Financial institutions are another key stakeholder in the diamond supply chain, which Ehud believed expected greater transparency from the diamond sector.
"Bank financing is the lifeblood of the industry. Without it, there would be no money for exploration or new store openings," Ehud stated in 2015. He also stressed the need to boost confidence in the diamond industry. This lack of confidence is evident in, for example, the decline in available bank financing over the past several years.
Beyond diamond players, Ehud explored other supply-side topics that have sparked debates over the years where he believed that similar to demand-side issues, greater transparency is central to address them. Lab-grown diamonds provide a good example.
While their emergence was accompanied by rising concerns across the industry, Ehud believed lab-grown diamonds can play a complementary role to that of natural diamonds, provided consumers gain a better understanding of the inherent value of natural diamonds.
As another possible way to solve the problem of fragmentation in the diamond sector beyond consolidation, Ehud encouraged the industry to explore strategic alliances.
Ehud explored possible methods of addressing the issue of fragmentation, drawing in part on lessons from other industries.
First among them was simply consolidation, whether natural or through mergers and acquisitions.
Delving further into the issue of fragmentation in the midstream (manufacturing) of the diamond sector covered in last week's post, Ehud said in August 2015, "The more we examine the facts, the clearer it becomes that the main problem faced by the diamond industry is that the midstream – the manufacturing sector of the diamond pipeline that mainly polishes diamonds – does not get its fair share of the pie."
In addition to improving pricing transparency, Ehud believed that the diamond industry should also tackle the other issues that have led to a decrease in trust in the sector as a whole.
Improving the pricing transparency of polished diamonds is the first part of the two main components of the Crystal Clear philosophy. The other part, driven by the first, is the ability to then determine the prices of rough diamonds.
The rationale that Ehud used here was that, ultimately, it is consumers who determine the price of a rough diamond based on how much they are willing to pay for its polished output.
The introduction of a transaction-based polished diamond price list is possible. The Mercury Diamond™ Price List which Ehud founded, provides wholesale polished diamond prices based on transaction prices in the wholesale market.
A key component of Mercury Crystal Clear™, the diamond pricing system which Ehud founded, is expanding consumer knowledge of diamond characteristics beyond the 4Cs (Carat, Color, Clarity and Cut) known to the ordinary buyer.
"The importance of a transparent and easily understood pricing system for diamonds cannot be stressed enough. For many years, the general press and many consumers have been stating that the misunderstood differences in diamond prices are a turn-off."
De Beers used to run and manage generic diamond marketing for the entire diamond industry, even though it was not a diamond polisher, jewellery maker or retailer. De Beers did this because it was the world’s largest rough diamond supplier, the source of more than 80% of the supply of goods.
Rough diamonds are selling if their price is correct. The conversation amongst Sightholders this week is that De Beers’ pricing of last week’s sight boxes has been a disappointment. Sightholders refused around 25% of their allocated boxes.
Man-made Diamonds, lab-made Diamonds, lab grown diamonds, synthetic diamonds and many other names have been given to what many consider to be a threat to the diamond industry. When referring to the matter it is almost as if people are asking, “to be or not to be?” I say: to be and to thrive.
The diamond market is quieter than hoped-for at the moment. Sales of polished diamonds in the run-up to Thanksgiving in the US proved disappointing and this has led to a decline in polished prices.
I believe increased transparency could change the future of the diamond industry. There are two main types of transparency now needed - pricing transparency and operational transparency.
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