Gaining Consumer Confidence

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The Antwerp Diamond High Council (HRD) Antwerp Diamond Conference, held November 15 and 16, called on diamond industry leaders and experts to identify the latest threats to consumer confidence, such as treated diamonds and synthetics, the use of child labor, the environmental impact of mining and corporate and social responsibility. All sectors of the diamond pipeline realize that to face these threats the industry must form a united front as it did when facing the threat of conflict diamonds.

Positive Press

While consumer confidence may be the responsibility of the entire diamond pipeline, it is ultimately the diamond jewelry retailer that bares the brunt of responsibility. Matthew Runci, Jewelers of America (JA) president and chief executive officer, explained that consumers ultimately hold the retailer fully accountable for managing the risk associated with diamond and diamond jewelry purchases. If the nongovernmental organizations (NGOs) “go to war over issues of mining reform in connection with gold mining’s impact on the environment, for example, while the public communication campaign would be waged in the media and on the worldwide web, the battles will be fought on the frontlines — on the sidewalks in front of our stores. That is a level of risk we feel we cannot accept,” said Runci.

For this reason, Keshini Navaratnam, BBC news anchor and conference co-moderator, stressed the importance for the industry to send out a positive message to consumers to avoid the false perception that the industry operates behind closed doors. Navaratnam said that while the industry may feel that it is a “victim of aggressive press,” this is the case with any industry that involves money and power; however, “openness and accountability creates positive press.”

Mark Killick, Hill & Knowlton senior media consultant and Diamond Trading Company (DTC) media advisor, counseled that the message to the media should be that “the diamond industry has never been stronger.” “Face the press,” he advised. “There is a need for consumer confidence and it falls on all of you to go out there and be the salesmen for it.”

New Ideas

Dan Ben-Ary, founder and chief executive of YYY branding firm, suggested that consumer confidence could be maintained by creating strong industry brands, which ultimately bring reputation and trust.

“Customers entering Louis Vuitton stores never question whether the bags are made from real or synthetic leather because they trust the brand. If they have confidence in the brand, they wouldn’t question whether or not a diamond is natural or synthetic,” stated Ben-Ary.

Ben-Ary also warned the industry to work together and realize that it is part of something larger. One such example is the retail experience, which is still too much about product and price. “Producers are creating incentives that are not reaching retailers. This is blocking change because they are the interface with consumers,” Ben-Ary said. He pointed out that retailers need to go beyond simply hiring interior decorators in their stores.

To achieve the ultimate in-store experience, Ben-Ary told retailers to hire creative directors without experience in diamond jewelry, to employ more women in top executive positions and to look for real consumer insights by meeting customers.

Gareth Penny, De Beers DTC managing director, agreed that there are few jewelry retailers who offer the same layout and in-store service found in other luxury product stores. “Consumers still find buying diamonds a daunting experience,” said Penny.

Peter Meeus, HRD managing director, foresees grading labs evolving into a third-party quality warranty for the industry. Consumers will recognize labs as brands and will therefore be more confident that they are buying natural diamonds. This “ingredient branding,” Meeus likened to a Woolmark and the International Organization for Standardization (ISO).

This Practice, That Practice

Responding to consumer concerns, industry leaders including the DTC, Rio Tinto, BHP Billiton, Tiffany & Co., Cartier, Signet and Zale Corp. have all embarked on individual corporate initiatives or Best Practice Principles (BPPs). The number of BPPs presented at the conference illustrated that there are too many varying principles.

Speakers agreed that the industry must urgently form a common code of ethics or face a duplication of efforts, divergent sets of requirements, an overburdened industry and ultimately, a train wreck of good intentions.

JA proposed a meeting among these companies, resulting in the creation of the Early Adopters Initiative. ABN AMRO bank, the National Association of Goldsmiths and other retail trade associations also support this initiative.

The question arose whether such an approach involved the bookends of the industry only, giving decisive power to the big players. Runci said that nothing could be achieved without midstream participation and that the initiative was a starting point.

Different Laws

Another cause for concern — and one that could be forcing BPPs fragmentation — is that countries and international bodies have adopted different sets of industry requirements.

Conference co-moderator Chaim Even-Zohar said the Financial Action Task Force (FATF) and the Organization for Economic Cooperation and Development (OECD) suggested different diamond laws for each country. For instance, a cash transaction that “may not be legally consummated in Antwerp could, for example, be perfectly legal in Amsterdam. This shouldn’t be allowed,” said Even-Zohar. While the industry is required to report irregularities, he pointed out that what may be normal in one country may be a strange transaction in another.

Similarly, describing the threat posed by the use of child labor to consumer confidence, Dr. Gaetano Cavalieri, president of CIBJO, the World Jewelry Confederation, said: “We cannot neatly transfer Western standards into a Third World environment. In some countries, for example, it is considered acceptable that 13- and 14-year-old children contribute to the family income. However, gross deviations from acceptable standards that are exposed by the media could still have very detrimental results.”

Good Corporate Conduct Equals Good Business

While recognizing a need to adopt an all-inclusive approach, Cavalieri stated that it is not the job of those promulgating BPP codes to police the jewelry community, “but rather to nurture a set of standards that will promote the type of environment in which the jewelry business will flourish.”

In his final speech to the diamond industry, Peter Gross, global head of ABN AMRO’s International Diamond and Jewelry Group, warned that seeing business excellence models as a means to ensure that the consumer maintains his confidence in “an unblemished diamond product and diamond industry in general… is a blemished and too limited view.”

Gross explained that a business excellence model emphasizes “the linkages between employee satisfaction, customer satisfaction, business performance and impact on society. Consumer confidence is not isolated from the business. It would be a great failure to think that through sophisticated marketing, nice brochures, lovely posters and superior press relations we can either attain or sustain consumer confidence.”

The war against terrorist financing, Gross stated unequivocally, will accelerate the process of turning the fragmented downstream players into a more transparent, accountable industry dominated by fewer, larger and vertically integrated multinational diamond and jewelry manufacturing corporations.

The diamond industry seems to be dragging its feet in adopting the vigorous and generally successful approach it did while fighting the most recent and real threat to consumer confidence — conflict diamonds.

It is increasingly obvious that reiterating the emotional value of natural diamonds is not a sufficient vanguard against the new threats to consumer confidence, such as synthetics. Perhaps only the DTC has the finances and power to push these reasons to buy natural diamonds. The rest of the industry needs prompt solutions, strong support and fast action.

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