On May 5, the World Health Organization (WHO) declared that COVID-19 no longer represented a “global health emergency,” ending an international public health crisis that had first been declared on January 20, 2020. Officially, more than 7 million died worldwide from the disease during the more than three-year period, although experts said the real figure most probably was closer to 20 million.
The economic fallout of the period was extensive, with the COVID-19 pandemic sending shockwaves worldwide and triggering what the World Bank described as the largest global economic crisis in more than a century. The crisis led to a dramatic increase in inequality within and across countries, with global poverty increasing for the first time in a generation.
For the diamond industry the impacts were mixed, although on balance the business managed to traverse the period without sustaining significant long-term damage.
Indeed, after a very uncertain 2020, characterized by extended lockdowns on the mining regions, cutting and trade centers and the retail market, in 2021 the industry proved its resiliency, producing what Bain & Co. referred to as a “brilliant recovery.”
In 2020, diamond jewelry sales had fallen 14 percent and rough diamond sales by 31 percent, but in 2021 revenues rebound quickly, even exceeding the levels set in 2019.
In 2021, according to Bain, revenue increased by 62 percent in the diamond mining segment, by 55 percent in cutting and polishing midstream, and by 29 percent. All were higher than pre-pandemic levels – by 13 percent, 16 percent and 11 percent respectively). This Bain noted matched the experience of the industry in with previous economic downturns, with high double-digit growth being recorded within 12 to 18 months after the peak of the crisis.
Photo: Yoav Aziz on Unsplash.com
WORKING TO THE DIAMOND INDUSTRY’S ADVANTAGE
Even taking past history into account, the recovery of the diamond markets was remarkable, largely because COVID did not represent a classic crisis. It struck at a time when the world economy was relatively stable, with inflation and interest rates low, and employment relatively high in the major consuming markets.
What precipitated the economic hardship were the enforced lockdowns, which during the early month of COVID in 2020 effectively brought all activity to a grinding halt, and that that was followed a much longer period when international travel slowed to trickle, and chains of distribution became clogged and -resupply exceedingly difficult.
But to no small degree – and certainly after the initial lockdowns, which began to ease at the end of summer in 2020 – the unusual circumstances began working in the industry’s favor. While well-heeled consumers were restricted in their movements, they were not illiquid, and indeed often flushed with cash because of reduced spending elsewhere. Keen to show appreciation for loved ones during times of hardship and uncertainty, diamond jewelry became the purchase of choice.
What also played in the industry’s favor was the fact that while diamond jewelry was relatively easily available, it was considerably more difficult to spend on certain luxury items that had given the sector a strong run for its money in recent years, and in particular travel and entertainment. Even fashion languished for a while, with homebound people not inclined to invest in clothing more elaborate than track suits and pajamas.
THE LONGER-TERM OUTCOMES
But it is possibly the less apparent effects of the COVID crisis that will have the most significant outcomes for the industry over the longer period of time.
For an industry whose chain of supply crosses multiple borders, and for which is success is reliant on the coordination of companies and individuals operating in many different countries, the period during which air travel was difficult and times impossible required a dramatic rethink of how it operates.
Members of the industry adapted quickly, using technologies like teleconferencing, which were available before the crisis, but rarely used. What became apparent relatively quickly was that social distancing does not automatically equate to social disconnection, and in fact many of the systems being used proved to be more efficient and less costly than those which had been employed beforehand.
Photo: Nick Fewing on Unsplah.com
What was clear was that when the restriction associated with COVID would be relaxed, the word and the industry would not return to where it was prior to January 2020. “Hybrid” became the favorite catchword in 2021 and 2022.
The retail markets adapted quickly as well, with companies that had not properly incorporated online trading being forced to so at record speed. This too is likely to continue moving forward. A Plumb Club survey conducted earlier this revealed that 62 percent had brought at least once piece online over the course of the past year, with another 10 percent saying they bought in-store after online browsing led them to the location.