With most countries’ governments relaxing the stringent COVID restrictions they had imposed in 2020, in 2021 the personal luxury and diamond jewelry markets experienced decade-high growth, respectively increasing in size by 35 percent and 29 percent, according to the diamond report published this monrth by Bain & Company and the Antwerp World Diamond Center (AWDC). Such was the case even with the outbreak of coronavirus variants, where consumer optimism was propped up by the vaccination campaigns in major diamond-consuming regions.
The world’s largest diamond jewelry market, United States experienced the most sustained growth, which stood at 38 percent when compared to 2020 and 23 percent when compared to 2019. According to the report, this was enabled by the substantial economic relief package offered by the federal government, unemployment rate reductions, a stock market surge, and, of course, vaccinations.
The world’s second largest market, China, was also buoyant, with diamond jewelry retail increasing 19 percent year over year, and up from its pre-COVID level by 6 percent. The Chinese government’s 14th Five-Year Plan revealed large spending potential in lower-tier cities and suburban areas, and retailers shifted much of their focus to online marketing, introducing digital sales method that were considerably more sophisticated than those being used by most of their Western counterparts.
India also saw growth, but it was more subdued. Diamond jewelry sales increased by 16 percent in 2021, following a 25 percent fall in 2020. Still sales remained 13 percent below 2019 levels. While lockdowns in the first half of 2021 restrained recovery, during the second half of the years a strong vaccination rollout revived, as did a 57 percent rise in the number of weddings.
Even the perennially moribund European market showed signs of life, the Bain-AWDC report noted, growing 18 percent at retail in 2021, although still 5 percent below 2019.
TWO MID-TERM GROWTH SCENARIOS
The Bain-AWDC suggest that two possible scenarios are possible in the medium term. The first it referred to as “continued rebound” whereby the United States and China would continue their sustained growth momentum while other regions return to pre-pandemic levels. This, the report said, would benefit both miners and midstream players, and supporting strong price rises for both polished and rough diamonds.
The report termed the second scenario as “short-term readjustment.” In this case there would be a possibly slight correction in diamond jewelry demand, beginning toward the end of 2022 and the beginning of 2023. It would be followed by a return to pre-pandemic trend levels and growth rates in 2024. This, it stated, is similar to how the diamond market has generally rebounded and then readjusted during past recessions.
But the report was optimistic, saying that the “continued rebound” scenario is more likely. This is because the industry is in a better financial position than it was during previous recessions, with inventory levels at the lowest and healthiest levels they have been in the past 10 years.
CREATING A WOW FACTOR
Longer-term market trajectories will be shaped by traditional industry factors, the report stated. These include affordability, desirability, value chain efficiency and the buying experience, which is likely to be influenced by new technologies being introduced in the marketplace.
“[C]reating a winning value proposition for consumers lies in enhancing the overall customer experience—from researching to buying to owning diamond jewelry—through product innovation, storytelling, and “wow” omnichannel engagement,” the Bain-AWDC analysts stated.
Generic market efforts, in which the diamond category is a pitched to a new generation of consumer, will also a critical factor in ensuring long-term growth. The Natural Diamond Council’s budget is expected to increase 33 percent, from about $80 million in 2021, which still will would put it at only about half of what De Beers was spending 20 years ago.
“The drive to improve and expand diamond marketing has to continue as marketing investment in luxury products increases and becomes more creative,” the report stated. “Diamond jewelry needs to keep pace to stay relevant and exciting for the next generation of consumers.”