Regal Imports News for NOVEMBER 2017
De Beers and Alrosa increased their rough diamond output or production by approximately fifteen percent so far this year. However, they have been forced to reduce rough diamond sales in order to slow down the decline in polished diamond prices. In October, Rapaport lowered his list prices in several categories under one carat. Sarine technologies, the largest supplier of diamond centric equipment, reported a 36% drop in revenue in the third quarter. Sarine attributes its poor performance to the diamond pipeline being over stocked causing more debt and less spending. Israel's polished diamond exports fell 12 percent in the first nine months of 2017. In an act of what I see as desperation, the Israeli Diamond Bourse is supporting a form of digital currency. This currency or digital investment is guaranteed or backed by loose polished diamonds.
De Beers continues to consolidate. Stephen Lussier CEO of De Beers Forevermark program makes his point, "Generic... marketing doesn't work now." I guess this means that generic diamond marketing is no longer a priority for De Beers. De Beers is venturing far away from their mining roots. They are supporting a fringe diamond investment scheme in Singapore. This new scheme sells diamonds in one hundred and two hundred thousand dollar denominations. The diamonds are housed in tamper resistant credit card cases and are identified and graded by the De Beers laboratories. This investment diamond scheme is marketed as "Diamond Bullion".
The trend today is to consolidation and more consolidation. Consolidation equates to fewer choices, fewer physical retail locations and domination in the market by well financed major brands and huge ecommerce sites
Consolidation causes fierce competition between giant commercial interests. Consolidation is big retail buying up the market and pushing out smaller competitors. Consolidation is expansion to every level of commerce. Consolidation is big companies wanting everything and striving to control the whole market from start to finish.
Statistics show that ecommerce is controlled by only a few top etailers. Smaller ecommerce sites are struggling and unable to compete. The vast majority of ecommerce happens in very limited places. In fact, Amazon will control nearly 45 percent of all ecommerce in 2017. Here is an interesting headline about the founder of Amazon.com from October 27, "Jeff Bezos' fortune surged by as much as $6.6 billion today... (Amazon) stock up nearly $62 billion in a single day." Business in 2017 is about money and jobs channelled to fewer and larger interests. Consolidation eliminates competition. Consolidation is about large interests controlling prices and achieving market dominance.
Consolidation blurs lines. Confusion reigns as diamond shoppers compare Blue Nile with Cartier. Confusion leads to the collapse of trust based commerce. More and more consumers trust no one and believe nothing. Consolidation means less choice and less expert personal and individual service. Consolidation is forcing independent operators into financial difficulties, causing banks to refuse credit and channeling more money into the coffers of larger financial interests.
All of the effects of consolidation are clearly visible in the diamond industry pipeline. The Jewellers Board of Trade reported that the jewellery industry is still shrinking with 1350 North American jewellery doors closed in the last calendar year. The consolidation trend continues.
I will end this conversation with a short discussion on the 4 C's of diamond grading. The GIA has dominated diamond grading since Robert M. Shipley defined the 4 C's in the early 1940's. Other than upgrading cut standards, the 4 C's have remained virtually unchanged for seventy five years. Considering the fact that the GIA is facing strong competition from the De Beers and Sarine laboratories, it would seem prudent for the GIA to rework, modernize and computerize their diamond clarity grading standards.
Here is my suggestion. The VS1 and VS2 and SI1 and SI2 clarity categories encompass a very vast range of clarity possibilities. Using current GIA standards, a diamond graded SI2 can range from a stone that is completely eye clean to a stone with an inclusion that is obviously visible to the unaided eye. Clarity grading under current GIA categories does not include enough detail to allow for proper evaluation.
Computers can be programmed to break down VS 1 and 2 into more detailed categories. The VS category, for example, could be divided into VS1 through VS7 and the SI category could be split from SI 1 through SI 10. A modification from 4 categories to 17 categories would more accurately represent the degree of inclusion and allow for precise evaluation when using a diamond report. More clarity grades make evaluation more accurate. More detailed categorization would protect the consumer and help them in making educated decisions. More detailed categorization would eliminate a lot of confusion that surrounds diamond pricing under current GIA grading categories. I, for one, would much rather see the GIA be more reactive to the needs of the public then guaranteeing profits and upgrades for the trade.