The overarching theme in major presentations for the diamond and jewelry industry during the JCK Las Vegas Show in June is that times are changing and how we adapt to these changes will determine our success. The following are insights gleamed from these presentations.
In his annual State of the Diamond Industry address at JCK, Martin Rapaport gave his take on where the diamond market is at and where it’s likely going, with advice for jewelers on how to navigate through the challenges to succeed. The chairman of Rapaport Group and founder of Rapaport Diamond
Report has a positive outlook for U.S. diamond demand, but only if the trade proactively embraces change and meets the emotional and social demands of a rapidly growing consumer base. During his presentation, Rapaport discussed the radical changes he sees in internet technology, the political and economic environment, and the oversight and transparency of the industry. “The only thing consistent is change,” he said, noting that the rate of change in these areas is rapid and how we adapt to it will be critical.
The diamond and jewelry industry is coming under extreme pressure from internet technology that is disrupting the supply chain and the way consumers learn about and buy products. It’s cutting out profit centers, and every stage of the supply chain is going direct to consumers.
“Extreme price and availability transparency in the internet age challenges profitability,” he explained. “We must identify and segment our added value propositions to remain profitable. If we do not change, innovative technology will push us out of business.”
Customizable, experiential, and extreme customer service are important to consumers, particularly Millennials. He advocated for jewelers to hire and empower more young people, especially women who have a passion for jewelry.
“We beat ourselves up as an industry that people aren’t buying diamonds, but they are. They’re just buying them in different ways.” — Neil Shah, Shah Luxury
In this digital age, the key steps to customer acquisition will be thought leadership, market segmentation, and engagement marketing. “The challenge, opportunity, and money is in customer acquisition,” he said. “Sales is a byproduct.”
Embracing new communications technology; being innovative in how you meet, help, and sell to customers; and targeting groups will help jewelers identify “value creation opportunities.” “We live in a multi-channel communication world,” emphasized Rapaport. “Use the right channels to communicate the right products to the right people at the right times.”
He recommended that jewelers evolve from price and product competition to online communication competition. “Use social media to authentically communicate your identity. Communicate who you are and how you can help people get what they want. Don’t be a product pusher.”
The most important forces impacting the global diamond trade over the next few years will be political. Rapaport expects significant changes in U.S. tax regulations, international trade policy, and government compliance requirements. He told jewelers that if they did not understand the new political forces and their objectives, they would not understand the diamond business.
Rapaport expects a focus on U.S. jobs, a $1 trillion fiscal stimulus, and an overhaul of U.S. tax policy. He thinks it’s likely that the United States will experience significant growth and increased demand for jewelry if the new economic incentives suggested by the President and Congress are implemented.
“The challenge, opportunity, and money is in customer acquisition. Sales is a byproduct.” – — Martin Rapaport
According to Rapaport, the diamond trade is under pressure to increase oversight and transparency in the diamond supply chain. Part of the reason behind this is because terrorism is becoming more common. “Governments believe that controlling the flow of money and valuable commodities is an important weapon against terrorism. The diamond trade is coming under increasing scrutiny regarding implementation of AML [Anti-Money Laundering] and CTF [Counter Terrorism Financing Act] regulations. The Kimberley Process does not provide AML or CTF compliance.”
Responsible members of the diamond trade will need to upgrade their compliance environment. “The idea is that all of us, from rough buyers to consumers, are responsible for what we buy and sell,” Rapaport explained. “Purchasing power requires responsibility to ensure legitimacy of our products.”
Amping up its diamond messaging, the Diamond Producers Association (DPA) unveiled its “Real is Rare” campaign for the fourth quarter at a symposium at JCK, hosted by JCK and The Plumb Club.
With a $57 million budget, the DPA will fund consumer advertising primarily in the U.S. market, as well as expand the campaign into India and China. Building on its launch last October with two video love stories, the DPA is rolling out new linear and digital videos in the fourth quarter. Through December, new print ads will run in a dozen lifestyle magazines and across digital platforms. The ads are available for retailers on DPA’s website. The campaign is also being featured on social media as well as in point-of-sale and training materials.
Showcasing diamonds as symbols of authentic connections and commitments, DPA’s latest campaign features real couples revealing stolen moments of tenderness where diamond jewelry is the obvious gift of love. The aim is to broaden the emotional territory for diamond moments for purchase, said Deborah Marquardt, DPA chief marketing officer.
“While our long-term plan will reflect stories around growing areas of the market like self-purchase and family gifting, we started with love and commitment because they represent the biggest retail opportunity,” she explained. “The objective is to link diamonds to the emotion versus the ritual. The couples are in love and committed, but their status is left ambiguous. This approach allows us to speak to committed couples planning to wed and those who are not.”
DPA research cites that about 30 percent of consumers aged 17-37 are married, 40 percent fewer than Baby Boomers at the same age. One in five say they don’t intend to wed at all, and those who do are marrying later. However, Marquardt also said that data and consumer behavior suggest Millennials do value diamonds. DeBeers’ 2016 Diamond Insight Report cited the Millennial share of diamond jewelry sales in the U.S. at 41 percent, greater than their 27 percent share of the population.
Neil Shah of Shah Luxury in New York City thinks DPA is making progress toward getting the right messaging. “We beat ourselves up as an industry that people aren’t buying diamonds, but they are. They’re just buying them in different ways,” he said.
In profiling Millennials, the challenge is that there’s no single identity for this generation. But Marquardt noted that what jewelers have going for them is that diamonds are already a social media star. If Facebook and Instagram have proven anything, it’s that the engagement ring photo is king.
Marquardt cited research that diamond content on social media works best when including love sentiments; facts, history, lore; quotes, especially about diamonds; celebrities; pets; and food. Millennials set a high bar for marketers because they’re not passive and receptive. Instead, they’re mobile, multiplatform storytellers and creators. “Connecting with this generation means speaking in stories and writing in pictures. Show stories they can see themselves in, adapt, and re-tell.”