Jewelry chains industry report

Covid-19 had major implications across the value chain, but repositioned the industry for long-term growth

Profit margins were devastated across the value chain, except in the C&P segment

Impacts of Covid-19 caused rough diamond sales to decline –33%

In 2020, upstream inventories increased by ~17%, mostly driven by supply chain disruptions

A slower decline of polished diamond prices vs. rough diamond prices supported stronger margins for the midstream

Prices for higher-quality polished diamonds have outperformed lower-quality diamonds over the past two years

Diamond production has been decreasing by ~5% since it peaked in 2017, with a drop of ~20% in 2020

Production value decreased by ~30% in 2020, driven by declines in rough prices and production

South Africa was the only country with increased diamond production in 2020

Russia, Canada, and Botswana had the biggest production decreases in 2020

Medium and large diamonds accounted for ~25% of production in carats but nearly 70%–80% in value in US dollars

Reduced sales activity in the first half of 2020 put significant pressure on profitability, which is expected to improve by year end

Covid-19-related restrictions resulted in ~26% reduction of C&P activities globally, with India recovering the fastest

In India, net imports of rough diamonds decreased by 27% in 2019 and 23% in 2020; recovery began in Q3 2020

Due to a significant decrease in rough diamond sales, midstream inventories returned to some of the lowest levels in a decade

Diamond financing continued to decrease, aligning with reduced activity levels in 2020

Consumers delayed discretionary spending during the pandemic, but diamond jewelry retail was less affected than the personal luxury market

After single-digit growth in recent years, the global diamond market was materially impacted by the pandemic and economic downturn in 2020

Despite challenges in 2019 and the first half of 2020, key markets are showing signs of recovery

After a significant drop at the start of 2020, key diamond jewelry markets demonstrated recovery trends in the second half of the year

In 2020, diamond jewelry outpaced other jewelry segments due to the relatively strong performance of luxury jewelry in Asia

Luxury bridal and luxury non-bridal diamond jewelry were the top-performing categories in the diamond jewelry market

Covid-19 shaped and accelerated key diamond industry trends

Covid-19 impacted diamond jewelry purchasing via lockdowns and an economic recession and stimulated changes in consumer behavior

The current economic crisis is expected to be deeper than the one in 2009

Interest in diamond jewelry dropped for three months, then reverted to 2019 levels in July

Most consumers plan to spend the same amount or more on diamond jewelry when the pandemic ends

Diamond jewelry recovery is expected in the next two to four years, with the market returning to its pre-pandemic level in 2022 or 2023

Diamond jewelry recovery depends on the epidemiology of Covid-19, government actions, and consumer behavior

E-commerce experienced a major boost in 2020

Consumer shopping preferences are slowly shifting to online; however, specialized brand stores remain the most popular channels

Consumers would buy diamond jewelry online from trustworthy brands that offer additional discounts

Digital is part of the purchasing experience for more than half of buyers; only 25%–35% of younger consumers make in-store purchases without it

Covid-19 accelerated the convergence of online and offline channels, forcing retailers to retool the customer engagement experience for the new normal

The diamond industry’s sustainability agenda is set by multiple stakeholders: consumers, international organizations, investors and local communities

Between 60% and 70% of younger generations consider sustainability when making a purchase decision

When purchasing diamond jewelry, sustainability concerns could be a deal-breaker for consumers

Fair working conditions, conflict-free products, the environment, and carbon footprint are the most important sustainability factors for consumers

Across the value chain, industry players focused on green energy, sustainable water consumption, and biodiversity

Social efforts are focused on traceability, human rights, and local community support

Lab-grown diamond capacity is increasing across the globe; current production is around 6 to 7 million carats

Retail price discounts for lab-grown diamonds vs. natural diamonds have slightly increased in the past year

However, lab-grown diamonds still evoke mixed associations; most consumers deem them artificial and affordable

Consumers across key markets do not see substantial differences in sustainability between lab-grown and natural diamonds

The lab-grown segment is developing rapidly due to technological advancements and rising acceptance across the value chain

“Diamond engagement ring” searches show stability despite downward-trending marriage rates; however, overall interest in “diamond jewelry” is declining

In India and China, jewelry remains one of the most desirable presents

Self-purchase emerged as a top reason to buy diamond jewelry in the US and China

Diamond marketing is becoming more sophisticated as retailers and other players address both traditional and emerging pressures

New marketing strategies should focus on intangible values and personalized communications

Marketing spending in the diamond industry is around 1%–2% of retail sales and lags marketing efforts in other industries

The Natural Diamond Council relaunched generic marketing efforts with new focused campaigns

Marketing messages about exclusivity and rarity disproportionally resonate with consumers, while origin and sustainability trends are quite new

A number of important recent trends will influence the whole value chain’s future

Covid-19 impacted key markets in the short term, but the industry’s long-term macroeconomic and consumption outlooks remain positive

Long-term scenarios for natural rough diamond demand and supply rely on key assumptions

The long-term outlook for real global GDP and PDI is positive; both are expected to grow at 3% per year despite the Covid-19 recession

Middle class and high-net-worth household growth in China and India will reinforce positive long-term demand

Supply is expected to be almost flat over the next 10 years, with very few new projects coming online

The supply-demand outlook is moderately optimistic

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