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- Aug 15, 2000
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Airports, planes, Vogue and branding
I am sure that it has happened to everyone who may read this. At an airport, yet another flight, no book to read…. Panic. The terminal did not have a particularly good book shop and as time ran out my eye caught a book called ‘No Logo’ by a Naomi Klein.
Certainly not the sort of book that I would usually read, but it seemed to be about brands, and with all the talk about brands in our industry I thought that I should be self righteous and read it. The shameful fact is that I am not that sure that I really know what a brand is.
Onto the plane and the person sitting next to me had a copy of Vogue and Tatler. She kindly let me flick through them once I had read all the papers that I could lay my hands on. I have to confess I was not desperately looking forward to ‘No Logo’.
I realise that we are in the run into Christmas, but even so the number of ads in both magazines even caught the eye of a nonchalant flick through. It is quite remarkable just how every ‘brand’ is bustling with diamonds. Virtually every page seemed to be merrily twinkling away.
Supplier of Choice was most definitely having an impact, of that there can be no dispute as it pushes its ‘reluctant’ participants into spending fortunes on advertising at a time when margins are being eaten up by the constantly spiralling cost of rough with no commensurate increase in polished prices.
However, things should be alright.
Gareth Penny, the driving force behind Supplier of Choice, is confident that this season will make a sufficient dent into the stock of polished to bring the whole rough / polish demand supply scenario into equilibrium.
A strong season and a weak dollar augurs well indeed, especially against a backdrop of no stocks in rough or polished (hopefully). Even the market acknowledges that there are no outstanding rough stocks. It has taken a remarkable time for the industry to generally accept this fact.
It is rather amusing that the realisation is being grabbed as some sudden thunder bolt. The fact is that it was painfully obvious that this was the situation two years ago.
But no, the industry just could not accept that De Beers did not have huge hidden reserves of rough. The peak of the stockpile in 1998 at $5 billion was talked up to $13 or $15 billion, just absurd numbers. Polished stock is going to be more interesting to see if it really has taken a hit in the current problem areas.
What seems to be passing by unnoticed is just how shortages in specific articles are spreading. Even the market accepts that there is a shortage of better colour larger sizes, but this is creeping down the colour range.
So the first thing that springs to my mind is as this boom in orchestrated promotion goes on and the impact grows how is the resultant increase in demand going to be met. In the short term, a few years or so, it can only be positive. But could this become just as serious for the industry as when it laboured under a huge rough overhang?
Prices are inevitably going to go up. Good news.
Yes, but is it such good news if prices are driven up too fast and too outside a reasonable correlation with GDP growth? Could one be engineering a boom and bust scenario?
De Beers has had at least four price increases this year. Everyone is talking about another increase in January. If the season matches expectations it would seem inevitable, as does the increase in polished prices over an ever increasing range of goods.
At the same time, we have the increasing threat of ‘cultured’ diamonds.
Personally, I do not see why such diamonds should be too much of a threat. If handled judiciously there is no reason why they cannot create another market or cannibalise such products as cubic zirconium.
Not that many fiancés are going to be enamoured by being offered a cheaper version of the real thing for their ring, they might think they are worth. As suggested by Des Kilalea in an article we published on PolishedPrices.com, why shouldn’t De Beers go into it?
The danger however, could perhaps be greatly increased with a combination of factors.
Vogue demonstrates just how much diamonds are being used to support fashion brands. De Beers very own venture with LVMH stressed that it wanted to generate excitement by being different by being more fashionable more trendy more relaxed.
To all anecdotal accounts this approach has not been outrageously successful. In fact, it is interesting that the promotion now seems to me to focus much more on diamonds, as the ads say ‘We are diamonds’.
Safer ground one would have thought. The whole essence of fashion is that it changes. Whilst a diamond is forever, no fashion is. Moving diamonds away from a sense of permanence could certainly increase consumer volatility.
Price may also come into the equation. As the price of natural is forced up and up, just as the focus on the industry goes more and more down the fashion route, cheaper alternative such as cultured diamonds could become attractive.
It is difficult to see this happening to the engagement rings, but what about diamonds in a leather strap? What is going to happen to diamond content in jewellery, a, if not the key, factor for long term health.
The creation of jewellery brands will put huge pressure on the diamond content.
Currently, the Polished Wholesale Value of the diamonds accounts for about 25% of the total retail market. De Beers advertising has been paid for out of the rough cost. The new incremental advertising that Supplier of Choice demands will almost certainly have to come from the diamond content.
Also, the diamond content will further be reduced by jewellery having a much higher design element. A simple band with a diamond attached to it will not do. If these effects cause average diamond content to drop to 20%, the advertising will need to add 25% to retail sales just for the trade to stand still.
Also, it is questionable if the new advertising will be sending out the right message. Whether always successful or not, De Beers advertising was designed to send out the message ''buy more diamonds''. The message that the advertising agencies are now being asked to promote is more ''come to my store not his’.
Advertising agencies always claimed that cigarette advertising did not grow the overall market, just made people swap brands. Has anyone seen an advertisement that would either make either someone buy a diamond who otherwise wouldn’t, or spend more than they otherwise would have?
Whilst some of these ideas were percolating, I started to read ‘No Logo’.
It is an angry book, but exceptionally well argued. Like all good arguments it is not necessary to accept all points raised. But as a diatribe against globalisation and the impact of branding, it is powerful.
I certainly do not agree with much of what is said but found myself agreeing with an uncomfortably significant number of points.
‘Brand essence’ revolves around confirming a feeling. A brand creates emotional ties as it forces a move away from the corporeal world of commodities.
The added value is effectively generated by advertising. For such brands as Nike and Gap the value has come in a phenomenal increase in advertising and at the same time a slashing in other costs and in particular manufacturing costs.
The middle producing segment of the final equation of bottom line profit has been squeezed beyond the pips going dry. As the author states, the more advertising there is out there the more advertising the brands must spend on marketing to stand out. Or, as the book puts it another way, brands need continuous and constantly increasing investment in marketing to stay in the same place.
This would seem to require careful thought on the part of the diamond industry as it charges down this route.
Unlike the fashion trade the cost of the raw material represents a significant part of the cost of the finished product. It is unlikely that you will be able to produce diamond rings for a couple of dollars to be sold for $125, which apparently is the case with some of Nike’s trainers.
If this does become possible it would imply that Supplier of Choice strategy has become self defeating.
What would worry me more as someone creating a diamond brand is the issue of supply. Creating brands is hugely expensive and long term. It would appear inordinately risky to go into this process without this comfort of a reasonable certainty in relation to supply.
The one thing one knows is that this factor just is not there.
De Beers has no stock. It only gives a commitment for six months. As the Rand increases in value against the dollar, De Beers is having real problems even with its own production. The development of Premier mine has been postponed due to rising costs… and perhaps the possible introduction of an 8% royalty.
De Beers has in its pricing policy this year clearly demonstrated that the immediate interests of its shareholders take precedence over its customers drive to create brands, despite the fact that De Beers is forcing them to do that so that they in turn can increase prices.
Somehow it does not seem to make sense. Having read Naomi Klein’s book, I think I understand brands better. But the drive to brands by De Beers only confuses me.
I agree with what Gabby Tolkowsky said, "Diamonds are a brand". Diamonds are a commodity, a special commodity, in fact a range of commodities where the consumption in jewellery has the very emotional ties that I read are what lie at the core of a brand.
It already has been done, and what is currently being done could well be undoing what has been done. As diamonds are used more and more to support other brands the very inherent brand already in diamonds becomes subsumed. All this at a time when there may not be enough diamonds to create the brands. Is the industry creating its own Trojan Horse?
Interestingly, Penny himself acknowledged at the recent Antwerp conference that branding small diamonds was actually easier than larger ones.
This ties in very much with our view at WWW International Diamond Consultants, that it is the smaller sizes of diamonds that hold the prospect for the greatest increase in prices over the next five to ten years.
Gareth’s view was recently clearly stated when he said, "There are some that might disagree with the view that marketing and branding will help growth in sales. They would argue that you cannot distinguish diamonds and that they are a commodity. The DTC''s concern is that commodities are more vulnerable to changes in the market and, with nothing different on offer to attract the consumer, they become defenceless within the heavily branded and highly competitive luxury goods sector."
To me, apart from being contradictory as De Beers has always refused to admit diamonds are a commodity; this shows a remarkable lack of confidence in the core emotional appeal of diamonds which has protected them so well recently as all other luxury goods nosedived.
Creating brands does not stop diamonds being a commodity, as clearly stated brands have little to do with the actual product but more with the emotional ties.
One thing is absolutely for sure in a world of increasing uncertainty, is that the only certainty is going to be more price volatility for diamonds. Something that it becoming more noticeable on the polished prices indices published by PolishedPrices.com.
Charles Wyndham, PolishedPrices.com
I am sure that it has happened to everyone who may read this. At an airport, yet another flight, no book to read…. Panic. The terminal did not have a particularly good book shop and as time ran out my eye caught a book called ‘No Logo’ by a Naomi Klein.
Certainly not the sort of book that I would usually read, but it seemed to be about brands, and with all the talk about brands in our industry I thought that I should be self righteous and read it. The shameful fact is that I am not that sure that I really know what a brand is.
Onto the plane and the person sitting next to me had a copy of Vogue and Tatler. She kindly let me flick through them once I had read all the papers that I could lay my hands on. I have to confess I was not desperately looking forward to ‘No Logo’.
I realise that we are in the run into Christmas, but even so the number of ads in both magazines even caught the eye of a nonchalant flick through. It is quite remarkable just how every ‘brand’ is bustling with diamonds. Virtually every page seemed to be merrily twinkling away.
Supplier of Choice was most definitely having an impact, of that there can be no dispute as it pushes its ‘reluctant’ participants into spending fortunes on advertising at a time when margins are being eaten up by the constantly spiralling cost of rough with no commensurate increase in polished prices.
However, things should be alright.
Gareth Penny, the driving force behind Supplier of Choice, is confident that this season will make a sufficient dent into the stock of polished to bring the whole rough / polish demand supply scenario into equilibrium.
A strong season and a weak dollar augurs well indeed, especially against a backdrop of no stocks in rough or polished (hopefully). Even the market acknowledges that there are no outstanding rough stocks. It has taken a remarkable time for the industry to generally accept this fact.
It is rather amusing that the realisation is being grabbed as some sudden thunder bolt. The fact is that it was painfully obvious that this was the situation two years ago.
But no, the industry just could not accept that De Beers did not have huge hidden reserves of rough. The peak of the stockpile in 1998 at $5 billion was talked up to $13 or $15 billion, just absurd numbers. Polished stock is going to be more interesting to see if it really has taken a hit in the current problem areas.
What seems to be passing by unnoticed is just how shortages in specific articles are spreading. Even the market accepts that there is a shortage of better colour larger sizes, but this is creeping down the colour range.
So the first thing that springs to my mind is as this boom in orchestrated promotion goes on and the impact grows how is the resultant increase in demand going to be met. In the short term, a few years or so, it can only be positive. But could this become just as serious for the industry as when it laboured under a huge rough overhang?
Prices are inevitably going to go up. Good news.
Yes, but is it such good news if prices are driven up too fast and too outside a reasonable correlation with GDP growth? Could one be engineering a boom and bust scenario?
De Beers has had at least four price increases this year. Everyone is talking about another increase in January. If the season matches expectations it would seem inevitable, as does the increase in polished prices over an ever increasing range of goods.
At the same time, we have the increasing threat of ‘cultured’ diamonds.
Personally, I do not see why such diamonds should be too much of a threat. If handled judiciously there is no reason why they cannot create another market or cannibalise such products as cubic zirconium.
Not that many fiancés are going to be enamoured by being offered a cheaper version of the real thing for their ring, they might think they are worth. As suggested by Des Kilalea in an article we published on PolishedPrices.com, why shouldn’t De Beers go into it?
The danger however, could perhaps be greatly increased with a combination of factors.
Vogue demonstrates just how much diamonds are being used to support fashion brands. De Beers very own venture with LVMH stressed that it wanted to generate excitement by being different by being more fashionable more trendy more relaxed.
To all anecdotal accounts this approach has not been outrageously successful. In fact, it is interesting that the promotion now seems to me to focus much more on diamonds, as the ads say ‘We are diamonds’.
Safer ground one would have thought. The whole essence of fashion is that it changes. Whilst a diamond is forever, no fashion is. Moving diamonds away from a sense of permanence could certainly increase consumer volatility.
Price may also come into the equation. As the price of natural is forced up and up, just as the focus on the industry goes more and more down the fashion route, cheaper alternative such as cultured diamonds could become attractive.
It is difficult to see this happening to the engagement rings, but what about diamonds in a leather strap? What is going to happen to diamond content in jewellery, a, if not the key, factor for long term health.
The creation of jewellery brands will put huge pressure on the diamond content.
Currently, the Polished Wholesale Value of the diamonds accounts for about 25% of the total retail market. De Beers advertising has been paid for out of the rough cost. The new incremental advertising that Supplier of Choice demands will almost certainly have to come from the diamond content.
Also, the diamond content will further be reduced by jewellery having a much higher design element. A simple band with a diamond attached to it will not do. If these effects cause average diamond content to drop to 20%, the advertising will need to add 25% to retail sales just for the trade to stand still.
Also, it is questionable if the new advertising will be sending out the right message. Whether always successful or not, De Beers advertising was designed to send out the message ''buy more diamonds''. The message that the advertising agencies are now being asked to promote is more ''come to my store not his’.
Advertising agencies always claimed that cigarette advertising did not grow the overall market, just made people swap brands. Has anyone seen an advertisement that would either make either someone buy a diamond who otherwise wouldn’t, or spend more than they otherwise would have?
Whilst some of these ideas were percolating, I started to read ‘No Logo’.
It is an angry book, but exceptionally well argued. Like all good arguments it is not necessary to accept all points raised. But as a diatribe against globalisation and the impact of branding, it is powerful.
I certainly do not agree with much of what is said but found myself agreeing with an uncomfortably significant number of points.
‘Brand essence’ revolves around confirming a feeling. A brand creates emotional ties as it forces a move away from the corporeal world of commodities.
The added value is effectively generated by advertising. For such brands as Nike and Gap the value has come in a phenomenal increase in advertising and at the same time a slashing in other costs and in particular manufacturing costs.
The middle producing segment of the final equation of bottom line profit has been squeezed beyond the pips going dry. As the author states, the more advertising there is out there the more advertising the brands must spend on marketing to stand out. Or, as the book puts it another way, brands need continuous and constantly increasing investment in marketing to stay in the same place.
This would seem to require careful thought on the part of the diamond industry as it charges down this route.
Unlike the fashion trade the cost of the raw material represents a significant part of the cost of the finished product. It is unlikely that you will be able to produce diamond rings for a couple of dollars to be sold for $125, which apparently is the case with some of Nike’s trainers.
If this does become possible it would imply that Supplier of Choice strategy has become self defeating.
What would worry me more as someone creating a diamond brand is the issue of supply. Creating brands is hugely expensive and long term. It would appear inordinately risky to go into this process without this comfort of a reasonable certainty in relation to supply.
The one thing one knows is that this factor just is not there.
De Beers has no stock. It only gives a commitment for six months. As the Rand increases in value against the dollar, De Beers is having real problems even with its own production. The development of Premier mine has been postponed due to rising costs… and perhaps the possible introduction of an 8% royalty.
De Beers has in its pricing policy this year clearly demonstrated that the immediate interests of its shareholders take precedence over its customers drive to create brands, despite the fact that De Beers is forcing them to do that so that they in turn can increase prices.
Somehow it does not seem to make sense. Having read Naomi Klein’s book, I think I understand brands better. But the drive to brands by De Beers only confuses me.
I agree with what Gabby Tolkowsky said, "Diamonds are a brand". Diamonds are a commodity, a special commodity, in fact a range of commodities where the consumption in jewellery has the very emotional ties that I read are what lie at the core of a brand.
It already has been done, and what is currently being done could well be undoing what has been done. As diamonds are used more and more to support other brands the very inherent brand already in diamonds becomes subsumed. All this at a time when there may not be enough diamonds to create the brands. Is the industry creating its own Trojan Horse?
Interestingly, Penny himself acknowledged at the recent Antwerp conference that branding small diamonds was actually easier than larger ones.
This ties in very much with our view at WWW International Diamond Consultants, that it is the smaller sizes of diamonds that hold the prospect for the greatest increase in prices over the next five to ten years.
Gareth’s view was recently clearly stated when he said, "There are some that might disagree with the view that marketing and branding will help growth in sales. They would argue that you cannot distinguish diamonds and that they are a commodity. The DTC''s concern is that commodities are more vulnerable to changes in the market and, with nothing different on offer to attract the consumer, they become defenceless within the heavily branded and highly competitive luxury goods sector."
To me, apart from being contradictory as De Beers has always refused to admit diamonds are a commodity; this shows a remarkable lack of confidence in the core emotional appeal of diamonds which has protected them so well recently as all other luxury goods nosedived.
Creating brands does not stop diamonds being a commodity, as clearly stated brands have little to do with the actual product but more with the emotional ties.
One thing is absolutely for sure in a world of increasing uncertainty, is that the only certainty is going to be more price volatility for diamonds. Something that it becoming more noticeable on the polished prices indices published by PolishedPrices.com.
Charles Wyndham, PolishedPrices.com
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