Diamond Market Analysis PDF

DDG Ass #20 Succeeding in the Marketplace Succeeding In the Marketplace: -Over the last decade, the global diamond jewelry market has hovered at a value between 75 and 80 billion U.S. dollars. Diamond Pricing: -The relationship between the 4Cs, rarity, and value affects how diamonds are priced in t...

DDG Ass #20 Succeeding in the Marketplace Succeeding In the Marketplace: -Over the last decade, the global diamond jewelry market has hovered at a value between 75 and 80 billion U.S. dollars. Diamond Pricing: -The relationship between the 4Cs, rarity, and value affects how diamonds are priced in the marketplace -Mines open and close, cutting centers react to changes in demand, markets shift, and world events cause major fluctuations in the diamond market -In the late 1970s, speculators began investing in diamonds. The speculation drove the price of a 1.00-ct. D- Flawless diamond from $10,000 to over $60,000 in less than two years. -In 2012 prices seemed to peak; since then they have gradually trended downward. Polished Diamonds and Diamond Jewelry: - provenance is the origin and history of ownership of a gemstone or piece of jewelry. -Diamond jewelry with a significant or distinguished provenance typically commands a higher price. -The highest profit margins are gained at the upstream and downstream segments, while midstream companies survive on a thin average margin of 1 to 3 percent. -The value of the ring rises if it is from a recognized designer. If the center stone is a branded cut, and the two side stones are well cut and carefully matched, the value increases even more. Wholesale Prices: - Many factors determine what a wholesaler might charge for a diamond. Several involve the way diamonds are purchased and paid for. - Buyers who pay immediately and in full usually receive the best price. -Some dealers may offer the option to make multiple payments over a specific time period. This type of agreement might be referred to as the terms of payment, often shortened to “terms.” -Buying on terms benefits both the buyer and the wholesaler. the wholesaler, they are able to charge a higher price than if the buyer paid up front and the buyer have the goods in their hands and thus the ability to sell them immediately. - This is not without risk to the wholesaler, so establishing trust between parties is an incredibly important part of buying and selling in the diamond market. -Wholesalers often charge higher prices if they’re selling on terms, memo, or consignment. - Memo—short for memorandum—is typically a buying agreement in which the supplier entrusts goods to a potential buyer without requiring immediate payment. - In some cases, a memo agreement may be made for the client to inspect the goods without necessarily intending to buy. -The length of time of the memo may vary depending on the relationship between the supplier and buyer, but it is often between 7 and 14 days. - Consignment transactions—when a wholesaler or manufacturer loans a selection of goods to a dealer—are more open-ended. A supplier might offer a dealer a parcel and request a payment or a return of the unsold goods in one or two months. -Memo and consignment benefit both the retailer and the supplier. The retailer benefits from additional inventory to sell in their store. The supplier is able to put their diamonds or jewelry on display with retailers without requiring the retailers to purchase them. Wholesale Price List: -Some price lists are based on recent transactions, while some are based on the price at which almost any dealer would agree to sell, called the high asking price. - The first successful price sheet, the Rapaport Diamond Report, lists the “approximate high asking price” in New York. -Cut plays a role in published price lists. Dealers know they pay a premium for high-quality cutting -Most price lists quote per-carat prices Some state them as whole numbers, so “3600” means $3,600 per carat, while others list it in hundreds, so “36” means the same thing. Wholesale Price List continued: - The publisher of each list typically states which market the prices are based on & how the figures were derived. -A price sheet is, at best, an educated estimate of wholesale prices in a specified market at a given time., Regional preferences, local market conditions, and payment terms all affect prices. -Many dealers quote prices based on a percentage of the published list price. For example: When someone says “20 back of Rap,” they mean 20 percent off the price listed in that publication. Parcel Pricing: -Parcels are carefully assembled and designed to be attractive to buyers. They usually contain a selection of diamonds that vary in color, clarity, and cut. -parcels are sold by lot price: a discounted price for an entire parcel or a large part of it. - Retailers or jewelry manufacturers who want to select a portion of the parcel pay a higher pick price. The price for an individual stone, whether purchased singly or as part of a parcel, is the unit price. -Diamonds in a parcel vary slightly in size, even though the parcel might be labeled with a specific size, ex: parcel of 50-point stones might contain diamonds that range from 0.46 to 0.59 ct. -To accurately assess a parcel’s value, sort the diamonds by size, and assess their color, clarity, and proportions against graded goods of similar size and quality. Then compare the prices of the diamonds in the parcel against a price list. -Sorting and grading a large parcel might be time-consuming, which means actual costs, including time and labor, might be a little higher. Consider this when calculating a price for the stones. - Become familiar with price levels in your market so you can determine what is a good deal. Lab Grown Diamond Pricing: -Before 2010, lab-grown diamond manufacturers sold their diamonds primarily for industrial purposes. -In 2018, De Beers’s synthetics division launched the new brand Lightbox, which sold its lab-grown diamonds at $800 per carat, the lowest retail price of any producer-set a new benchmark in lab-grown diamond pricing. - Lightbox was one of the first lab-grown diamond brands to follow a cost-plus pricing model. -In a cost-plus model, the final sale price is based on the cost of producing the product plus a small markup in order to achieve a profit. - Prior to the De Beers (Lightbox) model price skimming was used by diamond producer - Price-skimming model, manufacturers charge the highest initial price that customers will pay and lower it over time as new competitors enter the market. - Currently, lab-grown diamonds are priced at a significant discount to natural diamonds. Developing Market Awareness: - Market awareness means staying up to date with what’s happening in the industry—to make better decisions, generate new ideas, and solve problems more effectively. - Market awareness also includes anticipating customers’ changing needs and understanding internal factors, such as your company’s strategic goals. - One way to stay current with the industry is to follow trade publications (online or in print) Joining a trade organization, attending trade shows, and recognizing trends can also expand your market awareness. Trade Publications: - A trade publication is a magazine, newspaper, journal, website, or other publication that shares information on news, trends, and other topics relevant to a specific industry. -In the gem and jewelry trade, these publications include National Jeweler, INSTORE Magazine, JCK, and Rapaport Magazine. Networking: -Trade events provide an opportunity to network by exchanging information and developing contacts with people who share a common professional or special interest. - Networking can help establish relationships and broaden professional horizons. For a retailer, networking might lead to new customers, suppliers, or business partners. -the connections made through networking provide opportunities to succeed within the industry. Trade Organization: - a trade organization: a committee, club, society, or association of people invested in a similar purpose. -Trade organizations can promote and establish standards, educate their members and the public, and promote economic growth within the industry. - The Jewelers Vigilance Committee (JVC) is one example of a trade organization through which members can access education, guidance on legal compliance, webinars, and more. Trade Shows: - At trade shows, businesses come together to promote and sell their products and services -Trade shows provide an opportunity to network face to face with potential vendors and business partners. Some trade shows offer educational seminars and panel discussions to help you stay up to date with what’s new in the industry. - Popular trade shows in the gem and jewelry industry include JCK Las Vegas, JA New York, the Tucson Gem & Jewelry Show, and the Hong Kong Jewellery & Gem Fair. Recognizing Trends: -A trend is something currently in demand or popular among consumers. A short-lived trend may also be known as a fad. -Trends fluctuate, EX: In the span of 5 to 10 years, a particular diamond shape and cutting style might go from the most popular to least popular. - Trends present lucrative opportunity if recognized early. Careers in the Industry: - With the growing popularity of diamond reports among consumers, there’s a need for those who can grade stones. With advances in treatments and lab growth processes, there's demand for those who can tell the difference between treated and untreated stones and between lab-grown and natural stones. Sustainability: - Sustainability is defined as the ability to continue a specific behavior indefinitely. -In the jewelry industry, sustainability is typically related to economic, environmental, and social issues. -Sustainable development can be described as making responsible and ethical decisions regarding natural resources and improving quality of life. - In the diamond industry, sustainability includes reducing waste and environmental impact and implementing social initiatives that give back to the source country and its people. Beneficiation: - In a social context, beneficiation is a commitment to reserve a portion of the resources derived from a country for the economic development of that country. -The creation of jobs is an important social aspect of sustainability. Diamond mining creates jobs in remote areas around the world where employment opportunities are limited. -Much of the proceeds from diamond mining are put toward schools, hospitals, and infrastructure. However, a significant portion goes to the development of industries outside diamond mining. -Beneficiation is becoming a key focus for the many organizations now implementing sustainability initiatives. Environment : -More consumers and investors seek assurance that their money goes to products and companies committed to minimizing their environmental footprints. -The main challenges in diamond mining involve soil erosion, deforestation, and ecosystem and biodiversity disturbance, water use -diamond mining methods require the movement or removal of large quantities of earth - the most profitable/cost-effective methods move as little earth as possible—so mining companies have incentive to minimize their footprints. -Most mining companies implement policies and processes to reduce environmental impacts and increase operating efficiency, known as environmental management systems. -Energy efficiency and renewable energy programs are widely used in the diamond mining industry. Electric vehicles solar panels and wind farms serve as alternatives to burning fossil fuels. Traceability: - Many consumers want to know they are supporting products that are responsibly or ethically sourced and businesses that give back to the community. - Traceability in the diamond industry means being able to track a diamond’s journey from the mine to the end consumer. -Blockchain is a shared, unalterable ledger used to record transactions and track assets through a supply chain or business network. -The aim of blockchain is to offer many benefits to the industry along with transparency, including origin information, increased awareness of sustainable and ethical practices, and streamlined regulatory and compliance requirements for participating suppliers. - Give back to the community when you can. Establish goals and practices to better use resources and minimize waste.