As we start out on a new year, I believe we must all approach the challenges that it will undoubtedly bring, with renewed confidence and an optimistic outlook. We all know that the issues that confronted the industry last year are not going to disappear just because a new year has started, but we must also realise that financial and economic challenges are temporary and it is imperative to retain a balanced outlook.
What are the issues that will provide the biggest tests to our resolve this year and what do we need to concentrate on? Clearly, financing for our trade will be one; the growth of generic marketing and developments will be prominent this year; and then there is the challenge posed by undisclosed synthetic diamonds along with ongoing concerns about over-grading and the consequent potential damage to consumer confidence.
On the subject of financing for the diamond trade, we have witnessed declining interest among banks in providing credit to our members. This creates a handicap to our work since credit lines are the oxygen that finances our activities.
WFDB Working With ABN Amro On Bank Finance Norms
However, the WFDB is taking a pro-active approach in this respect and has been doing so for the past several years. We are working with ABN Amro Bank, the biggest provider of finance to the diamond and jewellery industries, on a template for the banks and our members. This aims to explain to diamond firms the concerns and requirements of the banks regarding the diamond trade. And it also provides the banks with in-depth information regarding the diamond sector and what it needs in order to operate.
The banks have shown a degree of reluctance to provide increased credit to diamantaires partly because they, like us, have seen the high prices of rough over the past year and more, and the static or declining price of polished which has made manufacturing simply not financially viable for many companies. Against that background, the banks assess the risk of providing credit as too high.
But I believe that with the decline in rough prices in the final quarter of last year, which is likely to continue in the first months of 2016 as well, in addition to the cutback in manufacturing in India and elsewhere which will create shortages in some items as inventories decline, the banks can be persuaded to provide financing since profitability will return.
However, I also continue to advise diamantaires, manufacturers and others in the midstream part of the market to realise the damage they have been doing to themselves by buying rough goods at almost any price. That boosted prices of rough diamonds to levels that were not connected to reality. It may have also made the banks suspicious about providing credit to clients who appeared to be chasing goods that could not be manufactured and sold for a decent profit.
I turn now to the issue of promotional activity to boost demand for diamond jewellery. Since De Beers ended its generic global promotion work in the previous decade, the diamond industry has failed to develop a unified approach on this issue. In the past two or three years, however, we have seen movement, not least by the WFDB which launched the World Diamond Mark (WDM) initiative. Consumers must regard regularly buying diamond jewellery as a natural and ongoing activity. Engagement and wedding ring purchases remain critical, of course, but there are many other occasions for which diamond jewellery can be purchased and the retail sector needs to show buyers those opportunities.
The World Diamond Mark was launched by the WFDB more than three years ago to promote consumer desire for, and confidence in, diamonds. The aim is for sales of diamonds and diamond jewellery to perform significantly better in the luxury product consumer market. And to reach that goal, the industry — from diamond producers to retail jewellers — is acting together to promote, advertise and market diamonds and diamond jewellery more effectively and visibly to the end-consumer.
We also plan to work closely with the Diamond Producers Association (DPA) as we believe that this challenge is too big for any one particular organisation to achieve. We hope the DPA will see the need for us to all join hands in this common cause. This would enable us to truly make a huge impact on consumer awareness, particularly among the younger generation.
We Need To Master Digital & Social Media
As I said at the WFDB's Presidents' Meeting in Tel Aviv in June, I have yet to see a young person queuing up all night to be the first in line to buy a jewellery item in the same way that youngsters do for the latest smartphone or tablet. I believe it is critical for us to create a big impact on the 18-35 age range.
And that presents a significant challenge because this is a demographic group that is often not interested in traditional advertising. They are forcing us to use the tools they like — and that means marketing in a digital world, including social media — to reach them. We also need to find the language and references that will appeal to them.
We must provide honest and up-to-date information about what we are doing to address some of the issues facing our industry, such as conflict diamonds and our sustainable development work in creating minimal damage to the environment because these are issues that strike a deep chord with environmentally-aware younger people.
Moving on to the issue of synthetic diamonds, the WFDB has no problems whatsoever with such stones just as long as they are clearly disclosed. Their production levels are rising and becoming more sophisticated, but most such stones are used in the industrial sector and the number of lab-grown diamonds that are gem-quality is still rather small.
Our paramount concern is that synthetics and the cases of over-grading cause damage to consumer confidence. Synthetics must be clearly marked and sold as such. We have seen cases where synthetics have been added to parcels of natural mined diamonds. We have no tolerance whatsoever for such illegal activity, and the same goes for cases of over-grading, where the means used are becoming more sophisticated, as we saw in the case of the certificates from GIA India that were fraudulently altered. People conducting themselves in this way will be removed as bourse members, where it is found to be the case, and prosecuted for fraudulent activity.
I would like to finish — as I began — on an optimistic note. During troubled times, it is sometimes difficult to remember that this is a large and powerful global trade that is self-regulated to an extent that is hardly seen in other sectors. The year 2014 saw record diamond jewellery sales of $81 billion and although last year was a challenging one, sales are expected to be of a similar level. We know that China is slowing down, but India is on a strong growth path, and in both countries, the numbers of middle class citizens is growing. Indeed, there are expected to be 100 million new middle class households in the major diamond consumer markets by 2019 — and that means rising sales opportunities for the diamond business.