Computer literate and growing in economic muscle, the millennials are coming of age
A fascinating development over recent times has been the rise in the economic power of the millennials (generally regarded as those born between 1980 and 2000). The overall population of millennials in China, India and the USA totalled almost a billion people (around a third of their total populous), with a combined gross annual income of approximately $8 trillion (almost twice the GDP of Japan), by 2016 and those figures are growing rapidly. Their incomes are forecasted to double to over $16 trillion by 2030. Whilst it is clear this group (in common with other generations) has a vast appetite for diamonds, coloured gemstones and jewellery, their shopping behaviours are markedly different. To fully capture millennials' demand over the longer term, the industry must invest in both category marketing and brand-building, in conjunction with social media, digital marketing and ecommerce. Jewellery is one of the top three gift types in the world, ranking first in India and China and third in the USA.
(To engage with millennials you must understand their consumer behaviour)
Millennnials offer a massive opportunity for the gemstone and jewellery industry but as their spending power increases, it is clear that dedicated marketing efforts and targeted customer acquisition strategies are needed to reach this group effectively. Millennials also stand out as a demographic of interest due to their extensive use of the internet for retail purchases, advice and ideas. Their purchasing behaviour does however differ culturally. In the US they are more active regarding online purchases versus India and China. In both the US and India they tend to seek family advice, more so than in China. Interestingly there is a small but significant market emerging among the millennials for synthetic diamonds. They often cite the value for money these synthetic stones represent as being a key factor (they are generally 30-40% cheaper than their identical natural counterparts), whereas many other generations are emphatically against them. As the buying power and computer literacy of the younger generations continues to develop, it is clear the millennials will be a force to reckon with in the years to come.
(Synthetic diamonds are slowly gaining market share but they are unlikely to replace natural stones)
In spite of the perceived value of diamond jewellery to consumers and the lure of the solid fundamentals of the industry to investors there are clearly challenges and head winds to overcome. Chief among these are the recent diamond price volatility and plateau in diamond jewellery sales worldwide, which has had a profound effect on the industry middlemen. These players must constantly evolve their business models to capitalise on a demand-driven inventory and forward production planning. Another break on the industry has been the lack of funds being made available by banks and traditional financial institutions. This may however have an unforeseen long-term benefit of whittling out the less streamlined middlemen leading to a competitive advantage for the last 'men' standing, who will have greater access to financing from larger operators and greater leverage within traditional corporate financing mechanisms. This will to some extent be predicated upon the assumption that their business models remain demonstrably streamlined and straight forward. All of these influencing factors should encourage the midstream actors towards greater efficiencies but of course the question of the longer term demand for natural diamonds over their synthetic rivals remains unanswered by the operators in this dynamic and ever shifting marketplace.
(DPA was established in order to promote the virtues of natural stones)
As the millennials enter their economic prime, the industry must engage with them on their terms. As we have seen, 2016 demonstrated that millennials are similar to their forerunners in terms of their want of diamond jewellery but they differ from them in terms of their decision-making and shopping habits. It has been suggested that efforts to maintain consumer demand for natural diamonds could mitigate some of the possible impacts of the threat of cyclical recession in the US in the short term, coupled with the continuing cooling of GDP growth in China. Demand for investment diamonds as 'treasure' assets, to hedge against the systemic risks posed by Brexit and Euro Zone instability may also provide an additional channel of demand. This can take the form of either trading platforms, that offer full price transparency, or direct investment mechanisms that enable the physical accumulation of tangible rough and polished diamonds. To increase the desirability of natural diamonds key players in the industry have formed the Diamond Producers' Association, an organisation with the express aim of promoting the allure of natural diamonds by focussing on the emotional appeal of natural stones versus their synthetic counterparts. It is clear that the industry is now fully equipped to identify counterfeit synthetic stones, an issue that blighted the sector until recently.
