Leaders Predict Future of World Diamond Market

By Russell Shor

Experts in "Diamonds: Mapping the Future" agreed that the diamond industry of the future will explode with consumer demand from emerging markets such as India and China, but ethical issues and marketing to niche segments of consumers worldwide will also greatly affect how diamonds are sold.

A billion additional consumers will enter the diamond market and they will have access to a vast array of outlets beyond traditional retail stores, Elliott Tannenbaum said.

The market will grow so vast that no one diamond firm or retailer will be able to serve it all. Diamond manufacturers will have to develop different marketing strategies for the markets they share with their clients.

"Manufacture globally, but market locally," he said. Tannenbaum noted that as governments of producing countries secure more local control over their diamonds, more emphasis on provenance in branding and marketing initiatives will be needed.

Martin Irving said ethics and corporate governance are important criteria for mining companies operating in Canada. In a decade, Canada will be putting 30 million carats of diamonds worth more than $3.5 billion into the world market, which will greatly transform the rough diamond distribution system.

"There will be no dominant producer in Canada. As a result, many producers will be marketing their own rough diamonds," he said.

China's consumer market is set to take off and sales of all types of jewelry will double to $20 billion by 2010, Lawrence Ma predicted. He said China's consumer spending will equal that of Japan's by 2025, and that 520 million people will be earning a middle class living.

Branding is the key to extricating the diamond industry's descent into commoditization, Glenn Rothman stressed.

He said the industry has lost sight of the fact that diamonds are a strong brand and that it must find creative ways to stay true to its "brand promise" by emphasizing the "magic" of diamonds instead of price.

The industry is too focused on the "buy" – getting goods more cheaply than a competitor – but the real profits are made in the sale, he said.

The diamond's promise must take into account ethical sourcing and trading, added Martin Rapaport. He said large mining companies are extracting profits from the diamond industry at the expense of smaller manufacturers.

He predicted that many of the marketing and branding efforts would be superfluous in the future, because while diamond supplies remain static, consumer demand will go through the roof – causing prices to do the same.

Rapaport said building brands by stressing that diamonds come from countries that experienced no conflicts could hinder Sierra Leone's efforts to rebuild the country. He described his Fair Trade Diamond project in which "artismal" diamond diggers would receive 20 percent of the value of the diamonds they find, with an additional 5 percent going to local community development – an improvement over the situation in which diggers are often "paid" in foodstuffs.

By doing good, the industry can make people feel good about diamonds, he said.

Moderator: Eli Haas, president and CEO, ENH International
Panelists: Martin Irving, manager, Minerals Sector, Strategic Sector Branch, Industry & Resources, Government of Saskatchewan; Lawrence Ma, executive director, Lee Heng Diamond Co. Ltd.; Martin Rapaport, chairman, Rapaport Group of Companies; Glenn Rothman, CEO, Hearts On Fire; Elliot Tannenbaum, partner, Leo Schachter Diamonds, Ltd.

Continued Excellence Maintains Success

By Emily Stegman

Excellence is excellence. The things that have been excellent in the past will always be so, no matter what changes around them," Diana Singer said during the panel, "Jewelry: The Changing Landscape."

The idea, which she applied to jewelry design, was also emphasized by the other three panelists, who attributed their success and staying power to the thoughtful implementation of technological advances, best business practices and brand partnering.

The session began with opening remarks from moderator Michael Kazanjian and a discussion of technical innovations by jewelry designer Michael Bondanza.

Using machines to make jewelry can be valuable, but the fluidity and human quality that's so important to each piece can sometimes be lost, Bondanza said. A designer known for his innovations in platinum jewelry, he maintained that the best designs combine art and science.

"There has to be a good combination of technology and traditional handwork for me in design," he said.

For Singer, jewelry's appeal comes from superior gemstones, workmanship and design. Excellent workmanship translates into consistent quality on the front, back and interior of a piece of jewelry. Intelligent use of color can help focus the eye, and mathematical concepts like the Golden Mean ratio and the growth pattern of the Fibonacci Sequence can create aesthetically pleasing shapes when applied to jewelry design.

"Good design is simple and strong," she said.

David Yurman advised one independent designer in the audience to think through the establishment of a national brand carefully; it happens very slowly, he said, and requires a lot of commitment.

He told designers to "keep the beginning vision alive," and encouraged them to retain their creativity and independent spirit.

Lee Michael Berg said he is proud his stores in Louisiana, Mississippi and Texas carry Yurman's collections. His company seeks brands that have proven staying power. Successful brand partnering, Berg said, requires integrity, shared goals and care for one another's business.

"Our advertisement, 'We are known by the company we keep,' succinctly states the importance we place on brand partnering," Berg said. "We know that whenever we sell any branded merchandise, we have engaged a business partner who helps define us to our customers and to other vendors."

Moderator: Michael Kazanjian, chairman and CEO, Kazanjian Bros., Inc.
Panelists: Lee Michael Berg, president and CEO, Lee Michaels Fine Jewelry; Michael Bondanza, designer, Michael Bondanza Inc.; Diana Singer, president, D&E Singer Inc.; David Yurman, CEO/designer, David Yurman

Colored Stones Offer Creative Opportunities

By Robert Weldon

Retailers and gem dealers alike are fond of pointing out that gemstones pose unique opportunities for greater profits and creative outlets for designers. Despite the positive clamor that colored gemstones generate, most also agree there is room for greater growth.

During his opening remarks for "Colored Stones: Seizing the Opportunities," Roland Naftule said there was much to learn about colored gemstones: the value of underappreciated ones; treatments and their place in business; and strategies for branding.

"Untreated gems are scarcer than their treated counterparts," Edward Boehm said. "Between 1995 and 2000, treated corundum prices decreased, while untreated rubies and sapphires commanded premiums of between 15 to 100 percent, depending on quality and country of origin."

The value of spinel and garnet has also increased because they are not treated, he said. "Esoteric gems like apatite, cat's eye sillimanite, maw-sit-sit and others are also gaining recognition as designers begin to use more affordable and unique gem materials."

Shane McClure outlined the challenges the gemstone market faces to keep up with a growing roster of new gem treatments

"We've seen 'olive green' and 'lemon' quartz at first thought to be produced by heating amethyst, but later determined [since Symposium 1999] to be treated in large quantities through irradiation," he said. "We've also seen unusual cabochon stars in chrysoberyl and sinhalite in which it was determined that the asterism was caused by fine, oriented scratches on the surface."

McClure said the most challenging treatment that emerged, and most far-reaching, was the beryllium treatment of corundum.

"Beryllium diffusion penetrates deeply into the stone or can also penetrate throughout, and it changed the way we think about corundum treatments," he said.

"It has forced the GIA Laboratory to perform chemical analysis on all corundum that shows evidence of heat treatment," he said.

Joseph Menzie noted that every market should find "the right product for the right price for the right customer." He also emphasized the need to practice full disclosure for all gems with known treatments or enhancements.

"Of particular importance are those materials whose treatments are not permanent, or which require special care, or those in which the value has changed," he said.

Menzie said he puts treatments and enhancements in perspective by examining market reactions through a timeline.

"Today I see that natural gems have increased in value, enhanced stones have stabilized in value, and there is much less demand for treated materials," he said.

Eric Braunwart extolled the advantages of branding colored gemstones.

"[Branding] will help define and separate products in an overcrowded and confused marketplace," Braunwart said. "What you should remember is that it is not just about developing a marketing name for the gem product. It really is about how you explain the name, how you support it and what it ultimately will come to mean to your consumers."

Brands can be "made" or "broken,"depending on how well you support them, he said.

"What we all would like is for the discussion of gems to move away from price and towards value."

Moderator: Roland Naftule, president, Nafco Gems, Ltd.
Panelists: Edward Boehm, president, JOEB Enterprises, LCC; Eric C. Braunwart, president and CEO, Columbia Gem House; Shane F. McClure, director, West Coast Identification Services GIA Laboratory; Joseph M. Menzie, president, Joseph M. Menzie Inc.

Luxury Brands Stand Out From the Pack

By Jaime Kautsky

A 10-year-old boy presses his face to the glass jewelry counter at a store in Chicago, mesmerized by the glittering objects within the case.

Martin Katz fondly remembers this first encounter with fine jewelry and said that's when his passion for luxury took flight. Katz, whose jewelry is a favorite with celebrities, was one of five panelists for "Luxury Retailing: Going for the Bling."

Katz said you need to translate your passion for jewelry into a tone that sets your business apart.

"Find your voice," he said. "When it is established and executed consistently, people will start to notice. You'll create in the mind of your client [the idea] that there is no other product quite like what you have."

Daryl Wickstrom, who oversees Sotheby's international teams for jewelry and several fine art categories, said an important and challenging key for success in luxury markets is a strong client focus. The famous auction house has enjoyed a reputation for expertise in the field, but Wickstrom said more recent surveys found that some consumers thought it was "too top-end."

Sotheby's has worked to "maintain a unique allure and high-end nature, while making it more accessible," Wickstrom said. The company has also launched customer-requested programs, like Sotheby's Diamonds, their new partnership with the Steinmetz Group.

Ralph Esmerian, a fourth-generation fine jewelry dealer, lamented that luxury is determined by marketing and price points, not by "superior work," as in years past.

"For most centuries, jewelry was an art form," he said, calling for corporate leaders to appreciate jewelry's rich legacy. "Luxury should once more refer to quality ⿦ and not only be a catchword for mass production and high-priced designer names."

Emmanuel Perrin admitted that, as a native of France, the American concept of "going for bling" didn't mean much to him. Instead, he has tried to capitalize on Van Cleef & Arpels' strengths, namely, the design house's history, Parisian origin and reputation for creating iconic pieces.

Publisher Jason Binn, whose high-end magazines include Ocean Drive, Hamptons and Los Angeles Confidential, said the biggest problem in marketing the luxury world is companies who speak at, not to, potential clients.

"To speak to them and connect with them is very hard," he admitted, but if businesses work hard at communicating with their customers, they can distinguish themselves in the luxury market. "It's all about standing out."

Moderator: Ralph Destino, chairman, GIA, and chairman emeritus, Cartier
Special Commentator: Jason Binn, CEO, Niche Media
Panelists: Daryl Wickstrom, managing director, Sotheby's Global Auction Division; Ralph Esmerian, owner, R. Esmerian Inc. and Fred Leighton; Martin Katz, president and founder, Martin Katz, Ltd.; Emmanuel Perrin, president and CEO, Van Cleef & Arpels

Treatments and Synthetics Call for "CSI" Tactics

By Robert Weldon

Forensic gemology, much like the award-winning television series, "CSI: Crime Scene Investigation," provides ever-increasing cliff-hangers for dedicated gemologists.

"It's no secret that more complex treatments and natural-appearing synthetics are entering gem laboratories than ever before," said Dr. James Shigley in "Identification Technology: The 'CSI' Factor."

More sophisticated identification technology is needed, said Dr. George Rossman. "In the past we used beam technologies, such as photons, electrons and X-rays, and we would examine light that came out of a stone. That's changed."

Rossman singled out new beryllium diffusion treatments performed on corundum as a prime example. Only a minute amount of beryllium diffused into a sapphire or ruby can be sufficient to markedly change its color.

He said the gem industry would likely turn to methods such as secondary ion mass spectroscopy or electron microscopy, to examine findings at parts-per-billion range; these developments would assist in other areas of gemology, such as determining geographic origin.

Dr. Alan Collins focused on three treatments seen in today's diamonds: extremely fine internal laser drilling called the "KM" treatment; diamonds colored through high-pressure/high-temperature (HPHT) annealing; and diamonds made near colorless through the same technology.

"If low-value material is treated for huge financial gain, that is fraud," he said. "Some who watch 'CSI' tend to think technology can do more than it really can. The truth is most treatments in diamond can be identified by a trained gemologist using conventional gemological instruments," Collins said.

Dr. Chris Welbourn said, "Synthetic diamonds will continue to be identifiable, even with projected developments in synthesis technology." He noted the Diamond Trading Company's advanced experiments in HPHT and chemical vapor deposition diamond synthesis also served to develop identification methodology.

Welbourn said that conventional procedures using gemological microscopes, ultraviolet lamps and hand spectroscopes, could separate out most synthetic diamonds. For more difficult cases, the DiamondSure or the D-Screen machines combined with gemological protocols remained essential tools for identifying synthetic diamonds.

"As dealers, it is very important to be able to recognize when you are not able to proceed with gemological identification," Robert Kane said. "Know when to refer to the expertise of a gemological laboratory."

Moderator: Dr. James Shigley, director of Research, GIA Carlsbad
Panelists: Dr. Alan Collins, professor of physics, King's College; Robert E. Kane, president and CEO, Fine Gems International; Dr. George Rossman, professor of mineralogy, California Institute of Technology; Dr. Chris Welbourn, associate fellow, University of Warwick, and formerly head of physics at the De Beers DTC Research Centre in Maidenhead

Tips for Gem Dealers
• Know your vendors: Know that they understand if the product they are selling you has been treated. Integrity of the chain of custody is important.
• Keep up on your gemology: Read trade and technical journals, attend seminars and advanced gemology courses.
• Improve security with lab reports: Use lab reports for smaller gems that can't be batch-tested by the dealer, or for large, expensive gems.
• Buy through trusted sources: Use trade associations where full disclosure is essential, and where you can appeal for redress, if needed.

– Robert Kane

The Many Forms of Reinvention

By Jaime Kautsky

Makeovers are everywhere in American pop culture. Look at the nearest television set, and you'll see networks on a quest to improve people, places – even pets.

The panelists on "Reinventing Your Business: More than a Makeover" suggested that to affect true change in an organization, you have to go further than skin deep.

For crystal company Swarovski, reinvention simply meant a return to its 111-year-old roots.

"Swarovski crystal was everywhere," said Nadja Swarovski, noting that the company had greatly diversified its product line in the 20th century, "but our brand was going nowhere. We had to look into the heart of Swarovski ⿦ our task was to reconnect the Swarovski brand to its true heritage."

The company re-established relationships with designers like Gucci, Galliano, Dior and Versace and participated in fashion shows like "Runway Rocks." The result, remarked Sheldon Kwiat, is that Swarovski has "taken the legendary brand to new heights."

Steve Robbins said his organization took a more dramatic and transforming step when it decided to focus on the bridal market – a scary move, given that he and his brother, Skip, were the third generation in the business and doing reasonably well as traditional jewelers.

But with a bold goal to dominate the engagement ring business in Southern California and to look at things through their customers' eyes, they went for it. Their plans began to take shape in the late 1980s, and today the company has 23 percent of the market share in Southern California, with plans for a nationwide rollout.

Robbins offered simple advice: "Never be afraid to be the dumbest guy in the room. Seek advice from mentors, outside boards and partners."

Hertz Hasenfeld, a second-generation diamantiare, said his company's overhaul meant re-examining every part of its operations – there were no "sacred cows."

The manufacturing process underwent a "complete overhaul." The company brought automation to their "hearts and arrows" diamond production and moved large amounts of rough to their manufacturing plant in China; cutting costs dropped by 50 percent and standards improved.

"A diamond dealer's success or failure is determined by his ability to determine his needs," Hasenfeld said. "Change is good, but never at the expense of quality."

Sir Ken Robinson, an expert on cultivating corporate creativity, encouraged audience members to embrace innovation.

"If you think things have changed in the past 50 years, hold on," he said, noting that the world's population has doubled in the past 30 years alone. "It will only get faster, and innovation will become very important."

Moderator: Sheldon Kwiat, GIA Governor and co-president, Kwiat, Roisen and Ferman
Special Commentator: Sir Ken Robinson, consultant and author of Out of Our Minds: Learning to Be Creative
Panelists: Nadja Swarovski, vice president of international communications, Swarovski; Steve Robbins, chairman and CEO, Robbins Bros.; Hertz Hasenfeld, vice president, Hasenfeld-Stein, Inc.