Latest Diamond Insight Flash Report

Diamond insight Flash report #7

November 2021

Why where and how matter

and what gen z has to do with it:

Since luxury items have existed, where they came from has been an essential part of their stories: from Persian rugs to Russian caviar, place of origin has suggested something about the innate value and superiority of materials. Luxury brands, particularly the storied European houses, have made provenance coupled with artisanship the overarching narrative explaining the value of their goods.

Slowly and then quickly, however, provenance has grown in dimension as well as salience. Previously, provenance was a shorthand for quality and authenticity. Today, people might prefer rugs made in facilities ensuring no child labor or choose caviar sustainably sourced in America. 

Provenance has added meaning-the safety and integrity of sourcing, the ecological and ethical implications of its supply chain, the care with which the people who touch or craft a product are treated. No matter the category, consumers are looking for confident brands that ensure behavioral integrity-they don’t feel it is their job to police the products they use. 

Brands that reliably create this trust will command a premium, as indicated by new research from 3600 Market Reach, as commissioned in August by De Beers.

The research confirms that most consumers (74%) believe that concern about provenance and social responsibility is not a passing trend: It is one that is here to stay. 64% of all consumers and 73% of affluent consumers (US$150K+ HHI) say they are willing to pay more for a product if its place of origin matters to them.

While provenance is not the primary driver for most consumers, it is important to them – and yet it is generally difficult for consumers to figure out the origins of most of the products they use. Only 7% believe it is “very easy” to discover where their products originate from, while another 29% say it is only “somewhat easy.” Over half say it is somewhat or very difficult to understand the story behind the items they buy.

14% say that they would absolutely not purchase a product unless they knew where it was from, while 71% say they would purchase.                                                                                                                                      Almost eight in ten (77%) say that importance of provenance differs depending on category, with food (95%), cars (84%) and skincare (80%) ranking as the top three about which customers “care a lot.” 34% say they “care a lot” about luxury goods, and 35% about diamonds. This tiering of product categories makes sense, as dictated by practical health and safety considerations. However, consumers also increasingly think about where and how their discretionary items are made as well.   

The audiences driving 

concerns about provenance: 

De Beers/360 Market Reach’s provenance research shows that affluent luxury consumers, particularly younger ones, are especially sensitive to all themes of provenance, sustainability and social responsibility, and research by Bain backs this up, with 80% of luxury consumers, driven by Millennials, saying their preference is for socially responsible brands, and six in ten luxury customers asserting that luxury brands should be more engaged than other industries.

De Beers/360 Market Reach’s research finds that when it comes to provenance, consumers cite the quality of products/ingredients and how well a product is made as most important. However, when segmented by age groups, the 50+ age group is driving those factors, while the 18-34 age cohort over-indexes on “human rights,” “environmental impact,” and “from a company whose values I agree with.”                                                                                                                                                

In other words, for those age 50+, provenance adds intrigue, and a specificity associated with luxury short hands - French champagne, Italian cashmere, and so forth. For Millennials and Gen Z it becomes about integrity, ethical values, and demonstrable sustainability. And as a sign of status, this translates into movement from associating self-worth with showing the world you care, versus simply showing the world you have taste and money.

This inflection point has been driven in part by necessity: As Bain's insight report2 noted: “On a basic level, global consumption has grown massively while many of the world’s resources remain fixed and finite, or only partially renewable.” Diamonds demonstrate this principle well, with recovery of gem quality stones becoming increasingly technically difficult and expensive. For De Beers, this also means a commitment to leadership and innovation in socially and environmentally responsible mining.

The 2020 World Economic Forum:

At a macro level, cultural and generational change have driven a widespread movement toward sustainability as a corporate tenet. 

The 2020 World Economic Forum’s main event in Davos was themed “stakeholder capitalism,” espousing the idea that businesses should strive to meet the needs of all of their stakeholders (customers, employees, partners, and their communities), rather than simply practicing “shareholder capitalism.”

For 2021, the theme was “the Great Reset,” an urgent joint commitment to build the foundations for an economic and social system that will lead to a “more fair, sustainable and resilient future.” Gen Z and younger Millennials have fought to bring these issues forward, much as they have forced issues of systemic racism, climate change and gender inequality to the forefront of conversation through social activism.                                                                      

The generations shaping the future:

Why are corporations listening so intently to their youngest customers and customers-to-be? It’s not simply because they refuse to stay quiet. Millennials accounted for 35% of consumption in 2019 and are expected to make up 45% of the market by 2025. 

A report on the future of luxury goods noted: “It’s the even-younger Generation Z that is poised to reshape the industry: By 2035 they could make up 40% of luxury purchases, up from only 4% today. In 2019, Generations Y and Z contributed all of the market’s growth.” 

These younger generations have inordinate sway on their parents’ generations as well: As Boomers and Gen X moved away from previous generations’ more dictatorial, hierarchical forms of parenting and toward seeking honest communication and connection, they are now more likely to be open to and supportive of their young adult children’s belief systems and values. 

This is one explanation for why, according to the Harvard Business Review, products marketed as sustainable are growing at an almost six times greater rate than regular products, and 73% of global consumers say they would definitely or probably change their consumption habits to reduce their impact on the environment – across age groups.

The more socially engaged younger generations, particularly those who are affluent luxury consumers, are driving a dynamic in which the consumer is an active voice, an agent for change, and a participant in an ongoing conversation rather than a passive audience for brands. Brands that wish to be future-proof are meeting those customers at the place where their desires not only for certain kinds of products but certain proof points for how and where those products originate, meet; satisfying those needs will result in both greater brand loyalty and stronger margins. 

(By De Beers Group: have a question you’d like to include in our pulse survey? Send it to flashreport@debeersgroup.com and we’ll aim to include it in an upcoming survey.)