A few years ago, during a trade show, I bumped into a diamond trader I know who presented me with his new business card. On one side of it, the card had the expected contact details of his new diamond venture, but the other side held a surprise – the name and address of a fast food place. The trader smiled when he told me that he always wanted to open such a place, and then delivered the punch line: “And the margins…” He didn’t have to add anything else. Because of the low margins in the industry, many traders invest in other businesses as a way to hedge and protect their income. The food business is not a common area for investment; real estate, currencies and high tech are far more common among diamond traders.
But when businesses seek to develop, they usually consider options that widen and extend their offerings. A decade ago, De Beers encouraged their clients to vertically integrate, extending their operations to jewelry manufacturing, retailing, etc. Of course, it did not mean to expand into lab-made diamonds, blasphemous at best, if not simply destructive to the industry.
A decade has passed and much has changed since. De Beers today speaks simply of adding value, not necessarily through vertical integration and traders are doing everything in their power to increase their margins. It may feel at times like a dark, fruitless battle, requiring tenacity, foresight, financing and a decent amount of luck.
British biologist Peter Medawar, winner of a Nobel Prize in Medicine, once said, “The human mind treats a new idea the way the body treats a strange protein – it rejects it.” That sums up the way lab-made goods are regarded in the industry. At least openly.
Diamantaires are a breed of their own, imaginative, resourceful and bold. You really cannot blame diamond manufacturers for letting their imagination run wild when faced with the prospects of demand for the product that is derogatorily called “synthetics.”
In all honesty, the possibilities are very appealing. It’s complementary to their product offering, they have the necessary know-how to polish and manage them, selling lab-made goods to jewelry manufacturers is not very different from selling natural diamonds, and the margins and financial structure is as clear as an expertly polished D/FL diamond. All they need to do is dip their toe in the cold dark water of brief experimentation and off they go.
All traders concerned about the future of their business must at least consider integrating lab-made goods into their offerings; it’s practically a no-brainer. They are a legitimate product, a good offering for lower-end merchandise, bundling and teaming up is asked for and addressing environmental issues is a must.
What is to prevent De Beers from marketing its very high quality products created by Element 6? With a growing market and opportunity out there, what would hold them back from venturing into the field?
The stage is set for major promotions of lab-made jewelry. The secret is strict disclosure, very separate market positioning, great design and proper financing.