Sales and Selling in the Diamond Industry
Overview of the diamond industry
Until the time of 1330, diamonds were not really considered as a special, valuable stone. Today, the diamond industry is now considered to be a genuine global business especially that the players in the diamond supply chain are geographically-dispersed. For instance, exploration and mining happens in areas of North Canada, Russia, Africa and Australia; cutting and polishing and jewelry fabrication occurs in China, India, New York and Milan and retailing, purchasing and utilization happens all over the world. Nevertheless, the diamond industry is also considered to be a relatively small industry in terms of total value. In 2006, the total value of diamond jewelry sold globally was under US billion while the total value of polished diamonds was under USbillion.
Further, diamonds and diamond jewelry are deemed as luxury products and are not a necessity. Demands for diamonds had been carefully built up and grown through extensive marketing and advertising. The competition of diamond products includes luxury cars, travel and cruises and yachts. Women is the primary market and within that marketplace, perfume, luxury clothing, furs and shoes as the major rivals. When it comes to its pipeline which shows the movement of diamonds from mine to the consumer, the diamond industry caters and crosses over a number of sectors that are not totally connected with each other such as exploration, mining, manufacturing and retailing.
According to (1985), the differentiated nature of diamond marketing is broadly divided into two concepts: gem diamond marketing and industrial diamond marketing . Companies are given the right to choose their own method where some sold production to Central Selling Organisation (CSO) while other companies directly sold their diamond products to dealers. The industrial diamonds has a more straightforward marketing with CSO as the major distributor of natural industrial diamonds. The nature of gem diamond marketing is entirely different due to the indestructible nature. At each market price, some of gem diamonds enter the market for resale hence a source of supply independent of new production
Diamond marketing centers the idea that any woman deserves to wear a diamond. Unlike any other commodities, diamond is never a homogenous product because each produce is relatively unique and the task of sorting diamonds took years to perfect. The sad fact is that the higher market prices of diamond because the majority of the diamond market is limited and controlled by a single entity, if not concentrated to powerful businesses in the world ( 2009). The CSO resorted in a profit-maximizing strategy of limiting market supplies and forcing the prices up. As such, the CSO has the central responsibility of stabilizing the diamond prices in the market.
Diamond shoppers of today have more choice than ever on where to buy their diamonds. As such, the direct selling of diamond products could be perceived as a horizontal integration into an eventual vertical integration ( 1989).
Direct selling strategies for diamond products mainly focuses on wholesale, trade and brokerage and on high-end retail stores. After the diamonds are cut and polished, they are sold to wholesale diamond companies and other diamond exchange or trade centers. From these, diamond retailers are buying diamond products to end-users basically through store sales. In the diamond industry, there are stores and non-stores direct selling strategies.
Jewelry stores, diamond brokers and ecommerce diamond companies are the three broad categories of retail diamond market. Jewelry stores are most common in smaller towns and rural areas. As these stores had a monopoly, jewelry stores could set their selling prices at whatever markup they wanted. However, these stores depend heavily on impulse buying hence the necessity for product portfolio, extensive advertising and convenience. To attract diamond buyers, jewelers build elaborate stores with polished floors, expensive display cases and tactical lighting.
Diamond brokers do not own inventory and basically have low overhead. Diamond brokers act as consultants for the buyer to find the best diamonds that could meet the requirements of the end-user. These brokers rely on word-of-mouth advertising and if they have a website it will deal with online education and shopping advice. Diamond brokers work hand in hand with their clients to find the best diamond on the wholesale market. They will present it to the client in the broker’s office or ship the diamond to the client for examination before the actual purchase.
Ecommerce diamond retailers capitalize on convenient purchasing. These diamond retailers provide a list of diamonds owned by groups of wholesalers and let the shoppers decide on their purchase based on their own specifications. Shoppers pay for the products in advance and then the wholesaler or the retailer will ship the diamond to the consumer. Online diamond stores offer an advantage of providing much greater selection and the ability to ship the items in any location. Because of lower overhead, online stores could also provide lower prices for the shoppers. The major detriment, however, is that the decision of diamond purchase solely on the shopper (2009).
Sales and selling at DeBeers
De Beers is a privately-held company that is involved in various diamond-related activities such as rough diamond exploration, diamond mining and diamond-trading. De Beers executed several strenuous activities to eliminate threats on the stability of their monopoly and to ensure a market-leader status. The five P’s of ethical power are purpose, pride, patience, persistence and perspective. The main purpose of De Beers is to ‘turn diamond dreams into lasting reality’ (De Beers Group). The purpose is the basis upon which the company builds its ethical behaviour. De Beers failed to comply. The paradox is De Beers are creating a mind set of attaining diamonds as an individualistic end and it does not encompass their role to be extended to the community. The company takes pride in diamonds. However, their confidence and complacency to vend diamonds is making the company irrational. Organizational pride makes every experience as a win-win reflection of their attitudes. However, De Beers is taking all the gains by means taking away the quality of life and depriving supposed-to-be rivals of the right to a level-playing industry. Patience demonstrates a virtue of trust to organizational values and beliefs. Though the strategic choices of De Beers brought them sustainable bottom-line results, values are not deeply inculcated to the people. One proof of this is the hidden hoarding which serves as the fastest way to acquire wealth. In addition, the company’s persistence is only apparent on creating and establishing their brand to the extent that they neglect their corporate responsibility to the people and the industry that they belonged with during those times. The company had an effective strategic plan that directly points to long-term goals as their perspective. However, the company lacks to evaluate the process with respect to universally-accepted moral/ethical standards. An example of this is the acquisition of conflict diamonds for which the company admitted that they are of such a tradeoff. Unfortunately, their policy only applies to buying of diamonds whether who or how those diamonds are accumulated (De Beers Groups 2005/6).
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