Rapaport State of the Industry, Vegas JCK trade show talk

[Garry H (Cut Nut)]

Martin Rapaport gives a breakfast address every year at the Vegas JCK trade show.

I made these notes as he spoke – they may not all be coherent as he talks like a gatling gun.

I have most of the slides too, so if anyone wants specific detail I can post the slides.


Diamond Market:

Rough 15b

Polished 20b

Jewellery 65b

Usa 51%, China 12%, India 3%, Japan 6%

Trump will grow American consumers


3 top issues

Retail profitability. Big concern.

Radical political change. New tax changes

Source certification. Terrorist funding


RETIAL.PROFITABILITY

Change adaption

External internal. E.g CVDs

Change change change

Profit life cycle e.g. fax sales

So come up with new ideas and products eg rap lost then mag then RapNet then auctions

Elite Daily news web EXPERIENCES not goods. Life is about memories not diamonds. THATS HOW MILLENIALS THINK. But when a woman looks at her ring she remembers the life and the man who bought it for her. That's the IDEA behind the diamond.

More millennials now than boomers. 27%

INTERNET "will never replace store experience!" Rap laughs - Hahahaha

Price transparency

It is how we communicate

Everyone communicates. Leaders. Segments etc engage with people. Then swll stuff to hundreds of thousands of people.

Disintermediatization

Can a diamond miner sell to consumers. YES

Manufacturers and dealers can bypass retailers. But not that simple. Eg Blue Nile is opening showrooms

BRANDING

Legal monopoly to sell TRUST and PROMISE

Amazon promise is to kill competitor's

Consolidated marketing like the watch companies. Canadamark?

Could FOREVERMARK be the new Rolex????

PROFIT for retailers

Its all about added value.

It costs 40% to open the doors.

Blue Nile can do it for half as much.

Value = quality (perceived) / price

Its the entire value proposition.

He service. The security. The happiness. The better your perception in clients mind.

V=Q/P

we have to make V greater than 1.00


WHAT IS OUR BUSINESSES Q???

Segment your products

Segment your clients. Rich dumb smart old young

Customizable

Experience

Extreme customer service

We must not lose the engagement ring market

IT MUST BE AN Experience

JAMES ALLEN buzzfeed video - yes, online can beat B&M experiences:

Your staff need to have great experiences if they are gunna give it to clients.


Bain take BlueBile private for $500M

James Allen get $140M for 50% of the company.

Brilliant Earth – great story, but are they really ethical?

All opening Tesla style show rooms EXPERIENTIAL!!!!


The Process

.innovation ..communication tech

.disruption...how you meet and greet and help sell to customers

.segmentation. ..people stuff communication

.curation... your expertise. Choose customer segment. Give em what they want

Today there is so much news it is like drinking from a fire hydrant

FIND YOUR 'Q'

BE THE BEST AT SOMETHING in the world

What are you passionate about? What do you have ability to do?

Then your V equals PROFIT

Hire young people. Ones with a passion for jewellery.

Treat them well. That’s how you get extreme customer service. Foosball chairs.

Evolve from price and product to communication competition.

Get client acquisition right and you get sales as a by product.

Relationships lead to business. That’s where the world is going.


Be authentic

Tell.em.what you do best

Segment

We live in a multi channel world. FB misses some. Email is for old dudes.

Instagram for others.

Don’t throw out what you do now and do well

Rap did a CEO Harvard course. Case study about Ringling circus that went broke. Hate animals being abused. Dusty. Dirty smelly. Circe de Solae worked out how to make a circus that works.

How do we do that transition?


Target story. King Solomon. “How did you hit the center of the target every time kid?” “I draw the circle around target after I shoot the arrow into the tree”


POLITICS

Big impact on the diamond macro market.

Tax changes

Trade policy

You better understand it baby!

US purchasing power is what Trump will use. China better reciprocate. Don’t build islands if you want is to let you sell to our country. Reciprocity

He is a huge mother of disruption. He couldn't give a stuff about destruction of Washington bureaucracy. He wants to break it and start again. That’s why people voted for him.

He has the house and the senate.

So he will change tax

1 trillion in infrastructure

Money will flow. Gold in the streets.

1000 billion

China will want to build islands near Manhattan

BAT border adjusted tax. It’s a republican policy. Tax on imports. 10% to 20% but less business taxes. And tax refunds for importation.

He is an insurgent.

Less imports more stuff made in USA and jobs.

The US $ will get stronger.

About now the slides projector died

TERRORISM

Bombs everywhere

Hard to open a bank account

Costs for banks to monitor money movements

Patriot act is looking at the diamond trade! They are looking at us. Same in Australia.

Where do my diamonds come from (eg my best supplier tells me. Botswana. Canada. Russia on every diamond.)

Big brands can be hit with just one mistake eg Signet share price dropped because they underpaid some staff. Imagine Tiffany was found to be selling conflict diamonds. So they are spending and working on CSR.

Is it environmentally safe? Do you know? Supply chain


CONCLUSION

Changes. Threat, internet, multichannel

Don't rely on technology though because it keeps changing.

Radical changes. Trump smashing systems.

If he spends and changes tax - USA will grow fast.


The word is EXTREME

Learn. Study. Grow. Understand. If it is not working it's your own fault.


Thank you

MARTIN RAPAPORT

 

[bmfang]

Interesting address Garry. Would like to see the slides. I take issue with his views on Trump unleashing money in the streets. The average US consumer is likely to have less disposable income with his tax policies in place than under the current system.

 

[Garry H (Cut Nut)]

 

[whitewave]

Thanks, Garry. That was interesting.

 

[valeria101]

Wondering where Tradition is in the mentioned Experince. Does it matter ?

 

[Rockdiamond]

Very interesting- thank you Garry. It looks like Rapport believes his ability to gauge the diamond market extends to all sorts of world views. That's where I think he's overreaching. He's drawing conclusions regarding how political events will shape the diamond market in ways that seem to ignore reality.

 

[diagem]

Very interesting- thank you Garry. It looks like Rapport believes his ability to gauge the diamond market extends to all sorts of world views. That's where I think he's overreaching. He's drawing conclusions regarding how political events will shape the diamond market in ways that seem to ignore reality.

Reality in the present Diamond and political arenas? You must be joking...

I would not cancel out Rapaport's political informational insights so fast...
Remember Rapaport's HQ is in Vegas..., Vegas is also home to Sheldon Adelson who was the largest donor to the Trump 2016 presidential campaign.

Just a simple mathematic exercise?

 

[Rockdiamond]

Great point Yoram. Reality and the diamond business.......divorced from each other for many years
I will say that when I read Rappaport spouting some nonsense about "Increased consumer confidence" benefitting the diamond industry ( I believe this was about 3 months ago) I nearly pounded the computer screen.
From what I see here on PS ( and in the real world) political instability does not inspire people to buy diamonds....

 

[diagem]

Great point Yoram. Reality and the diamond business.......divorced from each other for many years
I will say that when I read Rappaport spouting some nonsense about "Increased consumer confidence" benefitting the diamond industry ( I believe this was about 3 months ago) I nearly pounded the computer screen.
From what I see here on PS ( and in the real world) political instability does not inspire people to buy diamonds....

Humm, not to sure what you mean, first, we are only in the beginning of this new political reality (including but not limited to the UK, France et-al), who knows where the road leads to, in a few years we'll be able to objectively look back and see what happened.

Throughout history political instability didn't exactly inspire but in some dark points in history buying/owning Diamonds (Gems) was a survival necessity.

That was then, this is now.

If objectively looking at current regulation and transparency policies one can't help from thinking that stashing some Gems in a safe place (under individual control) might not be such a bad idea. Since the world is becoming a much more officially regulated society (e.g. People's wealth/assets are becming more and more official and transparent which potentially translates into individuals not fully controlling their own private wealth), banks and official governments are controlling more of our assets via strict bank regulatory policies and laws.

I can't help but notice the recent results on ultra rare Gems selling at auctions..., to me it looks like the ultra rich are moving assets into their control when voluntarily paying anywhere between $30-70 million for a single gem while smashing records doing so...

 

[bmfang]

Humm, not to sure what you mean, first, we are only in the beginning of this new political reality (including but not limited to the UK, France et-al), who knows where the road leads to, in a few years we'll be able to objectively look back and see what happened.

Throughout history political instability didn't exactly inspire but in some dark points in history buying/owning Diamonds (Gems) was a survival necessity.

That was then, this is now.

If objectively looking at current regulation and transparency policies one can't help from thinking that stashing some Gems in a safe place (under individual control) might not be such a bad idea. Since the world is becoming a much more officially regulated society (e.g. People's wealth/assets are becming more and more official and transparent which potentially translates into individuals not fully controlling their own private wealth), banks and official governments are controlling more of our assets via strict bank regulatory policies and laws.

I can't help but notice the recent results on ultra rare Gems selling at auctions..., to me it looks like the ultra rich are moving assets into their control when voluntarily paying anywhere between $30-70 million for a single gem while smashing records doing so...

But are those rare gems that sell at auctions representative of the gemstones that an average consumer is able to purchase? I'd venture that they aren't (unless the average consumer can easily afford gems like FCD's, large natural untreated sapphires, rubies and emeralds, etc).

 

[Rockdiamond]

Fantastic point about perspective Yoram.
In 2008 I realized something- I had been vocal in my opposition to selling diamonds as an investment- due to the difficulties consumers have selling them
But then I realized that if someone has stocks that lost all value, as compared to a diamond ring that they paid $25k for, would pawn for $10k- but it was still better than the stock- plus, they could have worn and enjoyed it.
As you said, that was then, this is now.
Also good point about how 30 million dollar diamonds seem to be hot right now.

In general though- do readers of this thread think PS is indicative of the broader market of English speaking diamond buyers?
If you look in hangout, there's a definite preference for the candidate that lost....

 

[bmfang]

Fantastic point about perspective Yoram.
In 2008 I realized something- I had been vocal in my opposition to selling diamonds as an investment- due to the difficulties consumers have selling them
But then I realized that if someone has stocks that lost all value, as compared to a diamond ring that they paid $25k for, would pawn for $10k- but it was still better than the stock- plus, they could have worn and enjoyed it.
As you said, that was then, this is now.
Also good point about how 30 million dollar diamonds seem to be hot right now.

In general though- do readers of this thread think PS is indicative of the broader market of English speaking diamond buyers?
If you look in hangout, there's a definite preference for the candidate that lost....

@Rockdiamond, the PS readership is probably a very small subset of English speaking diamond purchasers.

And I'd venture that a large number of folks in the US who voted for Trump are in the income bracket where they can't afford diamonds even as a luxury item because they have no disposable income left after their daily living expenses (and after the passing of the recent healthcare bill, they will be even more screwed over). Then again I'm an Australian who is socially conservative but not so in economic matters where I'd be more on the Democrat side of the equation.

 

[diagem]

If you look in hangout, there's a definite preference for the candidate that lost....

Like we said, that was then..., this is now. I learned in life that crying over spilled milk doesn't really help.

 

[Rockdiamond]

Bah bah bah- look there's some milk on the floor!!!

Seriously- I have noticed a definite improvement in the market over thew past few months.
I have not spoken to anyone who had a "great Christmas 2016" in terms of sales.
Was it due to the election? Hard to say, but the evidence does seem to point that way.

 

[Garry H (Cut Nut)]

US average incomes have fallen in real terms since 2000.
That is essentially a recession for the poor.
Trump is attempting pump priming.
http://www.investopedia.com/terms/p/pump-priming.asp
will it work?
Who knows. But we all might in 8 years time

 

[bmfang]

@valeria101, are you based over in the USA?

Thus far, haven't seen any requests to buy diamond signs on the streets here in Australia yet. But if it's happening in the States now, might not be long before it hits our shores as well!!!

 

[valeria101]

Europe. The listings were toward the eastern-most border thereof. I have no idea who would bother with diamonds in gold country.

 

[Tekate]

Do not confuse anger with crying over spilt milk..

Like we said, that was then..., this is now. I learned in life that crying over spilled milk doesn't really help.

Like we said, that was then..., this is now. I learned in life that crying over spilled milk doesn't really help.

Hmm, you assume that we liberals are crying over spilled milk? hah! Let us just say that at this moment in time, Trumpty has 3.5 years to effect positive change.. as I said HA... As to diamonds, not sure what he has

 

[Rockdiamond]

No question you're right about US real incomes falling compared to the prior 50 years-and especially since 2001- the greater proliferation of computerized systems- some developing countries have shown growth while the US has not moved a lot.
In regards to this discussion- I'm guessing US was probably 80% of global diamond demand in 2001, and now 50%
I've seen a lot of ups and downs since 1999 when we opened the site.
No matter how one feels about the results of the election, 2015 was a far better year for the jewelry industry than 2016....and you can't blame entirely on the election- even before it was going to be a lackluster year.
We can only hope that a broad range of people find a way to feel optimistic in 2017- for reasons a whole lot bigger than diamonds.

 

[Garry H (Cut Nut)]

I am not surprised people in USA wanted a BIG change.

 

[LLJsmom]

Video was funny!! Thanks!

 

[Garry H (Cut Nut)]

Video was funny!! Thanks!

Rap was pointing out to B&M stores that Extreme Customer experience can be achieved online.
JA did a great job!

 

[bmfang]

Rap was pointing out to B&M stores that Extreme Customer experience can be achieved online.
JA did a great job!

He's damn right on that front. The times when I have interacted with Brian Gavin Diamonds and Whiteflash staff over the last year, their customer service has been second to none. Far better than the customer service I've received at chain B&M stores (both mall and high end) and at some independent jewellers that my wife and I have visited over the last 3 years.

 

[bmfang]

Video was funny!! Thanks!

Which video? The buzzfeed JA one?

 

[Garry H (Cut Nut)]

Which video? The buzzfeed JA one?

Yup.
it's the only one in the thread

 

[Texas Leaguer]

I did not attend the JCK show this year so I did not see this edition of Rapaport's 'State of the Trade' presentation. Thank you Garry for providing the talking points.

It sounds very much like his past commentary, except that the Trump effect throws a wrench into his (and everyone else's) analysis. Not sure I buy his particular conclusions because it is unclear if Trump will actually be able to get anything done. If all he does is sow chaos, that will be bad for the economy and bad for the diamond business.

Certainly change is happening at an ever greater pace (Alvin Toffler was right!), so agility is a key for everyone. We must evolve quickly. Specialization, expertise, communication, all become particularly important to adding value and connecting with the buyers in the new economy.

I like the last line of Garry's recap: "Learn. Study. Grow. Understand. If it is not working it's your own fault."

 

[WinkHPD]

Throughout history political instability didn't exactly inspire but in some dark points in history buying/owning Diamonds (Gems) was a survival necessity.

Many years ago, back in the early 1980's I was invited to a lady's investment club meeting to talk about diamonds as an investment. While I am not a fan of it, it was a HUGE industry for a few short years. My intent was to explain to the group why investing in jewelry was not normally a good thing for those expecting a quick return as the commissions in and out are simply too high.

In the front row was an older woman who was frowning and shaking her head at everything that I said. I asked her why she seemed so angry.

"When my father and my family escaped from the Nazis we had jewelry that my father had spent tens of thousands of dollars for sewn into our clothing. We got only pennies on the dollar for them when we were living in the States."

"Really?" I asked, "How much would he have gotten had he been able to get for that money he spent had he been able to smuggle in the German money?"

"Why nothing, it was completely worthless!"

"Yet you, and your family had food on the table with that horrible investment he made in jewelry. If he had tried to smuggle in gold it would have been too bulky to carry and it would surely have been taken from you all and thus also been worthless, maybe even fatal."

It was as if I had been able to paint her face with sunshine as she contemplated my comments and realized that for them, those horrible investments in her mother's jewelry made her life much better than it might otherwise have been.

While as a financial investment for making money, I do not believe that most should invest in diamonds or gems, I do believe that in a time of crisis, those same family treasures which were purchased for enjoyment could be an important part of making things better than they might otherwise be.

Just my thoughts on an incredibly complex subject.

Wink

 

[Texas Leaguer]

I agree with Wink. 'Investment' is a loaded word, and potentially very misleading. Most individuals should never buy diamonds with the idea of a profit in mind.

I prefer to look at diamonds as a 'store of value'. A nice diamond will be convertible into money, and it is not difficult to find buyers for it at some price. And yes, they are highly portable so they work well as 'flight currency'.

Because of those attributes, buying diamonds is better than a lot of other things that you could put money into. You get the best result if you buy the right diamonds at the right price and have the right access to the market on the back end. Many people have done quite well, especially if they have held them during a time the market has advanced significantly.

And there is always the added bonus that you can enjoy them all the while!

 

[bmfang]

"Store of value" is a much better term to use for diamonds rather than "investment". Reminds me of a mega long thread that was on here not too long ago where one PS-er was looking at purchasing an "investment diamond".

 

[valeria101]

End of Days Policy

Vividly remembered ...