Rapaport Magazine - January 2020

VOL. 43 NO.1 JANUARY 2020

A FRESH TAKE ON MARKETING What do avocados have to do with diamonds? The answer lies in the need for industry ad campaigns

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NEWS

PR OF IL E

E STAT E

PR I C I N G

THE RAPAPORT TEAM TAKES A LOOK AT THE MOST IMPACTFUL STORIES OF 2019

EXPLORE THE FASCINATING WORLD OF NATURAL PEARLS IN BAHRAIN

HOW TO SET UP A VINTAGE JEWELRY DEPARTMENT IN YOUR STORE

THE ANNUAL DIAMOND PRICE STATISTICS REPORT: ANALYSIS AND DATA

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CO NTE N TS

VOL. 43 NO.1 JANUARY 2020

IN-DEPTH

14 NEWS

44 RETAIL PROFILE

The most impactful stories of 2019 as selected by the Rapaport news team.

Tiny Jewel Box in Washington, DC, counts national leaders among its clients.

18 OPINION

46 RETAILRAP

Martin Rapaport on ethical sourcing.

How to sell to millennials.

20 REPORT Four takeaways from the World Jewellery Confederation (CIBJO) Congress.

22 PROFILE As the world’s biggest producer of natural pearls, Bahrain is looking to put these treasures back on the map for US and international consumers.

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26 COVER

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RETAIL

Overview: Generic marketing has done wonders for avocados and milk. What’s keeping the diamond industry from making similar efforts?

Retailers’ views: Four jewelers weigh in on how effective the Diamond Producers Association’s campaigns are.

Wholesalers’ perspective: Most suppliers are urging the trade to promote diamonds as a category, but others say we’re better off leaving advertising to the known brands.

32 AUCTION REPORT The Geneva sales and Christie’s Hong Kong auction: Analysis and results.

STYLE & DESIGN

50 JEWELRY

CONNOISSEUR

Lightweight, strong and versatile, titanium has a lot to offer.

52 STYLE A look at American holidaythemed jewels throughout the year.

54 DESIGNER Bulgari jewelry director Lucia Silvestri shares her creative perspective on the maison’s latest collection.

56 LEGACY The jewelry that Mexican artist Frida Kahlo wears in her paintings is a window into her identity.

59 ESTATE JEWELS Gallery owner Simon Teakle shares what new estate dealers should know when setting up shop.

60 COLORED GEMSTONE Innovative gem cuts are both breathtaking works of art and increasingly popular among designers.

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52 PAGE

MARKETS & PRICING 62 DIAMOND PRICE STATISTICS ANNUAL REPORT 2019

A perfect storm of challenges.

83 TRADE REPORT 85 USA 90 INDIA 93 ISRAEL 94 ANTWERP 95 HONG KONG 96 DIAMOND DATA 101 PRICE LIST 113 RAPNET PRICE LIST 118 DIRECTORY 122 CALENDAR 124 THE FINAL CUT

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N OTE FROM TH E P U B L I SH E R T R EN DS TO E MB R AC E

John Costello PUBLISHER

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J OH N .COST E L LO @ DI AMONDS.NET

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mployees at Decca Records must still blush with embarrassment when reminded how one of their executives passed on signing The Beatles back in 1962, saying the band had “no future in show business.”

Likewise, Microsoft’s Steve Ballmer probably has the urge to face-palm every time he recalls the year 2007, when he quipped, “There’s no chance that the iPhone is going to get any significant market share.”

Making predictions is a precarious game, best left to wise men and fools. So don’t think of the following as predictions, but trends that have already taken root and will continue to blossom. How exactly they grow and develop, I will leave to people smarter than myself to predict.

The emergence of the female self-purchaser should be the catalyst for our industry to reconsider everything from product development to marketing, staff training to store design. The role that economically independent women play in shaping the diamond and jewelry sector is going to be interesting as it unfolds.

Get ready for it and participate in it.

For an industry famed for its secrecy, the push toward transparency — both financial and in sourcing — has been a struggle. But the momentum behind this, fueled by regulatory authorities and consumer demand, is unstoppable.

Whether it’s to do with grading, cutting, tracking, or sniffing out synthetics, technology will increasingly bring efficiencies and enhancements that will ultimately make us better and more profitable at what we do.

Finally, with Blue Nile set to open up to 100 brick-and-mortar webrooms in the next five years, anyone who hasn’t realized should be aware: Bricks and mortar are transforming into bricks and clicks. Having a seamless omni-channel brand experience that can take a customer from a digital platform to a real-world store and vice versa as many times as it takes to make the sale will become the norm.

So now it is over to you for the hard part: embracing these trends.

Wishing you a prosperous 2020 and beyond.

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REPORT

TALKING IT OUT

A blueprint for trading synthetic diamonds and a challenge to the term ‘cultured pearls’ were among the issues that occupied the World Jewellery Confederation (CIBJO) Congress, which took place in November at the Four Seasons hotel in Bahrain.

Here are some of the key takeaways from the conference.

BY DAVID BROUGH

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DIALO GUE ON LAB - GROWN The CIBJO gathering was a milestone for the natural and synthetic diamond industries, as the dialogue there triggered a thaw in their fractious relationship.

A discussion document by a CIBJO working group made recommendations for lab-grown diamond nomenclature and grading, as well as an appeal for a constructive relationship between suppliers of natural and synthetic stones. The primary goal, the group said, was to keep consumer confidence intact by ensuring shoppers could receive complete and unambiguous information about what they were buying.

These informational efforts “should be carried out with mutual consideration by all sides, so as not to harm the natural or laboratory-grown diamond sectors in marketing their respective products,” the document stated.

On the grading front, it outlined two options for laboratorygrown diamonds: using the 4Cs system like the trade does for natural stones, or establishing a parallel and separate standard with different terminology.

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Of course, natural diamonds may not be the only segment in competition with lab-grown. Jonathan Kendall, who heads De Beers Group Industry Services and is global vice president of CIBJO, said he believed an increased supply of lab-created diamonds would weigh on prices in the future and potentially lead synthetics to displace simulants like cubic zirconia as a diamond alternative.

“You are going to see the natural business reviving, and the costume jewelry category becoming synthetic rather than [featuring] the range of cheap alternatives [to natural products] that lower-end jewelry manufacturers use today,” he told Rapaport Magazine.

The Bahrain congress marked the first time there had been an open discussion between leaders of the natural and synthetic communities in such a forum. Suppliers of laboratory-grown diamonds have long accused diamond miners of unsustainable practices, which miners in turn have rejected, challenging synthetic producers’ sustainability claims. The CIBJO event helped soften the strained relationship between the two

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Four Seasons hotel, Bahrain.

segments, paving the way for a continuing dialogue to set a framework for trade.

The discussion document will next proceed to the CIBJO board of directors, which will discuss whether to adopt it.

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USE OF ‘FARMED PEARL S’ The congress also heard calls for “cultured” pearls to be called “farmed” pearls instead, amid concern that widespread usage of the term “cultured” to refer to laboratorygrown diamonds could lead to a misunderstanding of such pearls’ origins. “‘Cultured’ diamonds are grown in laboratories; cultured pearls are grown on pearl farms in some of the most pristine, beautiful places on the planet, [but] the consumer perception [of them] is rapidly starting to shift,” said Jeremy Shepherd, a pearl entrepreneur representing the Cultured Pearl Association of America. “We’d like to start using the term ‘farmed.’ We just want to go back to the original meaning of the word ‘aquaculture,’ which is [that the product is] farmed in water.”

Pearl farmers who use sustainable practices should be able to refer to their product as “sustainably farmed pearls,” Shepherd added, suggesting that their standards could encourage other farmers to employ sustainable methods.

The pearl industry in the United States plans to consider this proposed nomenclature, and CIBJO will mull the issue in the coming months.

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INTRODUCING ‘FEI CUI’ The material known as jadeite jade in the West was another topic of conversation at the CIBJO Congress, which considered adopting the Chinese term “Fei Cui” to refer to this green polycrystalline aggregate primarily consisting of jadeite, omphacite and kosmochlor.

Recent research has proven that omphacite and kosmochlor may be present in varying quantities, sometimes as the dominant component, according to a presentation by Chow Tai Fook managing director Kent Wong and Dr. Edward Liu of the Gemmological Association of Hong Kong. The term “jadeite” or “jadeite jade” is therefore incorrect, since it is using the name of a single mineral to designate a substance of varying composition.

Fei Cui is an example of a product that has not been transported or translated well outside its primary market of China, Cavalieri observed. He added that “after diamonds, Fei Cui products make up the most valuable sector in our worldwide industry.”

CIBJO will consider creating a Fei Cui Blue Book to set guidelines for its trade. ◼

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TRACKING NEW TE CHNOLO GIE S With technological advances disrupting the way the trade has done business in recent years, CIBJO’s board voted to establish a committee focusing on the long-term impact of these innovations.

Among the advancements the Technology Committee will examine is artificial intelligence (AI), which could be transformative for the sector. AI can create systems to analyze consumer demand and optimize the production of raw materials, including the types, qualities and quantities of gemstones being cut and the range of jewelry being produced.

Yet there are also more sinister aspects. AI often takes over decision-making functions that to date have been performed by people — such as grading — resulting in reduced human intervention and control. Invasion of privacy is also a concern for both industry members and consumers: AI allows for tracking, monitoring and profiling people, as well as predicting behaviors, and so can be used to cast a wide network of surveillance.

“It is imperative that we develop an understanding of where things are headed, rather than having to react to situations brought about by technological developments,” said CIBJO president Gaetano Cavalieri. “For a long while, our industry continued to operate according to rules and systems that seldom changed, but that is no longer the case.”

UK-based retailer John Henn — a CIBJO delegate representing the National Association of Jewellers (NAJ) — advised against fearing the unknown. “AI would normally scare a traditional industry like ours to death, where people and relationships are so important,” he said, but the forces at work “need to be brought out of the shadows.”

Clockwise from top left: Jonathan Kendall, president of De Beers Group Industry Services and global vice president of CIBJO; Gaetano Cavalieri, CIBJO president; Iris Van der Veken, executive director of the Responsible Jewellery Council (RJC); Kent Wong, managing director of Chow Tai Fook.

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R E TA I L R A P

Luxury retailers need a less traditional approach if they want the ‘me generation’ to buy their products. Here are some tips for reaching this coveted cohort of consumers. By Leah Meirovich 46 JANUARY 2020

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illennial consumers are independent, vocal, tech-savvy and used to getting what they want. They have disposable income and aren’t afraid to spend it on things they believe add value to their lives, no matter the price tag. But successfully enticing this market into your store is not as easy as it was with their moms and dads, and retaining them can be even more difficult. That’s why it’s essential to understand what makes them tick, and how to capture their loyalty.

CREATE A GOOD USER EXPERIENCE “Millennial shoppers want an experience” is a common talking point in retail. But what does that mean? What constitutes an experience, and what type of experience is this generation looking for? Most importantly, how much will it cost you to make it happen?

“Experience has become synonymous with millennial consumers, and in jewelry and luxury goods, opportunities abound to deliver a memorable moment,” says Kathryn Bishop, research and insights director of the Women’s Jewellery Network (WJN). “But here’s the thing — experience doesn’t have to be costly or ostentatious. It can be as simple as offering shoppers a glass of champagne and taking time to listen and learn about their lifestyles, preferences and personalities before pushing product their way.”

Karen Barry, a senior consultant with retail sales trainer The Friedman Group, agrees that millennials aren’t necessarily

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Kathleen Cutler.

“YOUR IMAGERY SHOULD MATCH YOUR CLIENTELE, AND YOUR REACH SHOULD BE AS BROAD AS POSSIBLE” seeking a flashy experience, but something that gives them a link to the product they are considering for purchase.

“Millennials…are more enticed by an item’s personal meaning or story,” she emphasizes. “Tell them about the mining process, or how your buyer selects specific items, or anything that connects the piece to people or otherwise brings it to life.”

Even creating experiences that require you to splurge a little can more than reward your efforts by forging bonds with new customers.

“Have an event where you invite your best millennial clients to come into your shop, bring friends and create a wish list,” says Kathleen Cutler, a sales expert for high-end jewelers. “Ask for the name of the person who would purchase off the wish list, and you can reach out to them with the suggestions.”

CATER TO THE INDIVIDUAL Unlike bargain goods, luxury items appeal to millennials because they are often one-of-a-kind products, and this generation considers itself highly individual. Millennials don’t want to wear “someone else’s engagement ring,” as bespoke jeweler Taylor & Hart declares in one of its ad campaigns.

“Millennials don’t want to look like everyone else,” states Bishop, stressing that retailers need to keep this attitude in mind when choosing their stock and marketing their products.

Barry concurs: “Individuality matters to millennials. When selecting products for your merchandise mix, include elements of current trends while still ensuring each piece is unique.”

Cutler suggests offering customizable products, such as highend nameplates that spell out the name of a significant other or a memorable date. But beyond that, she advises, “know your designers and their why, which is always best told through strategic storytelling. The millennial customer wants to feel connected to the brands they are buying, and will be extremely loyal when the brand vision resonates with them.”

DIVERSIFY YOUR MARKETING EFFORTS While consumers come from a broad demographic, that variety doesn’t always make its way into companies’ advertising campaigns. Millennials are more inclusive and expect the world to be more inclusive of them, notes Barry.

“Be aware of the diversity of images you share in ads and social media — and on your sales floor,” she urges. “Representation matters, and millennials want to see a wide variety of ethnicities, gender and sexual identities, ages, abilities and disabilities, cultural and family backgrounds, and even fashion styling. Your imagery should match your clientele, and your reach should be as broad as possible.” ▶ DIAMONDS.NET

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R E TA I L R A P

media feed. Stay top-of-mind by having memorable, engaging, purposeful posts with a true human connection.”

Kathryn Bishop.

Expanding your focus group is essential, adds Bishop, as therein lies the potential to drive tomorrow’s jewelry spending.

“Consider the fact that your future target audience for diamond jewelry will expand beyond heterosexual couples, men seeking the perfect engagement ring, or the burgeoning number of selfpurchasing women,” she says. “[Millennials] have the potential to spend not only on commitment and wedding rings, but on new occasions and relationships that jewelers might previously have never considered marketing for, like coming-out parties and Friendsmas.”

CULTIVATE OPEN COMMUNICATION The millennial consumer seeks community and a sense of belonging, and wants to connect with others more than ever, says Benjamin Smithee, CEO of retail consultancy The Smithee Group. Fostering an environment that lets these consumers receive and share information about your brand is imperative.

“Brands are a micro-community, [and] they must have a strategy for not only growing the community, but nurturing it,” he stresses. “That is more than an email newsletter and Instagram account. How are you creating opportunities for your fans to connect? How are you empowering your rockstar advocates to tell your story to others? And how are you listening to your community for feedback on how to evolve and grow over time?”

There are many ways to reach your consumers, says Barry, from phone calls to texts and social media. This generation has ever-increasing options of what to buy and where to buy it, so keeping in touch is more important than ever.

“Use social media as an engagement strategy, not simply to post photos of product and announce sales,” she says. “Respond to as many comments as possible, update regularly, and engage in storytelling. They are bombarded with ads on their social 48 JANUARY 2020

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MAKE YOUR ENGAGEMENT PERSONAL Don’t just blast your customers with your business, make it theirs, too. Millennials want to engage and be part of your brand.

They see it as more of a lifestyle than a business, and they want to feel like they matter.

“Send a message to important customers following a sale,” suggests Cutler. “Ask them for photos of your jewelry being worn, so you can feature them in both your social media and your email newsletter. This will continue to create loyalty and visibility for your brand while creating an affinity for your customer and their friends.”

Making your marketing personal automatically makes your customers part of your brand, Barry affirms. She believes the more you include customers in your business, the more faithful they’ll be when it comes time to make another purchase or suggest a jeweler to a friend. “[Post] stories and photos of couples who have purchased from you, employees sharing their favorite pieces with personal stories, [customers’] engagement photos with your rings, custom items shown with the story of the design process,” she recommends. “All of those make your store a part of people’s lives, not just a place to buy jewelry.”

ACCEPT THEM ON EQUAL FOOTING Millennials are one of the most educated generations and have a penchant for researching and planning most major purchases.

While a jeweler’s job is to be an expert and to impart knowledge, doing so in a controlling fashion can alienate customers.

“While it’s important to present yourself as an expert, be cautious not to talk down to a millennial,” warns Barry. “They

Ben Smithee.

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Karen Barry.

THE SHOPPER’S PERSPECTIVE TEAMING UP Collaborations are among the key trends of today’s luxury market, according to an April 2019 study by Boston Consulting Group and Altagamma. Some 60% of millennials have purchased “special edition” products that were partnerships between different brands and artists, the survey found.

COUNT THE GOODS The average luxury consumer in the millennial and Generation Z age bracket (16 to 34) owns nine luxury fashion items from the accessories, apparel and footwear categories, according to a report by NPD Group and Stylitics.

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are confident and prefer to be involved and treated as equals.

Share your knowledge, but also take time to ask for their opinions and input.”

Retailers should be casual and friendly, ask great questions, and be prepared with an answer when asked, agrees Cutler.

“They’ve most likely done their research online, so they arrive armed with tons of information. This may tempt you to take back authority and position yourself as the more knowledgeable expert, but don’t fall into this trap. You run the risk of the millennial interpreting your knowledge as condescending.”

GO OLD-SCHOOL – WITH A TWIST Merging a traditional sales approach with a new attitude is a great way to hook millennial consumers, says Bishop, who is also deputy foresight editor at trend consultancy The Future Laboratory. She suggests hosting focus groups to better understand what motivates these buyers, from the types of occasions they see as important, to what visual and design cues stimulate them.

One classic tactic that’s come back into style is keeping notes to make sure your clients don’t forget an occasion, says Cutler. “Start collecting names and dates [of partners and friends] and reach out to customers six weeks ahead of these important dates.”

That said, retailers need to understand that with millennials, not every experience or conversation needs to lead to a sale — for now. Instead, stores should work on building bonds and creating a feel-good environment centered around their brands.

“The problem millennials have with most experiences is that right at the end of a potentially amazing experience is a forced sales attempt that sours the taste,” explains Smithee. “Brands shouldn’t worry about immediate return on investment. Instead, they should focus on creating the most value for the customer.

That’s what will inspire them to return.” ◼

Unlike previous generations, most millennials don’t buy luxury because of its exclusivity. In fact, only 6% of millennials and Gen Z-ers surveyed by luxury fashion site Highsnobiety purchased high-end goods out of a desire to express wealth, and 85% believed in the brand’s ideals and authenticity. In addition, only about half of respondents thought the luxury item they’d bought was of better quality than affordable alternatives.

REPEAT PERFORMANCE When it comes to purchasing high-end products regularly, millennials take the top spot, with 25- to 34-year-olds comprising 34% of repeat luxury sales, according to a survey by Global Web Index. Men in particular tend to be repeat buyers, making up 67% of shoppers in that category.

FOR WHAT IT’S WORTH Approximately 50% of millennial consumers consider the long-term resale value of a luxury item when purchasing it, reported Boston Consulting Group and Altagamma.

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TH E FINAL QU IZ

THE FINAL CUT QUIZ

GEM TESTING

Check your knowledge of 2019 diamond news with Rapaport Magazine’s annual quiz JANUARY Lady Gaga stood out at the Golden Globes with a custom-made Tiffany piece featuring a pear-shaped, 20-carat diamond. What was the necklace called?

A) THE AURORA BOREALIS B) THE NORTHERN LIGHT C) THE TIFFANY AURORA D) THE TIFFANY BOREALIS

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FEBRUARY Two stones from De Beers’ labgrown brand, Lightbox, turned up at the Gemological Institute of America (GIA) for grading. What color and clarity did they have?

A) G, VS B) H, SI C) I, VS D) J, SI

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MARCH Fugitive Indian diamantaire Nirav Modi was arrested in which city?

A) HONG KONG B) LONDON C) NEW YORK D) PARIS

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APRIL Graff created this D-color diamond from the 1,109-carat Lesedi La Rona.

How much did the final polished weigh?

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MAY Which Signet Jewelers brand became the retailer’s first to offer lab-grown diamonds?

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A) JAMES ALLEN B) JARED C) KAY JEWELERS D) ZALES

A) BROADCAST LIVE COVERAGE OF THE POLISHING PROCESS FOR THE CONSUMER TO VIEW ONLINE B) GUARANTEE A GIA EXCELLENT CUT GRADE FOR ALL STONES C) OFFER POLISHED YIELD OF 99% D) PRODUCE ALL THE FACETS OF A ROUND BRILLIANT IN ONE PROCESS

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JUNE Martin Rapaport’s JCK Las Vegas speech called for an advertising campaign to promote natural-diamond engagement rings. How much did he believe the industry should spend?

A) $200 MILLION B) $500 MILLION C) $1 BILLION D) $2 BILLION

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JULY Which of these lines did not appear in Forevermark’s new bridal commercial, “I Take You, Until Forever”?

A) I TAKE YOU TO BE MY BEST AND MY MOST RIDICULOUS FRIEND B) I TAKE YOU TO BE MY EMERGENCY CONTACT C) I TAKE YOU TO BE MY LISTENER D) I TAKE YOU TO BE MY PARTNER IN SPLITTING BILLS

A) 302.37 CARATS B) 303.37 CARATS C) 304.37 CARATS D) 305.37 CARATS

SEPTEMBER Synova claimed its new DaVinci automated cutting system was the first to do what?

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OCTOBER Which mining company unearthed a rough diamond containing another diamond inside?

A) ALROSA B) DE BEERS C) PETRA DIAMONDS D) RIO TINTO

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NOVEMBER Thieves stole more than $1 billion worth of jewelry from a museum in Germany. But which valuable stone was luckily out on loan to New York’s Metropolitan Museum of Art at the time?

A) THE BLUE MOON OF JOSEPHINE B) THE DRESDEN GREEN C) THE GRAFF PINK D) THE HOPE DIAMOND

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DECEMBER What reason did Dutch bank ABN Amro give for reducing its financing of rough purchases?

A) MILLIE BOBBY BROWN B) BILLIE EILISH C) WILLOW SMITH D) GRETA THUNBERG 124 JANUARY 2020

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A) BANKING SCANDALS HAVE MADE THE SECTOR LESS SAFE B) CUTTING AND POLISHING IS NOT PROFITABLE ENOUGH C) DIAMOND CLIENTS HAVE TOO OFTEN FAILED TO REPAY THEIR LOANS D) THE DIAMOND TRADE HAS BECOME MORE EFFICIENT AND NEEDS LESS CREDIT

ANSWERS: 1. C; 2. A; 3. B; 4. A; 5. A; 6. C; 7. B; 8. A; 9. D; 10. A; 11. B; 12. D

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AUGUST Pandora recruited which teen celebrity as its brand ambassador?

WORDS BY: JOSHUA FREEDMAN. IMAGES: GRAFF; FOREVERMARK; ALROSA

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