The diamond industry is in its healthiest state in over a decade, but it will need to be proactive if it wants to maintain that progress.
There is a buoyancy about the diamond market that has surprised many at the halfway point of the year. Considering the struggles the industry has endured in the past decade, diamantaires aren’t necessarily used to the positive forces shaping the trade in 2021.
“Coming off a difficult last year, there’s no doubt the diamond industry performed better than most [industries],” says Paul Rowley, executive vice president of diamond trading at De Beers. “The market has shown remarkable resilience.”.
Not that the industry grew in 2020; growth was still negative year on year, with jewelry retail sales down by about 10% to 12%, according to De Beers estimates. But by most accounts, the diamond trade — along with the broader luxury sector — gained market share during the pandemic as consumers spent less on travel and had more discretionary dollars for buying gift items.
This year, the industry is already seeing strong growth. US jewelry sales surpassed pre-pandemic levels between March and May, according to Mastercard SpendingPulse. Revenue from the category was up 30% in March compared with the same month in 2019, followed by increases of 14% and 45% for April and May, respectively, the credit card research company reports. Diamond jewelry sales over those three months were 30% higher than in 2019 and were triple last year’s levels, according to estimates from the Natural Diamond Council (NDC).
China has similarly bounced back from the lows of the Covid-19 pandemic. Jeweler Chow Tai Fook registered its highest annual revenue and profit in seven years during the fiscal year that ended March 31. Sales in the second half were its strongest on record for any six-month period.
Such a robust retail recovery in both the US and China — the two largest markets for diamonds — “was probably better than we could have expected,” Rowley says. The rebound also stimulated demand for polished goods in the midstream — manufacturers and dealers — as jewelers needed to replenish inventory they’d sold.
On top of the sales growth, there has been a notable improvement in consumer sentiment toward diamonds, observes NDC CEO David Kellie, whose organization runs marketing campaigns to bolster the public’s desire for diamonds.
Millennials are heavily engaged with the product, he reports, pointing to social media and other digital metrics such as spontaneous Google searches. Indeed, the coronavirus forced the industry to invest in digital, setting a new normal for doing business, Kellie notes — though he says it still has a long way to go and needs to do a better job of converting the interest into sales.
In the midstream, steady trading and a positive mood defined the first half of the year. Yet there is still a debate over whether the force behind the recovery is a rise in demand, a shortage of supply, or a combination of the two.
Approximately 20% of supply made its way out of the system during the depths of the crisis, Rowley estimates. Manufacturers and dealers were able to diminish their inventory, selling online while freezing both rough buying and polished production for a relatively long time. Trading and manufacturing swiftly resumed as the spread of Covid-19 declined in the second half of 2020.