When LVMH Moët Hennessy Louis Vuitton handed its diamond ring back to De Beers in March, severing a 16-year retail joint venture known as De Beers Diamond Jewellers, the markets shrugged. After all, everyone — De Beers, LVMH, the diamond consumer — had already moved on.
Analysts described it as an experiment that didn’t work, and they were right: During those 16 years LVMH and De Beers, which had planned to create one of the largest jewelry companies in the world, had both found more efficient ways of building scale in the fine jewelry space: LVMH bought the megabrand Bulgari and De Beers put its muscle behind Forevermark, its collection of branded diamonds and jewels.
The market changed drastically, too, in those 16 years. In 2001, when the joint venture was first announced, both LVMH and De Beers believed they could grab and consolidate part of the vast, unbranded jewelry market and compete with the likes of Tiffany & Co., which has since been notching sales declines and come under fire from activist investors.
What they failed to foresee was that a new generation of skeptical and sustainability-minded jewelry consumers would decide that big wasn’t necessarily beautiful, and that the local, neighborhood jeweler still had a certain appeal.
“Today, those independents and small chains are still the backbone of the industry in terms of sales,” said Stephen Lussier, executive vice president, marketing, De Beers Group and chief executive officer of De Beers’ Forevermark brand.
“There’s been some consolidation in the jewelry sector, but the reason, fundamentally, why there’s been less than in other sectors comes down to the fact that every diamond is different. And there’s still this element of deep-seated trust in the person that you’re buying from. You want to know that person’s still going to be there if you go back, which is an advantage for the local, regional, well-run independent jeweler. In our sector, ‘people trust’ is still quite strong,” said the diamond industry veteran from his offices in London’s St. James’s.
De Beers has been taking full advantage of that trust factor with Forevermark, and has also been rethinking its approach to branded stores now that it owns 100 percent of De Beers Diamond Jewellers.
Lussier first launched the Forevermark collection of diamonds — which come loose or in settings — to jewelers, in 2009 in China and Japan. Two years later he took it to the U.S., and has only just begun to market the brand in continental Europe and the U.K.
Each diamond is inscribed with a unique number, while De Beers guarantees that the rocks are responsibly sourced and among the “most beautiful” stones in the world.
One of the motivations behind the Forevermark launch was to support small jewelers and give them a narrative — and a sustainability story — they could take to the end-customer.
Smaller jewelers, he said, “were struggling to articulate clearly the idea that not every diamond is the same just because it has the same four C’s (cut, color, clarity, and carat or weight). We were also concerned, particularly in this digital world, about a more commoditized selling of diamonds. You can’t commoditize a diamond when every one is different.”
Alongside the Forevermark launch, Lussier said that De Beers has also been looking at its retail network in a new light. While the aim is to build the retail network, any growth is automatically limited by the diamonds themselves. “We don’t make these things in a machine. If you’re going to deliver something that is inherently very special and unique there is a limit to the amount of scaling that you can think about,” said Lussier.
“When we look at De Beers Jewellers today, we see it as much more focused on not being about consolidation and creating a huge-scale distribution channel in the luxury branded way. We look at it more about how we can make sure we’re accessible, and have sufficient scale to be accessible to enough consumers, but not so much that we can’t support each store with diamonds that are unique and rare and exceptional and live up to the brand.
“It’s like old-fashioned luxury, if you go back in time, luxury stores could only make so much stuff. You had to go there to get it, you felt special. In some ways, we’ve evolved out of that now, but for diamonds it’s a reality because you only have what nature’s made for you. They’re rare. You need to think about the way you develop your business with that fundamental constraint. For me it’s a good thing, even though at times it’s frustrating. Diamonds are also different from any other luxury accessory, or fashion accessory, because they come with huge emotional importance.”
Little wonder, then, that LVMH and De Beers grew apart, with the former wedded to a business model that’s all about scale and pumping high-end, high-margin product out season-after-season, and the latter working around limited supplies.
“It’s a different mentality. Where we have found the opportunity for scale is more through Forevermark, where we could, in effect, create marketing scale, without needing to consolidate the retail environment. Our retailers could still be pretty fragmented, but the marketing muscle can still come from Forevermark. And because it’s broader in its price range, we can build sufficient scale.”
He described the retailer as “the pinnacle” of De Beers’ offer to the world. “The best of De Beers diamonds will flow through De Beers jewelers and the really unique, and exceptional diamonds will have a home there,” said Lussier. “At De Beers group it’s also an emotional thing, the jewelry stores are all that we want diamonds to be.”
There are currently 29 De Beers stores across 16 consumer markets, and Lussier said there is still opportunity for some expansion. He said the jeweler is “particularly strong in China, where authenticity of the brands and integrity are very powerful. I think that among Chinese consumers learning about our category for the first time, the inherent expertise and knowledge and history is very strong.”
The branded jewelry market is growing, too — although maybe not as fast as LVMH and De Beers had originally anticipated. According to Compagnie Financière Richemont, while the unbranded jewelry market is still far larger than the branded one, branded jewelry is taking about 1 percent of market share each year.
Going forward, De Beers plans to tear a leaf out of the indie retailer’s book when it comes to its own network of stores.
“With the Millennials, we hear more about the desire for something more unique — individual may be a better word. They want to think that they’ve been more involved in the process and that they aren’t buying something that was made for everybody else. That does provide opportunities for niche players in our sector and it’s again part of why we’ve developed Forevermark in the way we have,” said Lussier.
“De Beers jewelers is small enough in terms of number of stores that they can customize designs for their customers, particularly in the bridal area. They can involve customers in that process and create things that are unique. We have the capability to sit down with a customer and design something for them and deliver it in a reasonable time frame. You need to be able to cater to those different needs now.”
De Beers is also trying to respond to other customer needs. Lussier said a major theme that has emerged is female empowerment: Older women are increasingly buying for themselves, and husbands are buying for their high-achieving wives.
“If I take a really long view, and think about the biggest long-term factor impacting our industry it’s the megatrend of female economic empowerment. Today, in one in four American households, the woman is the principal earner. In a decade that is forecast to be over half of households.”
He said the insight that De Beers has gleaned from talking to affluent women consumers is that they want gifts from their husbands and partners, “and they want to be appreciated, but it’s more powerful to them now to be appreciated by their husband for what they do outside of the family as well. They want to be appreciated for their role as an individual out in the world. They really want their husbands to now say ‘Thank you because I am just so proud of you.’ As an industry, getting that message articulated is really powerful.”
America is a major market for De Beers, with U.S. consumers now accounting for roughly half of all diamond jewelry purchases globally. According to a De Beers Group report from June, total diamond jewelery demand from U.S. consumers increased 4.4 percent in 2016 to exceed $40 billion for the first time. The U.S. has recorded five years of consecutive demand growth.
Lussier said self-purchase remains the fastest-growing part of the diamond jewelry market today — accounting for about one-quarter of the overall market — with average purchase prices on the rise. He said it’s not — what many would assume — single women buying for themselves, but older, affluent married women.
“They say, there are times when I want the gift because I want all the emotional symbolism from my husband, and there are times were I see a design and I think I deserve it. I’ve got my own income, so why can’t I buy that design for myself?”
Lussier said it’s critical that De Beers connects with women and appeals to their needs and to an ever-evolving mindset.
“The whole Harvey Weinstein story reinforces the point: This is a seminal moment in terms of public awareness of the power of women and it relates back to this fact that women’s self-perception – and the reality – are really different now than in the long history of what jewelry was. When things are changing, there’s both risk and opportunity. You need to manage the risk and grab the opportunity.”