The distribution systems for various wholesale, rough and jewelry diamonds are still monopolized by De Beers. After the diamonds have been explored from the mines, sorted and distributed through the Central Selling Organization, De Beers' subsidiary, the diamonds go to "sight holders" which are the individuals and companies trading diamonds. Having a strong pull in the industry, De Beers securely handles approximately 40% of the global rough diamond sales. (Lee, et. al., n.d.) Their sight holders monopolize the supplies of the rough diamonds and this is why De Beers controls almost 90% of the global sales of rough diamond.
Need help with argumentative essay? You are in the right place at the right time! Our team of professionals freelance writers have great experience in writing various kinds of essays so don’t hesitate to contact us.
Hence, it becomes a main distribution channel for the rough diamonds globally. It offers diamond dealers from all over the world a diamond assortment or package of value added services. This attracts diamond dealers apart from sourcing through their other diamond suppliers. The main attraction and benefit to being a "sight holder" to De Beers' rough diamonds is to gain access to more than 40% of the world's rough diamond production.
The company created a Supplier of Choice Strategy which guarantees dealers and buyers of quality diamonds as defined by the 4Cs (cut, carat, etc,). Through this, De Beers has established its Diamond Trading Company (DTC). The Central Selling Organization was reformed and renamed as the Diamond Trading Company after it integrated De Beers' Consumer Marketing Division. Up to now, almost all rough diamonds distributed through DTC and it has become a central distributing channel for De Beers. The DTC categorizes and evaluates about two thirds of the global supply of diamonds every year. DTC is responsible for monopolizing rough diamonds from the De Beers Group's mining operations. The value added service as mentioned earlier pertains to the support services DTC gives to its diamond customers. This includes business planning, marketing, market research, and training.
Through this, De Beers has a powerful market research and development department and the influential use of its "Forevermark" logo plus the phrase "A Diamond Is Forever." As such, De Beers successfully controls the diamond distribution channels. It is interesting to note that the industry leader shows a solid acknowledgment of each distribution channel through its commitment and by maintaining the identity or good quality of products for its consumers.
The company also holds the channels by establishing a code of professional and ethical standards which ensures the consumers of the best quality and value for their purchased diamonds. They assure their customers that their diamond products are conflict free (which means that these diamonds are not illegally obtained and do not favor human exploitation).
De Beers's distribution and placement process is unique in the sense that their rough diamonds are not available in retail stores, direct mail, or via the internet. The company holds a strict restriction on who can buy diamonds from them. They have a tedious process of getting approved to buy from them. However, once the clients become accepted as their "sight holders," they can start purchasing rough diamonds after completing their invoices. Then, the purchased diamonds are distributed through DTC and these are shipped over to their "sight holders" in nay parts of the world. This is basically how De Beers distributes its rough diamonds to their direct customers, the diamond manufacturers.
In the early 2000's, this monopolized distribution scheme was changed following a three-year antitrust investigation of De Beers. The company pledged its commitment to the European Commission that it will slowly reduce and finally end its purchase of rough diamonds from another largest diamond producer, ALROSA. This loosened up the distribution channels and their controlled rough diamond sales slowed down in 2006 and completely ended after 2008 (World Diamond Council, 2007).
De Beers entered the retail distribution in 2001 through its joint venture with the well-known French luxury goods brand, Louis Vuitton Moët Hennessy (LVMH). Together, they built the independently managed De Beers Diamond Jewelers. The initial De Beers retail store opened in London. It sold high-end jewelry. This channel directly competes with other high end jewelry retailers like Tiffany & Co. and Cartier.
There are about 39 De Beers stores all over the United States, Europe, Asia, and the Middle East as of last year. Given that ALROSA has also emerged as a powerful player in the global diamond industry, the transition away from DTC showed an important shift in the industry's distribution system. At present, there is no single player distributing the significant parts of the rough diamond sales to the global market. Global market dynamics have evolved.
Bee Management Consultancy Pvt. Ltd. (2005) describes the normal distribution. Locally, the branded jewelers of the organized diamond sector (such as Tiffany or Bulgari) serve their consumers through one or two level supply chain. This comprises of either only franchised retail outlets and other retails or wholesalers and then retailers. This is illustrated by the exclusive partnerships of De Beers and Louis Vuitton and Tiffany & Co. and Aber.
On the other hand, the unorganized sector, either simply sell their manufactured products to retailers or have diamond offices or centers in major cities where the diamond products are transferred and sold to consumers or to retailers in the particular areas. Leviev is an example of this. With these two major distribution systems, rough diamonds and other diamond jewels are imported from sources, manufactured and polished in other locations and shipped or transported by air to the final destination.
In the exporting countries like the U.S., the diamonds are brought to retailers who are also customers or sent to their local branch office where the diamonds are sold to the local retailers. In both local sales and exports, the levels of intermediaries in the diamond industry generally do not really exceed two to three levels.
A growing challenge for jewelry retailers is to sell their diamond products online through Internet sales. This is a major factor in the establishment of a "margin squeeze" for the jewelry retailer. The margin for retail jewelers has vitally declined over the last 20 years (Diamonds Consultant Canada, 2008). The US jewelry retailers, the largest in the industry, have an average gross margin of 53.2 percent in 1986. In 2005, this has dropped to 48.4%46.
Blue Nile is the market leader for online diamond jewelry sales. The online company's diamond buying model is their edge because it enables them to sell their inventory with less inventory costs. Thus, the company can retail their diamonds at discounted prices. According to BlueNile.com, website of the company's online jewelry retailer, the average diamond price spent on a diamond engagement ring from their online store was $5,600 in 2004. (The national average in the U.S. was $2,300.) (Lee, et. al., n.d.) At present, the range varies between $5,000 to $7,500.
De Beers' website has an average of more than 200,000 online visitors over the previous years and this shows an increasing trend year by year. Aside from Internet sales, the main reasons for the reduction in the margins include the following: increased competition from discount retailers (such as Costco and Wal-Mart) and increasing prices for polished diamonds, gold, platinum and silver, which the consumer try to fight (Diamonds Consultant Canada, 2008). Industry experts even surmise that in the nearest future, even the diamond mining companies will get involved in distribution, specifically in the online sales of polished diamonds and jewelry.
Do you have no time or required skills to write certain military papers? Entrust this work to the best military resume writers from Pro-Papers company and get a qualitative result.
De Beers analyzed that most of their online visitors fall within their targeted market. The online visitors' demographics are described as women between 18 to 34 years old. These women check the De Beers' website in order to design engagement or "right hand rings" and e-mail their designs to close friends. De Beers welcomes this activity because it considers this as a good viral advertisement for their diamond products. It is also advantageous for the company since it makes prospective customers visit their website and recognize their new retail outlet for their diamond jewelries. De Beers Retailers is a relatively new business of the global diamond industry leader De Beers.
Another major consumer trend which is good news to the distribution channels of the diamond industry is that women are getting more independent, self-purchasers of diamonds. They are more empowered to buy their own expensive jewelries and to celebrate among themselves. This trend develops more opportunities to target this specific market through various sales channels.
Leave a Reply
Your email address will not be published / Required fields are marked *
Calculate your price