Point of View
Equity Communications
More color to themes and insights from the Global Diamond Business 2014 report
Helpful advice plus point of view on topical subjects and current items of interest
Global Diamond Industry and Precious Jewelry Markets
by Tinashe Takafuma
tinashe.takafuma@diamondshades.com
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For Clients Only
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August 14, 2014
Issue 1 of 24
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In this issue:
1. 2013 Diamond Industry Pipeline Factsheet. Plus 2013 review and 2014 outlook
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2. Helpful insight and analysis of online diamond retailing using Blue Nile as a template
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- Blue Nile has had a fantastic few years, find out why
- HOT TOPIC: Blue Nile has lost sales momentum in both of its geographical segments in
the first half of 2014. Quarter 2 sales of engagement jewelry in the key U.S market actually
fell
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 What you can learn about the current market environment
 How one marketing mistake damages Blue Nile’s customer growth
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- Five Key Factors That Drive Sales Success In Online Jewelry Retailing
3. Chart in Focus: Why India offers the brightest future for the consumption of precious jewelry.
Plus the new government in India promises stronger economic growth…opportunists should
get ready to pounce!
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Dear Client,
I'm relieved Equity Communications is not releasing any new reports on the global diamond industry
for the remainder of 2014. This frees up time for me to engage in what I hope will be stimulating and
thoughtful dialogue with our clients. Thing is, it gets quite difficult for me to respond to special
requests from clients when I also have to supervise my team on research projects. I get to review an
enormous amount of research.
Anyway, the Point of View serious is a welcome change of pace.
My first Point of View is heavily tilted towards the retail end of the diamond industry. However, in
future issues I will try to offer something for each stage of the diamond industry value chain. That is
- Supply, Trade and Consumption.
Also, I will try my best to limit it to just fifteen pages. But I sometimes get talkative and I hope you
won't mind.
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To compensate for the lack of diversity in this issue, I have attached a link to the 2013 Diamond
Industry Pipeline Factsheet. Basically, it shows the values achieved at each stage of the diamond
industry pipeline in 2013. For example, global sales of diamond jewelry reached US$73.754 billion
in 2013.
Download the file here: http://www.diamondshades.com/index.php/download_file/316/
Also, Equity Communications has released its key research findings on the state of the global
diamond industry in 2014. You can read the 2013 review and 2014 outlook summaries for each
stage of the diamond industry pipeline on this page:
http://www.diamondshades.com/diamondreport
Moving on...
Please continue reading to next page...
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As you know, the online diamond business has really transformed diamond retailing in two chief
ways: one good and the other not-so-good (for diamond traders).
The good?
Retailing of diamonds on the internet has made things much more transparent and better for
consumers since all diamond choices are literally available at their fingertips. Furthermore, today’s
consumers are more knowledgeable about diamonds because many retailers have used the internet to
educate them about diamonds and the diamond business.
The not-so-good?
Improved transparency means that consumers now hold the better end of the stick in the diamond
jewelry business. Price transparency at the retail level has introduced price competition to the
industry and lowered polished diamond prices.
As you know, the internet is the ideal environment to pit one seller versus the other and allows the
laws of supply and demand to set the most efficient price. Consequently, retailers who sell
comparable diamonds at a premium have been forced to reduce prices in order to move stock.
Against this background, I managed to review Blue Nile's second quarter results to find out the
current state of online diamond retailing.
I think we can use Blue Nile as a template for the online diamond business because it is the leading
company in that segment and certainly the most visible.
Maybe you will appreciate what I am going to say about it.
Blue Nile's business model can be summarized like this:
"Come to us for all your diamond requirements. Buy same quality diamond products from us at
prices 20 to 40 percent below those you get at traditional jewelry retailers."
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Now, diamond jewelry is expensive so savings of 20 to 40 percent for a product that costs $5,000 in
other channels is a great deal. The business model works.
How does Blue Nile manage to sell diamonds profitably at such lower prices?
Mostly, the business economics of the diamond business are such that retailers require large margins
to compensate for the fact that diamond inventory is costly while consumers buy diamonds
infrequently. Generally, the diamond retailing business is not sustainable in the absence of large
margins.
However, Blue Nile's business model eliminates expensive inventory carrying costs because it does
not stock loose diamonds.
The company has entered into arrangements with its suppliers that allow it to display suppliers’
diamond inventories on the Blue Nile website for sale to consumers without holding the
diamonds in inventory. Loose diamonds are passed on to Blue Nile only after customers have
ordered products.
The company’s strategy is a modern-day version of the 'just in time' inventory management strategy
originated by the Japanese in the 1950s.
In other words, Blue Nile maintains a virtual inventory of diamonds owned by its suppliers. The
company has developed an online platform (website) where it showcases and markets this
inventory to consumers after it has added its mark-up.
What's more, Blue Nile immediately gets cash for diamonds sold through its platform but pays its
suppliers on 30 to 120 days terms. This is a common and normal way of doing business in the
diamond pipeline. Anyway, the business model is cashflow positive for Blue Nile.
So how is this working out for Blue Nile?
Please continue reading to next page...
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Financial Metrics
Key Takeaway – Rapid sales growth last few years until 2013
Exhibit 1
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Double-digit sales growth in the last two years
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Sales in the key USA market have been strong
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International expansion efforts are progressing very well
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USA Market has maintained 84 percent share of sales in the last three years, matching
international sales growth
Exhibit Source: Blue Nile, Equity Communications
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Exhibit 2
Exhibit Source: Blue Nile, Equity Communications
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Engagement jewelry (diamond engagement rings) main product segment
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68 percent in the key USA market and 81 percent in the international market
It all adds up when you consider that most people buy diamonds for love events such as for
engagements. Diamond shoppers really appreciate the savings value...even for people with extra
money to spend.
In America, on average, a diamond engagement ring is the third most expensive item that a person
will buy in their lifetime (other than a home and a car).
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Exhibits 3 and 4
Blue Nile: Movement in gross profit margin
Blue Nile Sales By Product Segment
FY2010
FY2013
Non-engagement Jewelry (higher margin products)
32.50%
30.00%
Engagement Jewelry (lower margin products)
67.50%
70.00%
Gross Profit Margin
21.60%
18.60%
Source: Equity Communications, Blue Nile data
Gross Profit has steadily grown in the last few years while gross profit margin has steadily
weakened. The shift in gross profit margin is probably because engagement jewelry has increased
share of total sales as a result of growth in the key USA market plus growth in international sales.
Engagement jewelry tends to have lower margins compared to non-engagement jewelry,
especially as it becomes more costly. Add to this, Blue Nile's customer profile has shifted to the
higher-end...people who typically buy more costly diamond jewelry.
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Exhibit 3 Source: Blue Nile, Equity Communications
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Key Takeaway - But Blue Nile has lost sales momentum in both geographical segments in the
first half of 2014
Exhibits 5, 6 and 7
Blue Nile Financial Metrics: Last Two Quarters
$ Millions
Net sales
Gross profit
Net income
US Engagement Jewelry Sales
US Non-engagement Jewelry Sales
International Jewelry Sales
2014Q1 versus 2014Q1
2013
2014
97.1
103.7
17.6
19.1
832.0
1,079.0
55.3
59.7
24.2
26.1
17.6
17.9
Year-over-Year
6.8%
8.5%
29.7%
8.0%
7.9%
1.7%
2014Q2 versus 2014Q2
2013
2014
108.0
106.6
20.1
20.2
2,206.0
2,171.0
63.9
60.9
27.0
27.7
17.1
18.0
Year-over-Year
-1.3%
0.3%
-1.6%
-4.7%
2.6%
5.3%
Source: Blue Nile, Equity Communications
Exhibit 6 Source: Blue Nile, Equity Communications
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Financial performance in each of the first two quarters of the current year has been weaker compared
to 2013. In fact, for Quarter 2, sales of engagement jewelry in the key US market actually fell.
So what is going on?
Please continue reading to next page...
Exhibit Source: Blue Nile, Equity Communications
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Two things are at play here:
1. Certain changes have occurred in the market environment to affect the company's sales
performance.
2. And performance has been affected by issues specific to Blue Nile.
Let us start with the latter.
After studying Blue Nile's results for the first two quarters of 2014 plus each of the earnings call
transcripts, I think the key theme is that Blue Nile is currently not doing a great job of growing
the number of customers in the core US Market. Management says new customers to Blue Nile
are relatively flat versus last year.
Basically, the business is being driven by repeat purchases more than it is by new customer
acquisitions. Personally, I think that's a red flag for Blue Nile.
To begin with, new people buy engagement jewelry through Blue Nile every year but I think it's the
absolute number of customers that is not growing. For example, maybe 70,000 people buy
engagement rings through Blue Nile in a good year and the number has reached a ceiling.
If that's the case, then it becomes immediately clear that annual revenues for Blue Nile are quite
sensitive to changes in the market place - for better or for worse.
Actually, if you look at Blue Nile's financial results of the last few years from that angle, you could
conclude that the people managing the Blue Nile business aren't truly responsible for the great
performance of the last two years. The market environment was more influential.
More details in a moment - but one gets the feeling that executives at Blue Nile are running out of
ideas on how to grow volume of sales in the core engagement ring segment(see Quarter 1 2014
earnings call transcript...the very first analyst question).
Let me explain...
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If you have been following what I've been saying, then you now know that 68 percent of Blue Nile's
sales in the U.S market are engagement jewelry sales.
Value-driven engagement ring shoppers choose Blue Nile in order to get 20 to 40 percent
savings in the final cost of engagement jewelry. That in itself is Blue Nile's *key* competitive
advantage…
…But management says the business is not doing a great job of attracting new customers to buy
engagement rings through Blue Nile. Rather, current customers are making repeat purchases and
driving the business forward.
Well, that's just unfortunate. How many people make repeat purchases of engagement jewelry?
Don't get me wrong, I know that in this case repeat purchases means that some of the people who
buy engagement jewelry from Blue Nile go on to make additional purchases of non-engagement
jewelry over many years.
Repeat purchases are important for the sustainability of most business. However, repeat
purchasers are not the core market for Blue Nile.
About 2.1 million marriages occur in the USA annually and about 1.4 million of those marriages are
preceded by a marriage proposal involving a diamond engagement ring. Therefore, the total
addressable market for Blue Nile in the core engagement segment is around 1.4 million
potential customers per year.
Blue Nile had 5 percent market share of the US engagement market in 2012 and that has not really
changed in the last two years - around 70,000 customers if you use the average cost of an
engagement ring in USA.
Perhaps management is excited about repeat purchases of non-engagement jewelry since the
addressable market is much larger. But what's the point if engagement jewelry products have
actually increased share of sales from 65 percent in 2010 to 68 percent in 2013?
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Moving on, I have not included exhibits that show Blue Nile's marketing metrics in the last few years
because such metrics are open to fluid interpretation...you can easily get lost if you simplify things
too much.
However, the data I’m looking at suggests Blue Nile has not quite developed marketing initiatives
that effectively drive customer acquisitions. In any case, Blue Nile executives admitted that increases
in marketing and promotional costs in the important fourth quarter of 2013 were not really
encouraging for driving new customer acquisitions. Whatever they spent money on, it wasn't
immediately successful.
Too bad but I don't think they should be discouraged by this.
The way I see it, the e-commerce environment is dynamic therefore it's important to always test and
try out new things to drive sales. The good thing about it is that you don't have to wait too long to
find out what's working and what's not working in the online environment. Therefore, you can
quickly adjust tests before you spend too much money on marketing ideas and promotions that are
rubbish.
Naturally, most promotional and marketing tests will turn out to be rubbish but the few winners are
usually game changing.
That being said, Blue Nile management now appears discouraged and reluctant to try out new things
to drive new customer acquisitions. Marketing and promotional activities have been shifted to
driving repeat purchases. Of course, it's always better and easier to market to those that have
previously bought from you and liked your services or products. But as I said, the non-engagement
jewelry segment is of secondary importance.
Let me break it down for you one more time to prove my point:
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Exhibit 8
Illustrative lifetime value of new customer to Blue Nile ( 5 years)
Customer Mindset ( looking for more value for money)
Customer A
Gross Profit
Customer B
(Repeat Buyer)
(Repeat Buyer)
Year 1
Buys Engagement Jewelry
$5,000
Buys Wedding Jewelry
$900 Hers - $1,800
Year 5
Customer C
(Non-Repeat)
Gross Profit
Buys Engagement Jewelry
$432
His - $1,400
Year 2
Gross Profit
$5,000
Customer D
(Non-Repeat)
Gross Profit
Buys Wedding Jewelry
$900 Hers - $1,800
$350
$432
His - $1,400
$350
Buys Wedding Jewelry
Hers - $1,800
$432
His - $1,400
$350
Buys Anniversary Jewelry
Lifetime Value
Buys Anniversary Jewelry
$1,800
$378
$1,800
$378
$10,000
$2,060
$5,000
$1,160
$5,000
$900
$3,200
$782
Source: Equity Communications
In both instances, a customer who buys engagement jewelry contributes more to the bottomline
In the final analysis, to achieve greater and more sustainable sales success, Blue Nile just has to grow
the volume of people who buy diamond jewelry through their platform. The business model is viable
so it just means the company has to do a better job of promoting its service to consumers so that it
grows market share of engagement jewelry sales.
Let me now turn your attention to the market environment.
Through comprehensive study of the market environment over the last decade, we have learned many
things about it. Specifically, certain changes in the market environment result in more business
for online-only diamond jewelry retailers while other changes result in loss of business.
In other words, when certain events occur in the market, we can pretty much conclude that sales for
businesses like Blue Nile are going to increase and vice-versa.
Let me expand on this...
Please continue reading to next page...
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Here is what often happens:
On one hand is a consumer, usually male, who wants to buy a diamond but is price-point sensitive.
He typically has limited emotional attachment to diamond brands so he is not willing to pay
premium prices for brand attachment.
On the other hand is a diamond retailer like Blue Nile, which promises that it can fulfill the
consumer's desire for a diamond without charging premium prices for it.
Through whatever communication channel, the consumer becomes aware of Blue Nile's message:
"Buy same quality diamond products from me at prices 20 to 40 percent below those you get at
traditional jewelry retailers"
Since he is looking for more value for his money, the message from Blue Nile resonates with the
consumer and he immediately investigates the claim. If the claim is true and he proceeds to find a
diamond that meets his requirements, he will likely accept Blue Nile's offer. If the claim is not true
or appears sketchy, he will reject the offer.
Now, here is something very important about the online diamond business that you should
understand:
Both traditional jewelry retailers and online-only retailers sell diamond jewelry on the internet. The
difference is that traditional jewelry retailers typically own the inventory they display while
online-only retailers typically do not. Of course, many consumers do not know this and it's
not important to them.
However, the difference in approach becomes very clear in periods of price volatility. Traditional
jewelry retailers generally increase prices of diamonds offered for sale very gradually while prices
of diamonds displaced by online-only retailers are sensitive to real-time price movements.
Please continue reading to next page...
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What I am saying is this:
In periods of price volatility, the 'value-for-money' claim by online-only retailers appears sketchy
since prices of diamonds on their websites keep changing. Therefore, credibility is reduced and the
offer less appealing.
Conversely, in periods of stable prices, the 'value-for-money' claim holds, credibility is increased
and the offer more appealing.
Consumers consider the decision to buy engagement jewelry over many weeks and the final
decision to buy is always emotional.
For online-only diamond jewelry retailers, this is how changes in the market environment can
be explained
Exhibit 9
US-based Online Diamond Jewelry Retailers - How Changes in Market Environment Impact Sales
Sales Negative
Sales Positive
Geographical Segment
Polished Diamond Prices
*
Stable Prices
Rapid Price Rises
*
*
Falling Prices
Volatile Prices
Domestic US Market
*
&
International Market
Currency Movements versus US Dollar
Weakening Domestic Currency
*
*
Strengthening Domestic Currency
Volatile Domestic Currency
International Market
*
Stable Domestic Currency
Source: Equity Communications
Please continue reading to next page...
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Let’s now use this knowledge to analyze Blue Nile’s financial results for the last few years
Exhibit 10: Polished Diamond Prices
Polished diamond prices peaked in the second quarter of 2011 and then trended downwards until the
last quarter of 2013. Blue Nile was competitive for much of that time therefore the company could
pass on lower costs to customers.
However, the trend sharply reversed in the first half of 2014. Diamond polishers paid substantially
more for rough diamonds and then tried to pass on higher costs to retailers. Nonetheless, value-driven
consumers rejected higher prices for polished diamonds. Consequently, retailers like Blue Nile
struggled to push volumes.
Presently, prices of most categories of polished diamonds are off their March-April 2014 highs and
appear to have stabilized at levels last seen in 2012. A fresh round of price increases is highly
unlikely for the remainder of the year. Thus, Blue Nile and its suppliers can now afford to reduce
diamond prices and sell more diamonds.
Exhibit Source: Equity Communications
Please continue reading to next page...
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Exhibit 11: Currency Movements (Key International Markets)
Blue Nile does not provide detailed sales data for its international market. The Asia-Pacific region Greater China, Singapore, Thailand etc - accounts for more than 50 percent of sales in the
international market and rising to 60 percent in the second quarter of 2014.
However, Blue Nile's largest international market is actually Canada so the implication is that
international sales are probably very fragmented. Australia is also somewhere near the top.
Anyway, Blue Nile management has alluded to the fact that loss of sales momentum in the
international market is largely because of weaker currencies in Canada and Australia, relative to the
US dollar. A stronger US Dollar versus domestic currencies results in higher local prices. The
situation gets worse in periods of rapidly rising polished diamond prices.
China continues to grow by double digit rates but is coming from a very low base.
In the final analysis, Blue Nile and other online diamond jewelry retailers should have a better second
half of 2014. The market environment is no longer moving at a hectic pace so the 'value-for-money'
claim is more credible.
Exhibit Source: Thomson Reuters, Equity Communications
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Nonetheless, price resistance will likely persist since polished diamond prices have stabilized but
at higher levels. Overall, a rebound in sales is likely but it will probably be lackluster.
Five Key Factors That Drive Sales Success in Online Jewelry Retailing
1. Online Platform
Exhibit 12
The online platform (website) you use to display your fine jewelry inventory is central to success. It
has to be adaptable, predictable and easy to use no matter the access channel - whether PCs or
mobile devices such as tablets and smart-phones.
Consumers are demanding websites that provide the same high quality user experience whether
access is from laptops, tablets, or smart phones…
…But mobile is the number one channel of the future. Thanks to improving technology and
faster connection speeds, consumers have become highly skilled at using mobile phones and tablets
to search around for good value while on the go.
Exhibit Source: Equity Communications
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For Blue Nile, traffic from mobile devices is growing at +40 percent per year and mobile devices
now contribute more than 20 percent to sales revenue.
However, you must remain mindful of one thing: More consumers are using mobile devices for
their shopping but mobile conversion rates remain low. In other words, it's much harder to
generate sales from mobile devices.
2. Quality of Products
This one is less difficult to explain. If you provide quality products and stay current on trends, you
are likely to have an easier job selling customers. However, the ability to offer greater customization
for jewelry pieces is rising in importance and will become a crucial competitive advantage in the
coming years.
Exhibit 13
Blue Nile: Top Three Suppliers of Loose Diamonds
Vendor A
Vendor B
Vendor C
Total
2013
10%
5%
5%
20%
2012
6%
4%
4%
14%
2011
8%
7%
6%
21%
2010
12%
8%
8%
28%
Source: Company Reports
For online retailers like Blue Nile, relationships with suppliers are crucial since they don't actually
own the inventory they display. Consistent and predictable supplies of high quality diamonds are
especially important for the American market. Americans have much higher standards for
engagement jewelry.
Nonetheless, Blue Nile remains vulnerable to disruptive changes higher up in the supply chain
(subject material for a future Point of View letter). The top three suppliers provide 20 percent of
the 160,000 loose diamonds displayed on the Blue Nile platform.
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3. Marketing and Promotion
People buy on emotion and that's even truer for discretionary goods like precious jewelry. In the
coming weeks, I shall present some of my views on how the marketing of precious jewelry has
evolved in the internet age.
Anyway, Blue Nile management has said current marketing and promotional activities are doing a
poor job of driving new customer acquisitions. With this in mind, I decided to visit other areas of
the Blue Nile website to have a look at some of their current marketing initiatives. In my humble
and unqualified opinion, I wanted to find out whether these initiatives closely match the company's
ultimate value proposition.
Incidentally, I had visited the Blue Nile home page more than a dozen times in the past. Since I was
previously only interested in finding links that take me to the investor section, there is a lot that I
had missed until now.
For example, the Monique Lhuillier designer jewelry line is well represented on the home page. I
have often read about how well it is performing in Blue Nile financial reports.
Anyway, if you are looking to buy diamond jewelry, it's immediately clear to a first time visitor
that Blue Nile is able to satisfy his or her diamond jewelry needs. The multitude of options
available is almost overwhelming.
So are there any visible problem areas?
Yes. As someone who is familiar with Blue Nile's sales and financial performance for the last few
years, I know what drives the company's sales and I have talked about it a lot in this letter.
In case you have forgotten, most people choose to buy jewelry from Blue Nile because they are
looking for a good deal...that is, prices 20 to 40 percent below those at traditional jewelry retailers.
Please continue reading to next page...
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Therefore, if you strip away everything on the Blue Nile website...if you strip away the numerous
jewelry choices...it all boils down to this: customers are looking for more value for money. If
they get it, sales for Blue Nile increase; if they don't get it, sales for Blue Nile decrease.
Perhaps Blue Nile's current marketing and promotional activities are doing a poor job of
driving new customer acquisitions because of this: the ultimate value proposition is poorly
defined on the home page and a few other pages that I visited.
Anyone visiting the Blue Nile website will immediately get that the company is a retailer of fine
diamond jewelry...just like Kays...just like Zales...but it’s not immediately clear that Blue Nile
promises to provide more value for money.
I suppose this part here written in red on the Home Page --- "Know What You're Buying. Expect
Lower Markups. Always Have The Best." --- is meant to bring prominence to the value proposition.
But does it?
What does 'expect lower markups' mean to someone looking to buy jewelry? Did they test this to
make sure it converts well? Is this the best way to put across such an important message to potential
customers?
Anyway, I did click on the value proposition link to read about "The Blue Nile Experience". The
marketing information on the page is supposed to move the customer closer to the buying decision
and it probably does to an extent...but there’s not enough on it that ties in to the ultimate value
proposition.
So I'm not sure it provides a sufficient dosage of the right kind of emotions needed to drive new
customer acquisitions.
Plus, why is the company not giving prominence to its consumer credit initiatives? Sterling Jewelers’
effective customer credit programs are a big reason why they are slaying the competition left, right
and center.
Having said all this it brings me to something of absolute importance.
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I’m Not Familiar with Blue Nile's marketing initiatives and I have never looked at their marketing
data. My opinion on their marketing challenges is just that...an opinion and nothing else. It is based on
things that I have learned about selling online...things I was forced to learn when a business I have
interest in was failing to generate new orders. Perhaps their marketing initiatives are struggling for a
very different reason and you should know that.
4. Sales Tax Policies
Online-only jewelry retailers have an advantage over brick and mortar jewelry retailers since
they are not obligated to collect sales tax in the majority of cases. This adds to the perception of
lower prices...a very important advantage in the marketing of high-ticket items like engagement rings.
Moreover, online retailers do not have business costs associated with the collection of sales tax.
However, initiatives meant to level the playing field are in the pipeline. Change is on the way.
In the U.S Market, Blue Nile currently collects sales taxes related to purchases by customers located
in the State of Washington and the State of New York.
5. Commodity Prices
Exhibit 13
Exhibit Source: U.S. Department of Labor: Bureau of Labor Statistics, Equity Communications
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Sales are often better for online jewelry retailers whenever prices of precious jewelry
commodities are stable or trending down. A friendly commodities environment allows online
jewelry retailers to pass on the benefits of lower costs to customers and it leads to higher sales
volumes.
Chart in Focus
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Source: Chart 88, page 166 Global Diamond Business 2014 report
So there's now been a change of government in India.
The landslide election of new Prime Minister Narendra Modi has regenerated investor enthusiasm
towards India. There’s currently widespread optimism inside India and abroad that the new
government will return the country to a more exciting growth path.
That is great news because India had recently lost its way.
Since 2008, India has struggled with high inflation, slow growth and deteriorating corporate
finances. But there are signs of hope...such as lower inflation and higher exports.
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If India does return to a higher growth path...then opportunists in the precious jewelry
industry should get ready to pounce.
India is currently number two in gold jewelry consumption by volume, number four in platinum
jewelry consumption by volume and number one in diamond jewelry consumption by volume. The
country will remain the most important market for precious jewelry in terms of potential for many
years to come.
For one, demand for precious jewelry is already formidable because of strong cultural traditions and
yet more than 90 percent of adults in India possess wealth valued below US$10,000. With further
economic growth, a large number of Indians will move to higher wealth bands and this will
lead to an acceleration of precious jewelry consumption.
This brings me to this edition’s chart in focus…
People born starting in 1990 are the new generation of jewelry consumers for the next decade. If
you look at the chart, you will notice there are fewer children being born in the key markets for
precious jewelry.
That means there are fewer people in the pipeline coming of age to continue the cultural traditions
of buying precious jewelry for weddings etc.
While we still expect good economic growth in China, I think the best years for the consumption of
precious jewelry in that country are almost over. The country's birth rate sharply declined after 1990
and we can't win against demographics. Therefore, a repeat of the path taken by Japan is more likely
in future.
Europe has never been a truly exciting market for precious jewelry consumption but we are still
going to lose more of it. The crisis in Europe seems to be worsening the situation.
The USA is the most resilient first world market for precious jewelry - healthy population
regeneration and rooted diamond culture - even though consumption volumes are also naturally
structured to decline in the coming years and decades. Overall, jewelry sales should hold up well in
the country.
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If there's a positive it's this: a richer India can compensate for the loss of consumers in other
regions...at least at the global level. India has a young population (0-18 years) that reaches 500 million
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and people in that country have always cherished precious jewelry.
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Population regeneration in India is slowing to a level that is conducive for faster economic growth.
Furthermore, age at first marriage is becoming more attractive and this is positive for consumption of
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precious jewelry for engagements and weddings.
At Equity Communications, we believe India's business culture is greatly responsible for the country
growing below its potential GDP. Nevertheless, a return to plus 5 percent annual GDP growth rate
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guarantees that India will become the next China in the 2020s.
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io
And that’s it for my first Point of View letter. Hope you find it useful…
As always, I wish you well in your business endeavors.
m
Best,
fo
r
Tinashe Takafuma
In
Head of Diamond Industry Research
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The Point of View letter is for clients of Equity Communications. Subscription to the Point of View letter
is automatic and free to clients who obtain a copy of the Global Diamond Business 2014 report - Equity
Communications’ comprehensive report on the Global Diamond Industry.
Mr Tinashe Takafuma writes the Point of View letter in his capacity as Head of Diamond Industry
Research at Equity Communications. He is also lead writer of the Global Diamond Business 2014 report.
His views are based on his reading of the diamond industry and precious jewelry markets at time of
publication of each issue. Therefore, his opinions may diverge from those reflected in the Global
Diamond Business 2014 and other research publications by the Diamond Industry Research Team at
Equity Communications. Such reports are based on a longer time horizon and reflect the full input of
the Diamond industry Research Team.
The Point of View series starts on August 14, 2014 and ends on December 18, 2014 for a total of 24
editions in 19 weeks. It provides more color to themes and insights from the Global Diamond Business
2014 report. Furthermore, Mr Takafuma offers helpful advice plus his point of view on topical subjects
as they happen in the global diamond industry and precious jewelry markets.
General Disclaimer
This document is produced and circulated for general informational and educational purposes only. It is provided by Equity
Communications. Equity Communications research utilizes data and information from public, private and internal sources.
While we endeavor to keep the information up to date and correct, we make no representations or warranties of any kind,
express or implied, about the completeness, accuracy, reliability, or suitability of this publication. The information and analysis
contained in this publication has been compiled or arrived at from sources believed to be reliable but Equity Communications
does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the
use hereof. Furthermore, the material contained herewith has no regard to the specific investment objectives, financial
situation or particular needs of any specific recipient or organization. It is not to be construed as a solicitation or an offer to buy
or sell any commodities, securities or related financial instruments.
For more information, please visit http://www.diamondshades.com/
Diamond Shades is the online vault or research center for research by the Diamond Industry Research Team at Equity
Communications. Diamond Shades provides research material, analysis and commentary on the diamond industry value chain,
global precious jewelry markets and the general luxury economy. Registered Address: 605/2 New Quay Promenade, Docklands,
Vic 3008 Australia. © Copyright 2014, Equity Communications Private Limited, ALL RIGHTS RESERVED.
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How to subscribe to the Point of View series
The weekly Point of View letter is for clients of Equity Communications. Subscription to the Point of View letter is automatic
and free to clients who obtain a copy of the Global Diamond Business 2014 report - Equity Communications' comprehensive
report on the Global Diamond Industry.
Mr Tinashe Takafuma writes the weekly Point of View letter in his capacity as Head of Diamond Industry Research at Equity
Communications. He is also lead writer of the Global Diamond Business 2014 report.
The Point of View series starts on August 14, 2014 and ends on December 18, 2014 for a total of 24 editions in 19 weeks. It
provides more color to themes and insights from the Global Diamond Business 2014 report.
Furthermore, with input from the research team, Mr Takafuma offers helpful advice plus his point of view on topical subjects
as they happen in the global diamond industry and global precious jewelry markets.
If you have previously found immense value in some of our previous work…such as the popular 'Guide to the Jewelry
Market in India 2013-2014' and 'US Fine Jewelry Market 2013-2014 - State of the Core Market report'…we recommend that
you get your copy of the Global Diamond Business 2014 report.
Equity communications is not releasing any new reports on the diamond industry until February 2015. From August to
December 2014 we shall be concentrating exclusively on our clients.
Once you secure your copy, you will hear from us at least once a week for the next 19 weeks...with brand new, bite sized
content (up-to-date analysis and insight on the diamond industry and precious jewelry markets)...until Thursday 18 December
2014. We shall always be thinking about you...and working hard to figure out how we can help you in your business.
We shall dissect the global diamond industry and precious jewelry markets and along the way two things will happen:
-
We will present analysis and insight that you might not have considered
-
Sometimes from this you will get ideas you could use in your business...perhaps to improve it
If you would like to receive the Point of View series visit:
http://www.diamondshades.com/diamondreport/get-your-copy/ and follow the get your copy link
towards the bottom of the page
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