There is a long-standing perception among diamond traders and jewelers — the more price information becomes available to consumers, the more difficult the emotional pitch becomes. Walking the halls of the recent Hong Kong show, or any of the international diamond bourses for that matter, one gets a sense that the trade is more adept at dealing in certificates than the actual diamonds.
“Look around, no one describes the beauty of the stone they are selling anymore,” one manufacturer’s marketing director lamented in Hong Kong. “There’s no mystery left. Everyone knows the price, including the consumer.”
It is true, transparency comes at a price. An informed consumer is able to compare prices, which ultimately results in lower retail profit margins, placing downward pressure on the rest of the trade.
In today’s Internet age, price comparisons are unavoidable. Consumers armed with a print out from an online search can walk into any brick-and-mortar store with a low estimate of what they are prepared to pay for their choice of diamond. Further standards set by third-party independent grading laboratories, along with the Rapaport Price List, have brought additional transparency to both the B2B and B2C markets.
Ensuring a level playing field across the diamond pipeline — including among consumers — is critical to maintaining confidence in the product and creating additional demand for diamonds. Along with price transparency, full disclosure regarding where the diamond has been sourced and, where possible, how it was processed, all contribute to the industry’s goal of establishing a fair, open and competitive market.
Grant it, diamond jewelers are caught between the need to communicate with their consumers in an honest manner and the risk that those same consumers will use the information to diminish the retailer’s profit margins.
But the idea that price transparency erodes the emotional appeal of the diamond is misguided. Rather, the market should be asking what the value of diamonds is as a deeply symbolic product, and what retailers are doing to differentiate their product.
Women value diamonds for the message it represents — the sustainability of their promised relationship — regardless of price. Flowers are attractive, but they’re not sustainable. A diamond is forever — the bigger, the better, the stronger the illusion of the commitment. And that hasn’t changed as diamond markets have opened up.
That’s not to say that the industry should rest on its laurels. As this column has emphasized extensively before, the industry must raise its profile in the consumer space, particularly as it faces rising competition from other luxury products. Generic marketing is needed, but intense competitive branding within the industry would be more effective. For a jeweler that is confident in its brand, price doesn’t matter. The same is true for an industry secure in its message and product.
Of course, informed consumers are tougher customers. But that is the way of the world as people are armed with more information than before. The deeper question therefore is: Can retailers justify the price they are charging above the interdealer price by the added value they provide?
Jewelers need to recognize that with greater price transparency, their profits are increasingly defined by their added value. How they add value to their product is the biggest challenge facing individual businesses in the industry today and ultimately, it is how the diamond is sold that differentiates one retailer from the next.
Why don’t consumers just buy off the Internet? Well they do and increasingly will. But they go to stores to get the whole package offered by the jeweler – including their branding, service, knowledge and expertise, and full disclosure about the diamond product – be it price, grading and ethical guarantees. With the ever-rising competition from the web, it is up to jewelers to ensure that they provide that extra value.
Wholesalers and manufacturers can differentiate themselves in a similar way in their market space. But at the dealer level, they are forgiven for trading with a market-type mentality. Price matters in the market place and the perceived dealing in certificates reveals a dynamic diamond trade, rather than a so-called commoditized one. While one may not see the emotional connection or the descriptive sales pitch at the wholesale level, passion is in abundance, which is a far more important ingredient to the trade. In fact, an exaggerated emotional attachment to their goods may diminish that passion to sell, presenting them with additional risk.
If anything, price transparency brings extra confidence to the trade. Furthermore it is essential to attract additional avenues of demand such as from the financial and investment community, which has the potential to bring billions of dollars of finance and liquidity to the diamond market.
The industry can maintain its emotive message to raise demand through a dynamic price-driven trade. In fact, combining the two represents a tremendous opportunity for the diamond market. The ideas are not mutually exclusive. In the current difficult economic environment, consumers are increasingly looking for specific price points and products with a message. As it struggles to gain market share this coming holiday season, both price and emotion are what differentiate the diamond industry.