This week, Eira Thomas, CEO of Lucara Diamond, owner of the Karowe mine in Botswana, sent an open letter to the diamond industry promoting Clara, the sales perform that Lucara purchased two years ago.
Here, Thomas talks about how she feels Clara could change the industry’s current sales model, Lucara’s deal to sell all its special stones to HB Group, and her larger view of the COVID-era diamond market.
JCK: Why did you send that open letter out?
Eira Thomas: It was about building awareness. There have been a number of comments from Alrosa and De Beers and big players about the need to modernize and change things. For us, it’s about how we are already there.
I think there is some confusion about what it means to modernize our industry. There is the one approach about digitalizing the existing sales paradigm. That is not what Clara is. We are completely transforming how we sell diamonds. This is the only platform that you can buy diamonds individually based on specific demand. There is significant value that can be unlocked by creating a more efficient supply chain.
COVID-19 is advancing this at a much quicker pace. The restrictions that everyone is dealing with, we have necessitated new ways of transacting and Clara enables that. This assists at a time when there are some real limitations to move around the world. People can order diamonds from their home, akin to ordering espresso pods for their coffee maker.
How does Clara help value?
If you think about the way the world works, we sell our diamonds in rough assortments and then we create buckets or parcels that you intend to receive bids on, or in the case of De Beers, you have a sight. The manufacturers take those diamonds back to their factory and then they scan them.
Many of those manufacturers can only use a portion of the parcel of they bought. And that is a significant source of inefficiency. What Clara says is, let’s scan all the diamonds up front [to determine their polished yield]. So the manufacturers are not buying rough, they are buying polished. Those manufacturers are telling us what they want to make: “We want 10 1 ct. round stones at a certain price.” We now have a blueprint. Clara will search through the rough inventory and find the perfect rough stone for the manufacturer.
Everything is done in a black box. Nobody sees each other’s bids. Clara will find the highest value order for any given order, or any given stone, and allocate diamonds based on specific requests. The real beauty is nobody has to move out of their comfort zone. If you put up an order and don’t win anything, you can choose to just wait until a stone comes along that fits your criteria.
Traditionally, producers have sold in assortments, bundling “more attractive” diamonds with “less attractive” ones. Why is this a better model?
That’s been a big learning for me. We all have the same perception, that there are more desirable diamonds and less desirable diamonds. Diamonds do all get consumed. Eventually, they get traded to the right person that actually has a distribution point for those diamonds. What about getting those diamonds to that point in step one and not having to go through 10 trades? Get them to the person that is doing something with them and maximize the value. There is no such thing as an undesirable diamond on Clara.
When you look at an assortment, there will be maybe 20% that the manufacturer doesn’t need. So the manufacturer submits an average bid. They are never actually putting their best foot forward. The producer is never getting the strongest bid, they will get an average bid that reflects the ability of that person to sell all the diamonds.
Clara’s customers are bidding on their niche. That is why the producers get more money at the end of the day. You are selling the diamond to the right buyer.
It’s about creating a stable marketplace that links together the rough and polished markets in a much more sustainable way. Obviously, the polished market moves around, and manufacturers can adjust their bids at any point.