|By Arabian Post Staff| Diamonds are losing their allure and prices are dropping below the levels that prevailed a decade ago. And diamond’s loss is mostly the gain of vacations, fancy handbags and high-tech gadgets.
Diamonds are now cheaper than they were in 2006, says a Bloomberg report quoting data from PolishedPrices.com. Over the same period, the price of luxury items like cars, shoes and fine foods have risen at above-inflation rates, according to a Forbes index.
Demand for luxury jewelry rose just 1.9 percent a year from 2004 to 2013, trailing high-end beauty products, tobacco and watches, according to De Beers’s 2014 Insight Report on industry trends.
According to Bloomberg, minie owners like De Beers — who helped dream up those successful marketing campaigns in years past — have been unable to prevent prices from dropping below where they were a decade ago, a sign the industry is failing to maintain the cachet of its brand.
Efforts by producers including De Beers and Alrosa PJSC to push prices higher in the past five years unraveled in 2015. Polishers who buy the raw gems and sell to wholesalers and retailers were unable to pass on the higher costs as consumers balked. A threat to boycott auctions of rough gems by buyers in India, where almost 90 percent of the stones are cut, ended with De Beers lowering prices 15 percent for the year and another 7 percent in January.
“Producers cannot simply just increase rough prices and expect consumers to pay more for diamond jewelry,” said Anish Aggarwal, a partner at industry consultant Gemdax in Antwerp. “Consumer demand cannot be taken for granted, even in mature markets and especially with millennials.”
Earlier generations were easier to influence.
De Beers’ monopoly on diamond supply in the 20th century meant money spent on persuading consumers to pay high-end prices for commodity minerals paid off in surging sales. The investment led in the 1940s to creation of the slogan “A diamond is forever,” and the industry heavily promoted the gems for engagement rings. Jewelers loaned pieces to celebrities like Monroe and 1944 best actress Oscar winner Jennifer Jones to create a buzz around the product as a luxury item.
The new millennium brought the end of the monopoly, meaning other suppliers were able to sell their gems piggybacking on De Beers’ advertising. The company cut its marketing budget in half to about $100 million a year through the 2000s.
De Beers is getting the message. On top of its global advertising spending, the company plowed tens of millions of dollars into a push to spur jewelry sales in the key U.S. and Chinese markets in 2015.
Last year’s creation of the Diamond Producers Association, bringing De Beers and Alrosa together with Rio Tinto Group, Dominion Diamond Corp., Lucara Diamond Corp., Petra Diamonds Ltd. and Gem Diamonds Ltd., seeks to revive the kind of industrywide advertising seen during the monopoly years.