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  The rise of the mega-jeweler and the 'jeansing' of the diamond business

by Menahem Sevdermish FGA D.Litt.
November 18, 2012


For most of history an item of diamond jewelry was considered to be a work of art, with the number of pieces as diverse as the jewelry designers who created them. And while it is true that casting techniques have been used in jewelry manufacture for a considerable period of time, there typically were never more than a few dozen or a few hundred pieces of the same design.

Until relatively recently jewelry retail chains were far and few between, and those that existed included only a few outlets. Consequently, the size of orders required to satisfy specific jewelry designs never ran to much more than a few dozen stones, or on the rare occasion few hundred stones of the same size, and they easily could filled by most dealers in the trading centers.

But the rise of mega-jewelry chains, consisting of hundreds and in some cases thousands of outlets, and then the television shopping channels, changed our business fundamentally. The possibility of a single piece of jewelry, consisting of 30 diamonds of 3 points each, being shown on television, and then being sold 1,000 times over within one hour, gave rise to orders in the range of 30,000 to 100,000 pieces, all of the same size and quality.

No single dealer was capable of supplying such vast quantities of uniform material. Thus, a new position was created in the jewelry pipeline, the mega accumulator.

With vast networks of diamond suppliers and cutters, mega accumulators developed the ability to fill gigantic orders in short periods of time. Smaller and medium-sized suppliers - previously the rank and file of the industry - often found themselves unable to join the party. They were left with essentially three alternatives - to raise their level of risk and expand their businesses considerably, to specialize exclusively in niche markets, or to withdraw from the game entirely.

Companies that became part of mega accumulator networks found themselves making decisions that previously would have been unthinkable. To maintain their position in the supply chain, some intentionally cut diamonds to the size required, although they were losing on the yield. Suppliers also provided higher quality goods than necessary in order to meet their commitments.

It became increasingly difficult to keep a well-balanced stock supply. Because only certain sizes and qualities may be in demand at any point in time, other sizes and qualities remain unsold. This created distorted price structuring. For example, a massive order for 5 point stones of KLM colors at a certain price points would negatively impact the prices of same size goods in higher qualities.

But the influence of the mega-jeweler on design may have the longest-term effect, because it goes to the heart of the image of diamond jewelry. Because mass-marketed items need to appeal to tastes of many, designs must comply with the most common denominators. With the exception of those found at a handful of generally, restrictively expensive boutique jewelers, unique pieces of diamond jewelry have become obsolete. The primary yardstick for a successful item of jewelry is the number sold within a certain period of time.

We have called this phenomenon the "jeansing of diamond jewelry," where the brand name is frequently the only factor that sets one item apart from the other. Designs generally will be simple and not adventurous.

The lack of variety is not only the result of having to appeal to a mass market. Another factor is that there are only a few designers working for the mega jewelers, meaning a handful of people are responsible for the look of much of the jewelry sold. But the consumer typically is not complaining. Because the jewelry is made in vast quantities, the cost of production is relatively low and so frequently is the ticket price - in the stores and particularly on television.

Those small, local jewelers who have managed to survive, in many cases have had to offer their customers TV shopping channel-like diamond jewelry at TV shopping channel-like prices. This has created an opening for a new type of mega accumulator, who supplies goods for uniformly created jewelry sold to large numbers of jewelers, rather than to a single chain or TV outlet.

We would be naive if we believed the diamond jewelry business was immune to the effects that we have seen IKEA have on the furniture business and H&M and The Gap on the clothing and fashion industries. But we do have one thing going for us and that is the gemstone itself. For it is a unique item, which can be mass marketed, but never mass produced.

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