Fixating on diamond prices could be a distraction for those in the diamond business, according to Martin Rapaport, chairman of Rapaport Group. Two common problems weighing on the industry are weak demand and tight margins. Branding could be the solution for both.
Strong market conditions can facilitate rampant participation without requiring well-developed business strategies. When the tides turn, as they have this year, those thriving on the boom can find themselves fighting for survival. But what would happen if diamond sellers stopped gambling on prices and started building brands? Some suggest the outcome would be a much higher, more sustainable degree of success.
“If you are really a good value-added person in the diamond or jewelry industry, prices should not matter,” Rapaport told the Las Vegas crowd attending the State of the Diamond Industry presentation.
Mehul Choksi, chairman of Gitanjali Group, which consists of numerous jewelry brands, is another advocate of branding, and the business he oversees is an excellent example of the outcome.
“I wasn’t interested in selling a commodity. I wanted to sell a brand,” Choksi told Forbes in 2008, when his company’s revenue was expected to top $1 billion.
Choksi has maintained his stance, telling those at this year’s Rapaport International Diamond Conference, “[w]e want to sell each diamond at a better value and this is achieved by branding.” He believes that branding is the most effective way to reveal that emotional appeal of diamonds.
Sellers should realize that competition is not limited to peers in the diamond industry, but extends to others in the luxury space. Many consumers are willing to place premiums on branding. They flock to brands when purchasing shoes or cell phones. Diamond sellers are encouraged to ponder why shopping for diamonds should be viewed differently.
Branding is a strategy that could be used to lure more people toward the diamond industry and then to further streamline that interest toward particular businesses.
Miners dissatisfied with rough diamond prices or demand should shake off any notions that brand building is best left to retailers. The diamond business is built on selling stories of love, of wealth, of rarity, of whatever moves the precious stones through the pipeline.
“[S]ell the story of the diamond, rather than just focus on the four C’s,” Vikram Merchant, manager of Rio Tinto’s (ASX:RIO,NYSE:RIO,LSE:RIO) Mumbai office, said at the Rapaport conference.
Rio Tinto is doing more than contributing to the conversation about branding; the company is pinning its hopes on Nazraana. The branding initiative, which is focused on the Indian market, particularly the wedding segment, “takes its reference from the royal gift giving rituals of past eras,” a company press release states. Rio Tinto has teamed up with manufacturers, diamantaires and jewelry retailers to create a “Nazraana experience.”
Those needing further inspiration can look to diamond marketing pioneer De Beers. There are big plans in the works for the Forevermark brand this Christmas season. A commercial developed for “The Center of My Universe” line will be shown online, in thousands of movie theaters, on television and in stores.
This new product concept is aimed at the emotional appeal of celebrating “the woman.” However, Charles Stanley, president of Forevermark US, revealed that the brand also feeds off the drive for social responsibility.
“The Responsible Source Promise that we have behind Forevermark, that promises a diamond has been cared for from the moment it’s mined all the way through the cutting, the polishing, to the point that it’s at the jewelers I think is really important and plays directly into that need and sense of reassurance of the provenance of high-value luxury consumers today,” he said in an interview about the campaign.
Companies such as Rio Tinto and De Beers can focus on strategy because they have brands to push. That gives them a sharp competitive edge. Throughout the distribution chain, diamond sellers should consider whether branding is a strategic move that they too should make. These considerations should begin at the the mine and even before the mine. Junior miners should seriously analyze the potential benefits of developing not only diamond mines, but also diamond brands.
Keep in mind, however, that branding, more than creating a unique identity or story, is an effort to add value to a product. Brands thrive when they are successful at doing that.
Securities Disclosure: I, Michelle Smith, hold no direct investment interest in any company mentioned in this article.