The diamond industry and long been considered the world’s greatest monopoly. De Beers, owners of “A Diamond is Forever” and other stupid catchphrases has controlled this market for a century. De Beers’ success has come from managing the world’s supply of diamonds with utmost diligence. If a competitor comes on the scene De Beers will flood the market with their stockpile and drive the competitor out of business because they can’t beat De Beers’ prices.
But the world’s most well known luxury item may be the result of De Beers’ own undoing. This is because demand for the stones has fallen sharply as a result of the global recession. This isn’t normally a problem for them as the company can just hunker down and ride it out. But because this is the worst recession since the Great Depression, their best customers may become their worst competitors.
The problem is with diamonds actually being forever. Very few diamonds have been destroyed, most of the stones that make it to jewelry are sitting in the lock boxes and jewelry boxes of the world’s middle and upper class. One industry expert says there are about 500 million carets on jewelry around the world, that is about 50 times as much as De Beers can pump out in a year. This is known as “the diamond overhang.” What happens when those people start looking for extra cash? Cash4Gold.com has shown selling jewelry has been very popular. What happens if Cash4Diamonds.com or some similar website pops up offering the same kind of deal?
So diamonds are “a girl’s best friend” for two reasons now. On the one hand they get attention and feel glamorous, on the other they can sell the old stuff if money gets tight. Like an emergency fund you wear.
With so many diamonds in the world and demand in the tanks, there is no way De Beers will be able to compete with their own customers if this takes off.
If we take this little supposition further, we could potentially see the entire bottom fall out on the diamond jewelry industry. It’s fairly established that the stones are not rare at all, considering all the mining operations in Canada, Africa, and Russia. What if the world’s middle and upper classes lose the desire altogether to wear the rocks on their fingers? There is no health gain from it or any other advantage, and man-made diamonds can be made brighter and more perfect than mother nature can. What if diamonds are just a fad? They didn’t take off until the 20th century.
In my quest to destroy silly material desires built upon manufactured demand, I would love nothing more than to see this industry implode. What do you think about the diamond industry? Is Cash4Diamonds.com around the corner? Is De Beers done for? Will our material desires outlast the recession and save the industry?
Photo credits: theo5664 & iirraa
 By The Weakonomist |
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Wow… very, very interesting. Why did I have to get married 9 months ago when diamonds were EXTREMELY expensive?! Oh well…