It would be hard to imagine a more unfortunate series of events for the diamond industry as what we’ve seen so far in 2020. Demand was at one point pushed to near record lows by a combination of cancelled weddings, widespread furloughs and unemployment, disrupted supply chains, and the closure of many retailers on the high street. Gemdax expects excess inventories at the world’s largest diamond producers will hit $4.5 billion by year end, and Moody’s predict a drop in rough-diamond sales of 30 percent to 40 percent this year. Though some economic forecasts are offering a glimpse of a brighter future, the industry still has strides to make if it wants to reach an equilibrium between supply and demand.
The promise of a Christmas and New Year spike in demand is just around the corner, as well as a potential economic recovery pending a second wave, but brands must be more strategic and innovative if they want to be able to capitalize on this. Businesses need to offer their customers something more if they want to ensure that they can differentiate themselves from the competition in what is a buyers’ market.
Today’s customers are now purchasing items for reasons other than the look and cost of a jewel. Whether a diamond is ethically, and sustainability sourced has become a new source of value to consumers, and one which producers can no longer afford to ignore. The wine industry has long used provenance as a way of marketing goods, using the story behind the how, where and why of its production to demonstrate its value, and the diamond industry could perhaps take a leaf out of this book.
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Why technology is key to giving consumers insight into provenance
Though ethics and suitability are rapidly becoming of key importance to the modern consumer, these same consumers can be extremely cynical about claims which aren’t backed up properly. Modern diamond suppliers need to take responsibility for ensuring that these connections are more long-lasting and can truly convince millennial consumers. Merely telling is no longer enough, as these younger audiences perceive conflict-free gemstones, child labor and environmental impact as fundamentally too important to leave to chance.
Many organizations are looking towards emerging technologies like IoT, AI and Blockchain to bring light to the provenance of their products. Blockchain represents a version of the truth that everyone can agree upon, with no single party being able to control the entire blockchain. This allows organizations to develop a consensus, meaning a secure, unalterable record of the origin, characteristics, and ownership of any product are created on the chain. With the help of RFID, NFC and other technologies, we can track and trace any product, from diamonds to vaccines, from garments to PPE. This allows organizations to sidestep many of the issues plaguing traditional supply chains, such as fraud, value manipulation, and unsustainable practices, which can be hard to avoid by traditional means as the diamond trade involves numerous third parties and is highly globalized.
For diamond suppliers in 2020, just adhering to ethical sourcing methods is no longer enough. Companies must demonstrate with hard evidence that the products they offer truly reflect the ethical values of their consumers. Blockchain can be a game changer in an industry where consumers are increasingly basing their buying habits on ethical considerations.
How blockchain creates a better product for consumers
Blockchain-enabled provenance can also allow producers to add an authentic and rich narrative to a particular diamond, and this element of storytelling can radically increase its value for the discerning consumer. Suppliers who go the extra mile when it comes to ethics and sustainability can demonstrate this by adding a story to accompany their diamond, including individual information about all the traders, cutters and polishers that were involved along the way. Blockchain represents an ideal way of proving the veracity of every step of the story and allows consumers to take pride in that their gemstone was originated in a certain part of, say, Zambia or Tanzania, preventing the original miners being written out of the story. This enables the diamond industry to shed light on their practices, ensuring all stakeholders along the value chain to be remunerated fairly, their environmental and social practices well recognized, and a transparent story about each product presented to consumers in an information-rich way. In an increasingly competitive environment, more and more suppliers will look towards the many ways which technology can improve their brand’s storytelling.
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Implementing provenance in practice
It’s neither expensive nor difficult for modern diamond suppliers to embed technology into their platforms, which can enable consumers to access the entire journey of the gem from store to origin. It can be as simple as building an API into a pre-existing mobile app, for consumers who want more access to information. By creating new interactive touch points between consumers, jewelry manufacturers and retailers, platforms such as this can encourage brand differentiation in a competitive luxury market.
The future of the entire diamond industry arguably depends on its ability to engage the growing millennial demographic. In China for example, millennials account for 68 percent of diamond sales compared to 45 percent worldwide. At the same time, China suffers heavily from the counterfeiting of goods. It’s thus a very clear choice for brands to provide consumers with better digital platforms for authenticity and better user experience.
Though there is certainly hope for the diamond industry on the horizon, for businesses to reach the end of the tunnel, it is going to take a fundamental re-evaluation of how they position their products. Diamond producers will need to prove beyond a shadow of a doubt that they can fulfil the moral obligations which are now expected of them, and adoption and implementation of blockchain and related technologies in a consumer-friendly fashion will be a key part of this transition.
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Leanne Kemp, CEO, Everledger (opens in new tab)