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PART IV of With This Ring from American RadioWorks
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The Democratic Diamond
By Jacki Lyden and Davar Ardalan

Retail sales of diamond jewelry totaled 56 billion dollars last year worldwide. And nearly half of all the diamond jewelry in the world is sold in the United States.

Of those diamonds destined for the U.S., all but a few of them pass through the Diamond District in New York. This district includes the blocks surrounding 47th Street and Fifth Avenue in Manhattan.

This is not a good time for luxury goods. Demand for luxury goods has plummeted. The images of the 'blood diamond,' ransomed with human lives, have rocked the industry. The De Beers corporation, which used to rule a mighty cartel has been giving up some power, shifting the equation of demand and supply. Industry leaders have been fighting back by doing what they do best, marketing.

Fifth Avenue, with its big diamond-shaped lamps, is where it starts. The diamond district in New York's mid-town is one of the city's most colorful neighborhoods. The insular world still feels like an East European village, yet nearly every diamond sold in America passes through its streets.

The flocks of Hassidic men in flapping black frock coats and black hats push past gawkers in thigh-high skirts. And Hebrew is mingled with Spanish, Japanese, and Urdu.

Joe Schlussel, a Romanian-born dealer elbows his way through the crowd. Schlussel has 40 years in the district and explains his mental map of the district.

"This is the way to go when people talk about the diamond district or 'diamond way' they speak about the streets between 48th and 46th Street between 5th and 6th Avenue," says Schlussel. "There are many levels of the jewelry and diamond trade on this block— right now we are on the bottom — street level where the retailers are — now we call these exchanges, everybody has a booth — more like a bazaar — each has a specialty. In the bazaar, there are cubicles for the dealers, and in one building is the Gemological Institute, which trains everyone. On the higher floors, there are the diamond dealers, kind of a bourse, or exchange with its own synagogue. It's where, for a token twenty five cents, diamonds are weighed. Dealers can keep climbing higher, in search of the ultimate diamond. "If you want a real deal, " says Schlussel, "you have to go closer to the source." Schlussel is on the eighth floor, but there are some at a higher level than him.

At the moment, however, things are bad… there've been layoffs and foreclosures in the district. Worldwide, profits are expected to be down by a billion dollars. In India, four hundred thousand of the eight hundred thousand diamond cutters have lost their jobs. The diamond industry is sitting on excess merchandise it can't sell and that the banks effectively own. So the answer is to promote, promote, promote. And just ten blocks uptown, at Tiffany's, that's just what was happening at an event earlier this fall.

Tiffany's is the home of the trademark 'Blue Box.' It was Tiffany's, say its directors, who got American women hooked on the diamond. During its fashion week show, Tiffany's premiered a new line called "lace" designed to showcase the diamond in all its most powerful allure.

"They're beautiful, very modern; I'd want them" says one woman.

Igniting Diamond Desires

From a flagship emporium like Tiffany's, to the backroom mom and pop diamond shops, marketing is the anthem for an industry chorusing that it may loose its edge. When De Beers controlled the most of the worlds diamonds, supply and demand was easily manipulated: De Beers could make diamonds more rare simply by not putting them on the market. At that point, De Beers controlled 80 percent of the diamond supply. Now it controls just 66 percent; and without a powerful cartel controlling the flow, many more diamonds are available.

In an ironic twist of fate, the diamond district's purveyors are being nudged by De Beers into being the promoters of a more freely traded product. These nudges feel like tidal waves, says Rob Bates, who follows diamonds for Cahners publications. To explain: Gucci, a luxury retailer, spends about fifteen percent of its profits on marketing. In comparison, diamond industry spends only one percent.

Bates flipped through a recent issue of JCK, the jewelry magazine and pointed out a recent article on De Beers new 'marketing strategy seminar 101' — Igniting diamond desires.

Explains Bates, "It's basically about the seminars for the sightholders; a lot of these guys aren't marketing-savvy and De Beers is holding seminars for them." Bates acknowledges that while most middlemen in the business spent very little on marketing, De Beers is forcing them to learn how.

De Beers practically invented diamond marketing: a diamond is forever is the most recognized ad slogan line of the 20th century, according to Advertising Age. Ninety percent of all Americans know it.

Yet, right now they're spending millions on a campaign that doesn't even include the De Beers name. It's just like pork — 'the other white meat' or the milk as you see it on mustachioed celebrities. The ad agency J. Walter Thompson is in charge of a De Beers website called Their site is accessible to anyone who can go on-line; and Senior Account Executive Ann Ritchie hopes that it will be high-end platform. She says you shouldn't have to be a jeweler or a dealer to look at a diamond ring from every angle.

The website gets 200,000 visitors a month. Each spends an average of twenty minutes on line. Most of them are in the target market: women, 18 to 34 years old.

Ritchie explains that she's heard women talking about how much they enjoy the Web site, and that they email their friends with engagement ring designs.

But could a diamond by any other name shine more brilliantly? More ardently? De Beers may not be putting its name on diamond products now, but that will change. Branding means associating a diamond with a high-end merchandiser like Givenchy, or Prada, or, how about a De Beers diamond? Gucci spend fifteen percent of its profits on marketing, the diamond industry, one percent.

De Beers wants to exploit the changes in the market from both directions. It will sell its own diamonds directly to the public: industry analysts say that within a year or two, there will be a flagship De Beers store in London.

Andrew Lamont, with De Beers says, "If you look at the watch industry, as an example, people instantly recognize big brands: Rolex, Omega. There's exciting marketing — innovation. These are the sorts of things which help raise the tide to lift the ships."

The Fate of the Middlemen

But New York diamond dealer Joe Schlussel feels like his ship is being sunk. Branding, he says, can't help but negatively impact middleman dealers like him. He has started his own Internet service, but Schlussel sees branding as crass, inimical to decades of cachet and distinction.

"My view is that when you buy a diamond you buy something intrinsically rare. Each diamond, as De Beers used to say, is as individual as your love. Now when you have branding, it means that all of them are practically the same. In other words, when you buy a Gucci bag there may be a thousand of them in the world…My opinion is that when you buy a diamond, there is only one diamond that you and your loved one has, as a common bond forever."

And for the 80 percent of American women who will 'plight their troth' with diamond engagements rings, it is an emotional bond. But, whether that emotional bond extends to the middlemen of the diamond district, its hidden synagogues and diamond clubs, remains to be seen.

Those diamond purveyors who survive, say industry analysts, will be the ones that can 'add value' to their products. In other words, come up with something extra they weren't doing before. You can promote 'Love Equity'…a classic is the anniversary ring with three stones for past, present and future.

Alan Rehs is the son in a small, innovative, mother and son company, which in itself is a rarity. He describes a stone being polished, "With this particular diamond it will be an emerald cut — it's original weight was nine carats; and one part weights 4.9 carats, the other half is 4.2 carats…so it's lost some of it's weight. The leftovers are all over the wall — all this black dirt is diamonds."

Four men sit side by side at polishing machines; the walls are gray with coats of diamond dust. Once, Alan Rehs' time was consumed with buying rough diamonds, now he's a big believer in 'adding value': making finished rings.

As Alan Rehs checks on his polishers, he is doing something else — he is bucking the notion of diamond dealing as patrimony. It used to be a lineage passed from father to son, uncle to nephew. That was before profit margins shrunk by the billions; back when a dealer could walk across the street with a diamond in his pocket and make a two percent markup in five minutes. Alan Rehs is in his 30s, and suddenly, when he looks around, he is the rare young man in this business.

"The reality is that the margins in the business aren't as grand as you'd expect…. I was actually playing golf with an associate in the business and he strictly told me that he would not let his children into this business." Rehs continues, "I don't think there are a lot of young people coming in. I see that a lot of firms are looking to maintain the status quo, and when they retire from the business, I don't see anybody else coming along to keep those businesses continuing. The reality is that the margins in this business aren't as high as people expect."

A Diamond is for Everyone

The pot has a lot of sticky fingers in it, including some who are brand new to the diamond game. What if you are hooked by the diamond desire? More and more, women are buying themselves diamonds — in industry code: self-purchasers. Do you go to the diamond district, Tiffany's, or wait for the De Beers brand? How about

Every day and in every way, Jim Schultz is a symbol of what can happen when you broaden the diamonds' appeal. He's a young newcomer with absolutely zero connections to the diamond trade. Dirt-Cheap diamonds deliberately takes diamond mystique and debunks it to nothing but the facts. "Diamonds are not remotely rare," says Schultz. When I searched the Internet, I would get hundreds or thousands of diamonds. There were a lot of hands that each diamond went through before it got to me. Depending on whether a diamond went through two hands or three hands or twenty hands between De Beers and the retailer seemed to be reflected in the price."

The irony is that as the d in diamond becomes more aligned with the d in demographic, it also stands for discount. For several years now, Costco, the purveyor of all things bought in bulk — from toilet paper to crab legs — has a jewelry bar. We visited a Costco in Sunset Park, Brooklyn, not a tony place.

There, in a Plexiglas case of jewelry in the store's center, twinkling at one end, was the diamond display. Costco's diamonds come with a guarantee: they will be half the price of an appraisal anywhere else, or your money back plus a hundred dollars and the cost of the appraisal. Such competitive pricing shows how much flexibility in the diamond's markup.

We interviewed some of the Costco shoppers, and none of them felt their diamond would mean any less if it came from Costco. Shopper Eileen Morales certainly did not think so, "I came here last week and I was looking at the diamonds…they're pretty good. It's really nice, I like diamonds and have nice diamond earrings on."

Morales said she was surprised to find diamonds at Costco, but when asked if she would think less of her diamond if it came from Costco, she said, "I don't think so. The quality of the diamond is guaranteed; they're really good, and you can tell because if you put your hand over the diamond and the light goes through it and they're good diamonds. that's how you know — that diamonds are forever!"

As a marketing ploy, the slogan still works. But as the markets are profoundly changed from upper class cachet to the dirt-cheaps and bulk stores; perhaps a more apt slogan should be "a diamond is for everyone."

And that is the depressed diamond industry's greatest hope: that we just can't live without those glittering, glamorous gems, however we get our hands on them.

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