DeBeers is making positive moves but is it too late?


DeBeers is reacting to market pressures by reducing prices and production. According to Bloomberg, rough prices are falling by 9%. Rapaport News reports reductions over 10%. Last month DeBeers cut its yearly production goal to 29 million to 31 million carats from a target of 30 million to 32 million carats, a far cry from their earlier predictions of 34 million carats. This is in response to complaints by cutters that rough is priced too high to be profitable.

Had DeBeers been proactive about supporting diamond manufacturers a few months earlier this might be a strong move. Instead they held off until sightholders began refusing significant numbers of parcels before making an adjustment. They waited for that wake up call to take action but now it may be too late.

The diamond industry relies on the retail market. Sales of finished goods have been lagging due to a weak economy resulting in lower prices and less demand. Lower rough prices at the beginning of the year could have brought stronger sales in jewellery stores. But now, the economy worldwide is crashing. The plunging stock markets in China were mirrored in the US, decreasing consumer wealth in the two major markets for diamonds. It is human nature…when times are difficult luxury spending is the first place to cut back. Right now, diamonds are a hard sell at any price.

DeBeers, through their Forevermark brand, is taking steps to create demand at the retail level with an aggressive marketing campaign focused on the US and China.  Along with the reprise of the old standby of “A Diamond is Forever” they will be introducing a multi-channel holiday campaign to include digital platforms and is designed to impart both traditional and emotional components to boost seasonal sales. A good marketing program can be effective in driving sales and this one should tweak Baby-Boomer’s heartstrings. If the economy recovers by the time the holidays roll around there should be some positive results. If the economy still lags, sales will be weak.

While decreased rough prices and increased advertising is a step in the right direction, it may be a temporary bandage covering a severely wounded industry. A strong end to 2015 may not carry over into 2016. DeBeers needs to stop reacting and start being proactive.  They must find way to thwart problems before they surface instead of waiting until it is too late.

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