As the heads of De Beers never tire of telling diamantaires: if you want to stay alive and thrive, then find a niche. It's something of a cliché, but in diamonds, as in every other line of business, it is absolutely true. There are thousands of manufacturers and sellers worldwide of standard round diamonds. The American market, and those of other countries, are saturated with them in all shapes, colors and clarities, particularly in lower-priced commercial shapes of one carat and under.
That's not to say that fancy shape diamonds are a new product with few competitors. As with round stones, there are many manufacturers and traders. But the range of shapes gives players in the market more options in terms of marketing the diamonds.
If there is one thing that Israeli diamond companies are known for, it is their willingness to find new niche markets and to try to become big players in those areas. One of those markets is fancy shape diamonds. Although Israeli diamantaires are known for their love affair with the American market, Ramat Gan-based firms have been trying to push more of their gems to the Far East market, particularly to Mainland China via Hong Kong since the financial crash of late 2008.
In this they have been aided by the work of the Israel Diamond Institute which opened an office in Hong Kong more than six years ago which stores a wealth of information about the Chinese market, including demographic statistics showing the rise in demand for diamonds in general, as well as retailer information. A locally based office manager is also on hand to guide Israeli diamond firms in breaking into the Chinese market.
The aim is to help Israeli diamantaires identify possible sales targets, as well as understanding the bureaucracy and the very different cultural conditions.
And that is critical, because not all shapes are well regarded by Chinese buyers. "Ironically, one of the most popular shapes in Chinese mythology is round, and that helps explain why round diamonds have such a big part of the market," said an Israeli diamond manufacturer of fancy shapes.
"As with all markets, it's critical to do your homework in order to get an advantage. I would not admit it out loud, but I did not find this out until I had already invested in attending tradeshows in Hong Kong and Shanghai and visiting in order to hold meetings. One day it occurred to me that maybe there was a reason that there was such strong opposition to the range of fancy shapes I was offering. On the other hand, squares are an important and respected shape so that helps, especially since you can offer related shapes, such as baguettes and cushions.
"You have to establish a presence in the region in order to gather information about the market as well as making contacts, but also to gather information and ‘intelligence’ about what is happening in the market, changing tastes, what new opportunities exist and if there is a problem with certain cuts. For example, princess shape diamonds can be difficult to sell because the Chinese usually do not like the pointed cut.”
With the Chinese diamond market seeing a slowdown as a result of the economic conditions, Israeli manufacturers of fancy shape stones also report a decline in sales overall. Leading Israeli manufacturers of fancy shape goods include S. Schnitzer Diamonds MID Diamonds Ltd. Limor Diamonds, Danny Avlas Diamonds, and Eli Yona Diamonds.
At S. Schnitzer, CEO and Chairman Shmuel Schnitzer, who also serves as Israel Diamond Exchange President and as an advisor to the Shanghai Diamond Exchange, says the Chinese market is robust and has a great deal of potential despite the current slowdown. “We have seen a gradual growth in demand for fancy shapes. We know that Chinese tastes and fashions often mimic those of the United States. Since the fancy shape market in America is quite strong, it is possible that China will develop further as well. For now, we are hoping that the Chinese market will stay stable.”
He added that for now, the overwhelming Chinese demand is for round gems. However, around 25 percent of the stones that his firm supplies to Chinese clients are fancy shape goods. “For the most part, these are princess, pear, marquise and emerald shapes in D-H color and VVS-VS clarity and high make. In our experience, Chinese consumers may be willing to compromise on color but not on clarity."
Dozens of Israeli diamond companies have entered the Chinese market in the past decade or so. “It has been a steep learning curve,” said diamantaire Shay Sadot. “It is not easy, but the potential opportunities are enormous so it is worth the expense in getting to understand the complexities of the market.”
But it is not just the Chinese market that likes the variety and options that fancy-shape diamonds, said Avi Paz, a former Israel Diamond Exchange president, and the owner of Paz Diamonds. “The American market also has a strong following as does Europe.”
He said the focus on fancy shape stones by Israeli manufacturers and away from conventional shapes illustrates well the initiative that characterizes the Israeli diamond business. “It all comes down to finding a way to bring added value to operations.
“Diamond companies in Israel know how to search and create demand for new items. Israelis are good at bringing different elements together and managing complicated projects, often in several countries simultaneously as a way of finding a new market for goods,” Paz added.
Meanwhile, Limor Diamonds specializes in small fancy shape diamonds and claims there are few companies in the Israeli bourse, which it does not supply. “We are a very young company, now in the fourth generation, involved in the business,” explained Roi Limor. “I believe our average age is probably the lowest among Israeli firms, and it is probably because of that that we are able to be so open-minded and have a modern and progressive business model.
“We are not stuck in old and perhaps outdated ways of thinking. I believe that it is because of this that we are able to provide a niche market with speedy service and to think in completely different ways.”
One of the largest Israeli firms in the fancy shape market is Dalumi Diamonds, which manufactures fancy shapes and makes jewelry set with the stones in both the Chinese and American markets. The firm has been involved in China, and the wider Asian market, for the last 19 years. Indeed, it was among the first Israeli companies to have a presence in Hong Kong, and to join the Shanghai Diamond Exchange.
The secret to expanding its fancy shape diamond production and selling to the Chinese market? Managing Director Vered Dalumi Yitzhaki says its jewelry lines are popular precisely because it uses fancy shapes, which allows the firm to produce more jewelry items. “There is strong demand for princess and heart-shape diamonds.”
Limor believes the more mature markets are open to fancy shape diamonds, having always been traditional markets for round goods. “The United States and Europe have generations of experience in buying round diamonds. Inevitably, consumers are looking for something new and with a different ‘edge’ and feel. They want to be able to wear alternative types of jewelry.”
By our Israel correspondent Abraham Dayan
