Sea Change
Diamonds are a potent symbol of love, commitment and success. Americans spent $27.4 billion on diamond jewelry in 2002, and the dollar volume is rising. Over the past few years, however, widespread controversy over the origin and treatment of stones has affected demand. Buyers are increasingly eager to avoid “conflict” diamonds—those sold on the African or Asian black markets to fund brutal rebel armies and terrorists. Meanwhile, sophisticated diamond enhancements have emerged that can make a mediocre stone appear flawless to the naked eye, and technologies used to grow diamonds in the lab have become so advanced that, in some cases, these clones can hoodwink experts.

THE DIAVIK Diamonds Project is positioned in the middle of a fragile Arctic ecosystem.

These distressing developments have prompted considerable changes in an industry that has operated much in the same fashion for generations. Some of its strategic moves may not be obvious to shoppers who simply want the best, brightest and biggest stones money can buy. Others provide tangible benefits, such as a greater selection of branded stones coming from some of the world’s leading diamond miners and traders, who are coming out from behind the scenes to sell directly to the public.

One of the biggest transformations in the diamond trade is the emergence of vertically integrated businesses, in which a company owns everything from the mine to the retail showroom. Vertically integrated businesses give today’s diamond merchants greater control over their supply. They know the mine and country of origin, and they can track stones from their inception, thereby ensuring that their diamonds are not treated or fake. Also, it can cut out the middleman in many cases, reducing costs and ultimately bringing greater value to the customer.

Also, diamond supplies today are more numerous than in the past. DeBeers once controlled the lion’s share of rough diamonds. Today, however, diamonds come from a wider array of sources, including mines in Russia and Angola. The new Canadian mines are just beginning to realize the fruits of years of development efforts.

Aber Diamond, which mines and markets Canadian diamonds, announced in November that it will purchase America’s legendary Harry Winston, making it part of a vertically integrated diamond company. Aber hopes to capitalize on the Harry Winston name when it takes ownership of the company from Ronald Winston, the founder’s son, and Fenway Partners, a private equity firm that acquired a $55 million stake in the company in 2000.

CARAT BAGUETTE and brilliant cut diamond cuff set in platinum.

Aber also is a partner in Tiffany’s foray into Canadian mining. In 1999, the luxury retailer agreed to purchase at least $50 million of diamonds a year for 10 years from Aber, subject to meeting quality standards. At that time, Tiffany’s also acquired 14.7 percent of Aber; Aber, in turn, owns 40 percent of the Diavik Diamonds Project.

Ethical Excavation
While this Canadian deal represents just a portion of Tiffany’s diamond supply, the company is taking other measures to procure diamonds from a secure network of sources. It also is working toward providing specifics about the mine of origin for all of its diamonds, though that is several years away, Kowalski notes. Despite the media attention about conflict diamonds, he concedes that consumers are generally not inquiring about a diamond’s origin. “Consumers might not articulate it, but we believe that they care and expect us to source our materials in a morally responsible way,” he says.

Other companies apparently subscribe to the same sentiments. Rand  can trace a stone’s genealogical history, from mine to polished stone, for its owners. “A diamond is an emotional purchase and knowing the people who helped create and finish a stone makes the purchase even more personal and endearing,” says Sean Cohen, president of Rand and the third generation in his family’s 50-year-old diamond trading company.

The Rand diamond, introduced three years ago, is his company’s first branded venture. Each diamond is cut by a proprietary method called Zero Tolerance, which positions the facets to provide maximum brilliance, Cohen explains. Each stone is polished for optimum beauty rather than to preserve its carat weight, so that a 20-carat rough stone will typically result in a 3- to 5-carat polished diamond, he adds.

Each Rand diamond is sold with an individualized provenance report, which serves as its birth certificate, outlining its unique characteristics, including a serial number that is laser-inscribed on the stone’s girdle. Using their diamond’s serial number, customers can sign on to the company’s website, www.randbrand.com, and view pictures of the stones they have bought being cut and polished by the company’s craftsmen.

Even the diamond heavyweight DeBeers is beginning to market diamonds directly to consumers under its own name. DeBeers opened its first store in London in 2002, a second in Tokyo in 2003, and it plans to open shops in New York and Beverly Hills within the next two years.

While the untrained eye would likely be hard-pressed to tell the difference between a Rand or DeBeers signature diamond, the notion of a powerhouse brand behind the stone undoubtedly gives consumers added confidence when making such a sizeable emotional and financial investment.

Others are following suit. The British diamond merchant Graff, which has been trading in large rocks for more than 30 years, recently opened a salon in Palm Beach and is close to finishing an elaborate boutique in Chicago. International diamond trader Rosy Blue introduced its first branded collection, Rosiblu, and the Vera Wang jewelry collection in partnership with the high-profile designer.

Another emerging diamond brand is Vivid, a decade-old jewelry company that gets its cache of exceptional stones from Lev Leviev, who is a partner in Vivid and who is also the owner of LLD Diamonds, the largest producer of polished diamonds in the world, with mines in Russia and Angola. When Vivid opens its first boutique on Madison Avenue later this year, it expects its stock of important diamonds will outshine any competitor, says its CEO, Alexis Sarkissian.

Vivid now sells its large rocks to an exclusive group of private clients around the world with the average sales ranging from $300,000 to $600,000. Among its treasures is a 110-carat, D-flawless Golconda diamond, taken from the famous Indian diamond mine in about 1660. Vivid is also fast becoming known for its rare colored diamonds, including a 4.69-carat fancy deep green, cushion-cut diamond with a value of about $4 million.

Provenance and Pedigree
Luxury brands, though, are not built overnight. Novel ideas, insider connections, and even a stockpile of extraordinary diamonds will not guarantee a brand’s success, especially in an industry where a new luxury purveyor is competing with jewelry retailers that are generational family businesses or, in the case of Tiffany’s, have been around for more than 160 years.

“First and foremost, diamond customers want to shop at a place they trust, and that trust is built over a long period of time,” says Jim Haag, global director of marketing and sales for Harry Winston. “Mr. [Ronald] Winston always said that a diamond-grading certificate does not define the beauty of a stone. Our clients rely on our sales executives to help them make a decision. And these relationships have been built over decades.”

An age-old luxury brand such as Harry Winston goes to great lengths to cultivate and maintain its long-standing client relationships. When well-heeled customers enter its palatial Fifth Avenue boutique, they are greeted by a trusted salesperson who knows them by name and is likely to recall their last purchase or gift. While the firm may change the way it obtains its stones, it is not likely to alter the way diamond purchases are so often based on trust and a handshake.

Among the veteran sales executives at Harry Winston is Richard Winston, who has been with the company 54 years and is Ronald Winston’s cousin. “When someone like Richard Winston calls a client on the phone and says you have to come in and see this stone,” says Haag, “you can be sure that it’s worth the visit.” 

Photos courtesy of Tiffany & Co and Harry Winston