Why is Diamond Profitability Paper Thin?

(ehudlaniado.com) - Examine the diamond sector – especially the midstream where most of the skilled activity takes place – and you will find a sector with very narrow margins and near zero profitability. This state of affairs keeps the industry constantly on the verge of bankruptcy. How did things get to where they are now? How is it possible that an industry that manufactures luxury products is operating as though it provides low cost, price-point driven items? Why is the manufacturing sector of the diamond jewelry industry always looking for ways to further cut expenses, such as by seeking lower labor costs, lower taxation agreements, lower tariffs, free trade zones and reduced overheads? How did this happen to an industry that produces luxury items and caters to upper middle-class clientele who have set aside money for expenditures? Will a 5% price difference really determine if a diamond is sold? Will cutting already low labor costs by a few percentage points really make diamonds more attractive? Or, looking at it from a more positive angle, would paying a few more percentage points to laborers, a little more on taxes, and slightly raising the prices of diamonds to consumers, really make diamonds unsellable? Does this mean that it is impossible to polish diamonds in countries across the globe where wages and taxation are applied evenly across business sectors? How can this possibly be the case for a luxury item like diamonds?