The self-purchasing - the fastest growing segment!

A supply-chain transparency standpoint 

The diamond industry & trade under the eyeglass of GenNext diamantaire Adish shah, Chairman-Leo diamonds, Who expresses all those facets from rough to retail!  

At the juncture of gem-n-jewellery (GJ) industry & trade resumption in the post Covid-19 era, Adish shah said, The industry has been through so much and most people, at least in the Western world, still want a diamond when they get engaged. Diamonds are unique in that they are one of the few luxury items that most women will receive in their life at one point or another. 

The industry is now seeing this trend shift to China and Southeast Asia, which I think shows how much diamonds resonate with the human consumer. Bridal jewellery segment represents about 1/3 to 40% of diamond demand. Gifting and self-purchases represent the balance of demand. The self-purchasing segment is the fastest growing; these trends have continued into the pandemic although, bridal still remains strong.

Investing in diamond & commoditisation of diamond, Adish said, there has always been interest in diamonds as an investment vehicle. The lack of fungibility, i.e. there are thousands of different categories of diamonds by size, shape, color, overall quality etc., has made liquidity difficult relative to other actively held, store of value commodities like precious metals. 

In circumstances where currency debasement/inflation becomes a broader concern, like now, there is always an uptick in interest in diamonds as an investment. Most of this actual demand comes from high-net worth investors that buy the rarest, most desired stones and self-store them, as they want to own the physical asset. 

Diamond futures contracts have been proposed as far back as the early 80’s. What are your thoughts on more recent attempts to make diamonds more of a commodity, that can more easily traded? For example, 1: GemShares, 2: Singapore Diamond Investment Exchange, 3: Indian Commodity Exchange and then recent ‘blockchain’ ideas. 

I think there is demand for a product that allows diamonds to trade as a commodity, which would be used by industry participants, financiers to the industry, for accounting/ marking purposes, hedging etc. But again, fungibility has been the biggest challenge here. 

While he said, he was aware that the DeBeers always followed in other way on the subject of commoditisation of diamond & DeBeers say, “The plain fact is that diamonds are not a commodity; they are unique.” 

By focussing on a supply-chain transparency standpoint he said, as of today, Tiffany can track their diamonds through the whole supply chain without external interference and thus can provide customers with a whole history of where a diamond has been. That said, I think the industry has not seen more of this given the expertise required at each stage of the supply chain: miners are good miners, manufacturers are good cutters/polishers, retails are good at merchandizing and branding. 

Even more transparency is on the way, i.e. see the aforementioned Tiffany example. Also, the large majority of global diamond production is done by large commercial, publicly traded companies, so there is transparency required by financial regulators etc. 

Most lab-diamonds are produced in China or India, so the supply chain is still globally diverse and there isn’t always the transparency you would hope there is. But there are certainly companies producing in the U.S., for example, that do all the processing domestically to keep their product as transparent as possible, and this is probably a viable business model. 

All of this said, from what I have seen, most customers that are choosing lab-diamonds over natural diamonds are doing so because they are a lot cheaper, period. And, I think ultimately this is what will differentiate the product the most in consumers’ minds going forward: the price; so the question becomes is the customer buying fine jewelry or fashion jewelry, when they purchase a lab-diamond –and how will this impact their purchasing decision? By extending his view on transparency Adish shah added that the transparency is certainly something customers are looking for!