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De Beers explores the other end of the supply chain
The most profitable link of all in the diamond pipeline is in production. For example, in 2004 (a good year for jewellery sales), retail jewellers worldwide sold US$57 billion worth of diamond jewellery. The cost to produce the diamonds contained in that jewellery was a mere US$2.3 billion, and producers sold them to cutters, manufacturers and dealers that year for US$9.2 billion.
Carol Besler
As a producer, then, De Beers has always been the envy of the diamond world, particularly among retailers who gripe that they can’t make margins in diamonds. In 2001, however, De Beers surprised everyone by venturing all the way to the other end of the pipeline, partnering with luxury goods empire LVMH to create a De Beers retail chain that would sell its own line of jewellery. The new company, De Beers LV was infused with a generous US$500 million startup capitalization, and the partners announced a goal of 150 stores worldwide. Seven years later, despite criticism, rumors of failure and snipes at everything from the brand’s jewellery designs to its store design, De Beers says the joint venture is on target and over its sales budget.
Ultimate goal: 150 stores worldwide
Although the company does not release profit statements or comparable store sales figures, Neal Sussman, information officer for De Beers LV in London will say that, “two years ago we had 16 stores, now there are 33. We plan to open another 10-18 next year. We are well above average in sales.” When asked if, like many other retailers in this uncertain economic climate, the company will scale back on its expansion plans, he answers, “No, we haven’t stopped our store launch plan. If you put expansion plans on hold during hard times, then you just end up miles behind once things improve. We don’t want to do that.”
De Beers LV’s ultimate goal is 150 stores worldwide, a conceit that is built on the foundation of the strength of a brand name that enjoys global recognition. It is not based, as many believe, on the fact that De Beers has direct access to the 50 million carats of diamonds it produces in a year. All diamonds used for the company’s jewellery collections are bought on the open market, mainly from sight holders. A De Beers mark is lasered onto the table of every diamond larger than 30 points, in addition to a code that lets the store know which company supplied the diamond, plus an individual code number for every store. Sussman declined to state the company’s current advertising budget, but a 2004 press release announced a budget of US$4 million for 2005.
Talisman, the latest collection
The first store, the flagship and company headquarters, opened in 2002 on Old Bond Street in London, and the first US store launched in 2005 on New York’s Fifth Avenue. The stores display an extensive array of De Beers branded diamond jewellery, conceived mostly by in-house designer Raphaele Canot who, before joining the company, was creative director at Cartier, where she worked for 11 years. Canot’s vision incorporates the philosophy that diamonds should be worn everyday, not just for special occasions, and has described her collections as classic yet modern. The jewellery is priced beginning at US$700 and rises up to US$1 million. The latest collection is the Talisman, which is set heavily with rough diamonds (mainly octahedrons, and some macles) and so-named because, as De Beers’ promotional material says: “From ancient times through to the renaissance, unpolished diamonds … were mythical talismans for protection, good luck and strength.
Also, “rough diamonds are part of De Beers’ dna,” explains Sussman. “They reflect our core activity.” The collection is unisex, and is comprised of medallions, tags, rings, bracelets, earrings, pendants and necklaces, many one-of-a-kinds. De Beers boasts that a special setting, “characterized by small points that lift the table of the diamond above the surface of the gold, allowing more light to enter the stone.” (It is worth noting the irony, however, that very little light actually makes its way through a rough diamond, and few would argue that the best way to enhance light return is to give a diamond a round brilliant cut, preferably to ideal proportions.)
A watch collection too
This year, the company launched a Talisman watch collection, as well, also set with a combination of rough and polished diamonds, many of them baguettes or tapered baguettes, used as hour markers. Cases are white or yellow gold, and movements are automatic or quartz. The watches are priced at between US$10,000 and US$38,000.
Sussman says there are no plans to wholesale the De Beers brand watches or jewellery, a philosophy that is consistent with that of many luxury brands that increasingly prefer to control distribution by retailing their collections at their name-brand boutiques. ■
