact on the creation of a possible wealth preservation asset, I attempted to explain the economic rationale behind transparency.
There is another aspect that should be touched upon in this context: how we change the framing of the discussion. Diamonds have been promoted to consumers as a symbol of love. This was a great way to approach a post WW2 consumer market, and establish diamonds as an item accessible to all, and not only to royalty and movie stars. Fast forward 70 years, and we are living in a very different society. We are far more affluent, with shorter distances and easier access to distant travel destinations. Postwar social mobility meant getting married, having children, establishing a career, and building some equity. Today, we have a different view of how to get ahead, one that shakes off the rush to get married, establish a career, have kids, and build equity.
A successful life in 2017 still includes building a relationship, but without necessarily getting married. With fewer weddings, a large driver to buy diamond jewelry shrinks in a noticeable way. With fewer and delayed weddings, there are fewer wedding anniversaries, and this causes a further dent in diamond jewelry buying. Delaying having children in turn delays many life occasion celebrations, and the purchasing of large presents (like diamond jewelry) to celebrate these occasions. Changes in the way careers are built, including frequent changes in job positions, can mean greater uncertainty in the workplace, which in turn decreases the tendency to spend on high-ticket items such as diamond jewelry. This change in the workplace also means a delay in building equity – so why buy a diamond? University tuition debt is rising at an alarming rate, which casts a heavy shadow on the first ten years of career building. In fact, discretionary expenditures are being funneled in other directions, at the expense of buying a house, a second house and, yes, diamond jewelry.
However, we must admit that the picture is a little more complex than this. It’s not only that the economic situation is changing: culture is changing too. Perceptions of what we need in life are changing. The things that are important to us today are different to those that were important to our grandparents in the postwar era. Although the focus of the diamond proposition was always emotional, if you take a look at negative sentiments about diamonds, they are largely focused on value: first that diamond prices are inflated, and second that they don’t maintain their value. Trying to battle wide-ranging social norms is not an option for the diamond industry. What we can change is the perception of diamonds, specifically diamonds of great value.
This is where price transparency comes into play. It is of paramount importance to understand that consumers are smart, and to treat them accordingly. We must provide them with the ability to both consider the data quickly, without diving too deep into it, but at the same time to give them the option to consider data about individual diamonds at great depth. There is a reason for the double option. True, most consumers won’t dive deep into the data, but if they see that only limited information is made available, they will feel that information has been hidden from them. Knowing that there are additional, easily available data provides peace of mind. Everyone wants to know that they are treated with respect and dignity, as serious and intelligent consumers. Opening ourselves up makes an important contribution to addressing these expectations. Consider what has happened in other industries. Taxi services, for example. We all stood and waited in line for a taxi, sometimes for long periods, sometimes only to see a cab drive by and not stop for whatever frustrating reason. We have all suspected at some point that the driver is taking us on a roundabout route to push up the cost of the fare. We may have run into drivers who didn’t clean their cabs, or who had one of many other issues. Along came Gett, Uber, Lyft and others, and addressed these concerns. We know when their cars are about to arrive, that they’ll take the most efficient route, that the cars are clean, etc. These companies have simplified the process, and built multibillion-dollar business by doing so.
Now consider lab-grown goods. Aren’t the companies producing them trying to do the same to the diamond industry? Taxi drivers battled the entry of Uber et al to their markets, but in the markets in which the new companies entered, traditional taxi service became better. If there is a lesson for us, it is that unless we make the change, the change maybe be forced upon us. We may find that we need to improve our game anyway – and that is if we are lucky. We may eventually attempt to improve our game, but find that we have responded too late, and loose out to the competition. Look at what happened to the natural pearl industry. They are small, price is largely dictated by the cultured pearl industry, and most consumers have no idea that there is even a difference. This is a fate that we must avoid at all costs if we want to thrive.
Opening up to consumers, addressing their concerns, providing them with the information they want when they want it, are the basics for consumer business today. This is especially true in the US and Europe, but it is becoming a demand in other places as well. That is why I’m suggesting the industry makes a change now, before it is too late. And that is why I developed a price list based on transaction prices, the Mercury Diamond™ Price List. It provides not only wholesale polished diamond prices, but a basis for retail prices as well. Why a basis? Because all along the diamond pipeline we add value to diamonds. Retailers included. Therefore, each retailer can choose to sell their diamond jewelry at a price appropriate to them – because of location, trust, brand, service, availability, design, jewelry materials, etc. With diamond as a component in jewelry, we should not have any fears about consumers knowing wholesale prices. After all, they know wholesale prices of gold, and are not surprised to find out that they are paying a higher price per ounce of gold than what it is trading for. Consumers know they are paying for all these extras – service, brand, workmanship, design, overhead, and more.
Because diamonds are usually the most expensive component of a jewelry item, we should provide consumers with the ability to assess, analyze and understand what the value of the diamond in question is prior to making a purchase. This way, if they want to understand what it may cost to replace the diamond with a different one, know what the replacement value of a given diamond is, upgrade or simply sell the diamond at a later date, they have all the information on hand, and are empowered by it. Transparency of prices provides a platform to make an informed decision on how much to pay for a diamond, to understand what the cost of the added value is, and to become aware of the possibility of losing much of the added value when selling the diamond on the secondary market. The knowledge that you may lose some 30 percent of the retail markup is not necessarily a deterrent. Quite the contrary. People consider the resale value of a car before purchasing one, and take it into consideration. I believe that consumers who possess the knowledge, and understand the retail markup, may even improve diamond jewelry sales, because they will give new life to a secondary market where “used” diamonds are traded. Proving this point, De Beers launched a recycled diamond business. a few years ago. They now buy diamonds from consumers both directly and indirectly.
The International Institute of Diamond Valuation (IIDV) launched in the US in 2016 to provide a diamond jewelry reselling solution for both retailers and consumers. IIDV intends to provide an improved consumer experience by offering attractive prices, as well as greater transparency in the reselling process. In doing so, they will enable retailers to offer their customers a reselling service that complements their own activities, helping to maintain customer relationships, support repeat business, and drive incremental store traffic. IIDV says that through retailers, they are offering customers a reselling solution for all diamonds, regardless of value.
So what is the Mercury Diamond™ Price List? Read this article and learn about it in depth. In short, it is a price tool based on transaction prices. We at Mercury Diamond™ have system that collects transaction prices from a wide range of manufacturers, traders, and retailers. These transactions are backed up by continual market research, which double checks, verifies and completes the transaction data. We cover more than 18,000 polished diamond categories across the 4Cs, covering polished diamonds weighing up to 30 carats, clarities ranging from Flawless to I3, in colors from D to P in all shapes.
We provide the current price for a top stone without any irregularities, and then provide a table of irregularities that shows the discounts or premiums of each irregularity, so that the exact current price of any particular diamond can be discovered easily. Finally, to provide an added layer of confidence, the pricing system was reviewed and validated by one of the Big Four accounting firms, which continues to audit the price list monthly. Beyond informing consumers, bankers or investors, there are many internal benefits of using the price list. By inputting their manufacturing costs, diamond polishers can also reverse engineer to calculate the cost of rough diamonds.
We are currently publishing the price list monthly, on the tenth of every month. It is also available in the form of a ticker. We hope that you will consider this important alternative, which has the potential to contribute to a crucial change in the consumer market. Please download the list and test it. We provide it to you with the hope that you will consider using it regularly.
As for consumers, they are the foundation of our business. Without them we have no business, and therefore we must cater to them. That means addressing their apprehensions about buying diamond jewelry, and understanding what the obstacles are in feeling comfortable buying diamonds. We must press forward on making the changes that remove these obstacles. That is key to running a successful business.
 
    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.  
Technology in the Diamond Industry: Manufacturing
March 2017 Market Report

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