Following is the full text of Diamond Trading Company Managing Director Varda Shine at the 32nd World Diamond Congress in Tel Aviv, “Transforming Diamond Industry Culture – Responsibility and Service”.

 

Introduction

 

It’s a great pleasure to come home to Israel for such a prestige event as the World Diamond Congress. Israel is important to me because it’s here that I first learned my profession, and here that I made so many industry friends.

 

Worldwide sales of diamond jewellery are growing steadily, year-on-year. And that growth indicates that we have something to be optimistic about -- and that we can be proud of our industry.

 

That optimism will serve us well in a future full of changes and challenges. And this is what I want to talk about today – to share with you how we at the DTC see the marketplace changing, and how our future vision is developing.

 

My speech today is entitled:  “Transforming Diamond Industry Culture – Responsibility and Service.”

 

Responsibility … because it’s the duty of everyone in the pipeline – and not just the DTC – to ensure our industry continues to enjoy sustainable growth.

 

Service … because this growth depends on understanding the needs of consumers and market players, by becoming ever more service-oriented.

 

I’ll describe what’s been done so far … and what remains to be done in the fields of marketing, maintaining consumer confidence, and of ethical behaviour. I’ll also give a snapshot of how the DTC is playing its part.

 

But even before my story begins I want to issue a call to action.

 

We need your help.

 

We all need to recognise our responsibilities, and the role we can each play in strengthening our industry’s growth and creating consumer demand for the product that sustains us all. 

 

Encouraging this growth involves a whole range of activities, and I am not simply talking about advertising and marketing.  Vitally, I mean finding ways to differentiate diamond products and services and improving business standards.

 

We live in a world of competition, innovation, and partnership. And we all need partners to help grow and develop our industry. The bottom line is that while our core product – the diamond – is forever; our industry itself must certainly evolve.

 

The Diamond Industry today and the Imperative for the Future

 

But why change what has worked so well?

 

As an industry we are united by a common goal: to ensure that diamonds continue to be an expression of love, the ultimate symbol of an emotional connection or a special occasion.

 

We cannot assume that our inherent human fascination with diamonds alone will maintain the position of diamonds as the world’s most popular luxury product. In fact, the diamond industry has reached the end of an era when heritage and sentiment were the driving forces. We need to extend the mood or message of “a diamond is forever” into a new age.

 

From economic volatility to competition from other luxury goods, from synthetics to conflict diamonds, to pressures on our industry pipeline, there are many challenges and threats to be reckoned with. 

 

For mid-stream cutters and polishers, there is the additional challenge of fragmentation in manufacturing, which arises from the requirements of producer countries to add value to locally-mined diamonds, a trend that will continue growing.

 

And in the minds of today’s consumers, diamonds vie for attention with luxury holidays, Prada handbags and other glamorous experiences. So we must ensure diamonds will always be the first choice.  We need to invest more in “diamond equity” – the underlying emotional mystique that diamonds carry.

 

Partly, that means preparing for the potential impact of synthetics. Consumers must feel that when they buy diamonds they are getting the real thing -- naturally formed billions of years ago.

 

So, Ladies and Gentlemen: what do our priorities need to be?

 

I believe we should adopt three key priorities: we must act together in facing our challenges; we must be more consumer-oriented; and we must be more innovative.

 

To illustrate the first priority, acting together, let’s consider what creates a winning golf Masters team. Playing your individual best, but playing together as a team, is the secret.

 

Look at the way both Hollywood and the music industry present a united front when it comes to controlling piracy or copyright theft.

 

That’s why we need unity and cooperation around certain principles like best practice. And because of the entertainment industry’s new interest in conflict diamonds, we must unite to maintain consumer confidence.

 

On consumer orientation, we must focus on what people want and on new ways to keep diamonds desirable.

 

Jewellers need appealing, relevant campaigns that get consumers excited, as well as enticing retail environments.

 

Good examples here are Prada and Moet & Chandon’s campaigns, and store environments in the lingerie sector for        La Senza, La Perla or Agent Provocateur.

 

Appealing to consumers in different nations … especially new markets like China and India … requires products to match the cultural diversity of our customers. Knowing what fits consumers in different regions and tailoring products to suit those preferences is the key to success in globalised commerce.

 

In fact it’s one of the great strengths of the HSBC banking group, which they frequently highlight in their ad campaigns. At the DTC, we do much the same.

 

Great examples of this are Vivaha in India, Rayana in the Gulf region, Journey in the US and “you and me” two stone rings in Taiwan. These are all value propositions or “big ideas” initiated by the DTC that have created new market categories for the benefit of the entire industry.

 

Innovation breathes new life everywhere. Think of the telecoms industry: two decades ago it had no tradition of customer service or competition. Thanks to innovation, the industry embraced new customer-friendly technologies such as mobile telephony that brought massive growth and brand differentiation. Today strong brands such as Orange, Vodafone or Verizon create strong brand personalities with essentially similar products.

 

Creating differentiated diamond offers … especially niche brands … is crucial to innovation. In the luxury market, innovation and brand strength are not exclusive to huge corporations.

 

Think of Glenfiddich malt whisky, a product that’s recognised worldwide and competes successfully in the highly competitive drinks sector against global whisky brands owned by Diageo and Pernod Ricard. The Glenfiddich brand has been achieved without enormous advertising costs.

 

Of course, we must think about the importance of creating of opportunities to present differentiated offers to consumers. For example, new jewellery shows, new collections, new trends, new fashions … these are all ways to get consumers excited about diamonds.

 

But it is important to appreciate that brands and brand loyalty can only be created through repeat purchasing.  If you look at a clothing store like Zara, customers make an average of 17 purchasing visits per year.  By comparison, a typical customer for diamond jewellery only makes a purchase every 3.5 years, therefore building brand loyalty for diamonds poses special challenges.

 

Achievements to date -- The last 5 years

 

So what has been achieved over the last years?

 

Change has already begun. Let’s take a moment to celebrate some of the achievements of the last five years. I have time for just three snapshots to highlight: improved industry professionalism; better ethical and business standards; and innovations to market and technical processes.

 

On the subject of improved industry professionalism, I think we have something to celebrate together.

 

Let’s pause for a second and reflect on the question: “How has my business changed over the last 5 years?”

 

Today, more than ever before, diamantaires look at their businesses rigorously, and are accustomed to making tough financial decisions. For instance, those who are not making sufficient returns on capital will readily consider investing in other industries.

 

Improved governance and business reporting practices reinforce significant developments on the ethical front to build trust.

 

Think of the DTC Best Practice Principles and since 2003, the Kimberley Process. Let us not forget that over 99% of diamonds are conflict-free, and they are of huge benefit to Southern African economies, such as South Africa, Namibia and Botswana as well as many other economies around the world.

 

Lastly, marketing and innovation.

 

The demand for diamonds has become so great that now even fashion houses and other luxury brands don’t want to miss out.  Brands like Gucci, Dior and Escada now offer diamonds as part of their product line-up.

 

Even brands such as Smirnoff, Nissan and Montblanc are finding excuses to incorporate diamonds into their offering. 

 

Meanwhile, as an industry, we’re reaching millions of new consumers in new growth economies and developing new technologies, for example Sarin, which marks diamonds for maximum yield.

 

The next 5 years for our Industry

 

So it has been a good five years. But we must balance the temptation to offer a rosy outlook with hard truths about consolidation of the industry pipeline. While both ends of the pipeline – miners and retailers – make margins, the depressed profit levels in the mid-stream may continue to be a challenge until consolidation and product and service differentiation takes place.

 

The good news is that over the next 2-3 years, consolidation and differentiation will bring about increased margins and more bargaining power.

 

The experience of other industries shows consolidation can produce a polarised retail landscape with large integrated players, and boutique players with unique offerings. Think of the food retailing sector where you’ll find giants like Walmart, Carrefour, Tesco – and thriving local delicatessens too.

 

 

Changes in the retail environment – notably the arrival of strong branded chains – are going to have an affect on other parts of the industry, especially traditional cutting centres. Moving forward, the cutting and polishing industry will either be dominated by larger players or players able to offer differentiated services … either through cost-efficiency or having a unique offering.

 

On the financial side, the industry is currently experiencing cashflow problems. If, as an industry, we operate in a more transparent manner … particularly in the area of corporate governance … we will see a greater range of financiers coming into the industry.

 

The DTC – Focus on Service and Customers

 

I have talked about the need to focus on consumers and to drive growth for diamond jewellery sales.

So what can I tell you about the DTC and how we see ourselves playing our role in this?

 

Well, we are also thinking about customers and particularly about how we can provide services to the wider industry that will help to grow consumer demand. We started with our marketing programmes and of course these will continue.

 

We also have services for our Sightholders and these are constantly evolving and improving. Now we are thinking of other services too, but not just for Sightholders: The long term aim is to provide services that leverage our intellectual property and skills for the benefit of our clients and the entire industry.

 

DTC is evolving into a service company with an open service culture. So we don’t only sell rough diamonds – we sell the diamond dream.

We are also the preferred partners for producers.

 

But we cannot stop at this …

 

We must and will continue to review our business and continually ask questions of ourselves:

•           Do we have the right strategy?

•           Do we have the right people to deliver this strategy?

•           Do we have the ‘big ideas’ that will make a real difference?

 

We must continually challenge ourselves and ensure that any changes we make matches our strategy and are of benefit to the whole diamond industry.

 

Conclusion

 

Which brings me to my conclusion.

 

We must not underestimate the great potential of our industry, but we must embrace a new era … an era of action, of taking responsibility and of rising to the challenge of change.  This applies to everyone here and every individual in the diamond industry.  The reason for this new era is simple … competition.

 

We know from our own experiences that change is never easy, but together the diamond industry can achieve sustainable growth through more innovation, more active marketing – and by maintaining the highest business standards. Our industry must delight consumers with a truly service-oriented culture. 

 

The diamond industry has grown up supporting a number of quite different business models, ranging from large corporations to family businesses. There will still be a place for all these models providing they add value at all times. 

 

So, if you are asking yourself what can I do?  I would recommend the following three things: find the right vision for your business, generate great ideas, and ensure you have talented and ambitious people who will make your plans happen.

 

What excites me most in this challenging business is that the DTC team I am building are doing just that.

 

Thank you very much.