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How Blockchain Will Bridge Consumption To Consciousness In The Jewelry Industry

As the diamond industry re-emerges from the Covid-19 shutdown, Everledger CEO Leanne Kemp urges business leaders to widen their perspective on what really matters to consumers.  

The diamond industry was reeling, even before Covid-19 hit it with an uppercut. In India, for example, where the vast majority of stones are cut and polished, many manufacturers were already operating under an impossible margin band, ranging between -7% to -1%, meaning they lost money on every diamond sold. In 2019, global diamond jewelry sales had already dropped by up to 5%, according to Bain’s, while mining and midstream revenues had shrunk by 25% and 10%, respectively. For some smaller operators, this sudden recession could prove a knock-out blow. 

The old-fashioned hand-shake culture in the diamond industry arguably left it more vulnerable to a global pandemic than others. For example, International diamond shows – a crucial networking and sales window in the calendar – were heavily disrupted by the grounding of air travel. Diamond jewelry is traditionally a bricks-and-mortar marketplace, so those without a scalable e-commerce offer and well-established digital customer engagement systems were caught cold. Restrictions on the supply chain, and faltering consumer demand, will result in a drop in rough-diamond sales of 30% to 40% this year ($7 billion to $8 billion) as predicted by Moody’s

All eyes are now trained on the peak season of Thanksgiving, Christmas and Lunar New Year, as retailers and manufacturers attempt to regain lost ground from the first financial quarters of 2020. There are some grounds for optimism. The same Moody’s forecast expects a market pick up in the second half as social distancing eases, with revenues rising 20% to 25% in 2021, barring another virus wave. The world’s largest diamond mining company Alrosa predicts a rise in demand by July or August, buoyed by the fact that sales are already bouncing back in China and other Asian markets.

A problem shared… 

While conversations will center on the pandemic recovery, the industry must also address the underlying issues that have hampered its progress in recent years. For too long, the focus has rested on efficiency: how to make supply chains bigger, better, faster and cheaper. Diamantaires have lost sight of the collective benefits of value chains, not least in reducing risk. As business author Michael Porter first described it, the “value chain” is the set of processes that add value to a finished product as it moves through a supply chain. Diamond manufacturers add a significant value to a diamond, despite the low aggregated cost it brings to the chain.

Nonetheless, the fact that mid-tier manufacturers are operating with negative margins is everybody’s challenge to solve. The fact that retailers must convince consumers about the provenance of their jewelry is everybody’s challenge to solve. Might the impact of the pandemic have been mitigated by a more united front? 

Covid-19 has created an excess supply of diamonds and lower demand from customers, suggesting price drops all along the pipeline. Yet, prices are already rock bottom. In this buyer’s market, is it possible that a new value system could emerge, based on more than simply dollars and yuan? A values system, perhaps?

Notably, people who love diamond jewelry also want to know their purchase has been sustainably and ethically sourced. In the post-pandemic market, these conscious consumers will increasingly call the shots. With prices so low, auditability is becoming a source of added value – and a bargaining chip. Those businesses with the desire and ability to meet the provenance challenge will be better placed to shake off the rigours of the pandemic, and then prosper in the long-term.

Indian diamond cutters who process the lion’s share of low-grade stones have been forced to close because the flow of raw material has dried up, forcing the mass exodus of an estimated 200,000 workers from the key diamond processing center of Surat.

Retailers are already responding to their demands by passing the need for transparency, accountability and truth down the chain to manufacturers and miners alike. Market leaders like Alrosa are investing heavily in sustainability reports to demonstrate their green and ethical credentials. A good backstory is now a business asset. Take the Dimexon Group, for example. A diamond manufacturer and jeweler based in India and China, the company has been empowering its 75% women workforce for 40 years. Today, half of the group’s management team are also women – a rare occurrence in what remains a male-dominated industry.  

The industry has entered an evolutionary period, from which only the fittest will survive. With provenance changing from a nice-to-have to a business imperative, the definition of ‘fittest’ may start to change too. The most conscious of the planet and people, perhaps? The most accountable and transparent. The most willing to celebrate truth. Imagine if fittest meant: the greatest contributors to a value chain in which stakeholders matter just as much as shareholders. 

Now, consumers are speaking directly to the diamond industry. They want to know for sure that a natural diamond reflects their own principles around authenticity, ethics and sustainability. Saying it’s so, doesn’t make it so. Gone are the days when even a reputable supplier could sell to Gucci without a high level of auditability. And transparency isn’t the preserve of top luxury brands. Low price leaders such as Costco won’t accept face value either. Pop-up retailers must demonstrate a pedigree of legitimate sourcing to sell their affordable jewelry. 

Tech propulsion 

Digitized information and communication are vital for achieving a transparency revolution. However, technology for technology’s sake interests nobody. Any new solution must have a human dimension to attract end consumers and move goods throughout the whole pipeline. 

Technology can help to propel the mindset of the industry from consumption and efficiency to consciousness and contribution. For example, as new diamond categories emerge – such as green, carbon-neutral and conflict-free –  secure blockchain solutions can help retailers, manufacturers and mining companies to communicate the sustainability and ethical credentials of each stone. Rather than pushing in isolation, the whole value chain unites around a collective consensus, creating a single version of the truth and a more secure distributed tech stack. Consumers, buyers and suppliers can now search for the diamonds that best meet their priorities. Transparency and trust emerge as a powerful market force. 

Now or never?  

Like their post-war predecessors, today’s diamantaires face an existential crisis, caused by the emergence of synthetic stones and the changing retail habits of consumers. Jewelers find themselves in a far bigger luxury arena than ever before, competing with other sectors for wallet share. Instead of new earrings or a necklace, for example, a millennial or newlywed may choose to splash out on a trip of a lifetime or designer mobile phone.  

The longer that diamond businesses sit within their echo chambers, making deals with the same old people through the same old channels, the further they risk falling behind. Conversely, there is an opportunity for companies that widen their perspective. If CEOs can tune into the wavelengths of systems leadership and technological innovation, then the future of precious stones may become more secure. 

The cut of a diamond is vitally important for releasing the full brilliance of the stone. Moving forward, the diamond industry needs to shape its message to the world in a way that shows every facet of a diamond’s provenance in the best possible light. The beauty and financial worth of a diamond remains a major part of the story – but not the whole story.

All this upheaval provides an opportune hiatus to rethink the storytelling behind diamonds. Coordinated marketing, once the industry’s go-to solution, will need to make a comeback as consumers emerge from the wreckage of coronavirus. Post-pandemic values may change broadly.   

It’s time to look beyond the diamond ring to the finger that wears it. The industry must again speak directly to the consumer’s heart and mind. Businesses must listen to consumers like never before, then show their truth with actions and transparent evidence. Without this consciousness, the future of diamonds could remain insecure.

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