Some large diamond producers (miners) have been trying to conquer manufacturing and retail, but will independent businesses pay the price?
De Beers has been dabbling in the retail end of the diamond industry for more than 15 years, but recently, other miners have begun to follow suit, breaking out of the production box and entering other aspects of the trade.
“The move into retail was a natural step for De Beers“, says David Johnson, the company’s head of strategic communications.
Initially, De Beers undertook category marketing for the entire industry, which required the business to be active in other parts of the diamond pipeline. When circumstances changed, the company chose to invest that money in building its jewelry brand so as to continue promoting diamond demand.
While the retail business is only a small part of the group’s overall finances, it is no less important. It provides not only revenue, “but also insight on trends and opportunities downstream, as well as other key strategic benefits, such as driving demand for the products we mine,” Johnson notes.
Plans in store
Other miners are progressively seeing the benefits of diversifying. Alrosa has already segued into cutting and polishing its own colored diamonds, which it offers for sale directly to consumers, and is mulling over the possible purchase of diamond manufacturer Kristall. The Russian miner is also working on a number of projects aimed at the end consumer to make buying natural diamonds more appealing, says Dmitry Amelkin, head of strategic projects and analytics for Alrosa.
Rio Tinto is likewise looking beyond a purely mining-driven business. Senco Jewels — an India-based chain of franchise stores — partners the Australia-based diamond producer with many of India’s top jewelers. The venture offers retail customers “access to Australian diamond jewelry collections by sourcing from the jewelry manufacturers who are authorized suppliers under Rio Tinto’s Australian Diamonds program in India,” according to Robyn Ellison, communications manager for Rio Tinto. All the diamonds in the jewelry products at the Senco stores will be sourced from the miner’s Argyle asset.
‘One has to consider the risks’
These moves are not altogether unexpected for some of the large mining companies, says Kieron Hodgson, an analyst with London-based investment bank Panmure Gordon.
“The larger players have clearly identified additional revenue