HONG KONG: Slower growth in China and economic turbulence in global markets has dented the diamond industry, but millennials are offering light at the end of tunnel, say De Beers.
In its new ‘Diamond Insight Report’, which looks at the state of the sector worldwide, the firm predicted volatility would be the “new normal” over the next 10 years.
The value of global diamond jewellery sales to consumers took a hit in 2015, down two percent at US$79 billion from US$81 billion in 2014, the report said.
It attributed the drop to “unfavourable currency movements and economic slowdown in China and other emerging markets”.
There were also added industry costs due to a larger proportion of diamonds coming from deeper mines.
But De Beers CEO Bruce Cleaver said he was still optimistic for the medium to long-term, although there was “no question 2015 was a more difficult year”.
Although consumption had slowed in mainland China — the world’s second-largest diamond market behind the United States — Cleaver said buyers’ interest was still there.
“We actually think demand in China has stood up reasonably well — better than flat in 2015,” he told AFP.
A corruption crackdown by President Xi Jinping has also put pressure on the luxury market in China and Cleaver said buyers were warier of conspicuous consumption.
However, the overall impact on the diamond sector had been “minimal” he said.
“The crackdown is not aimed at diamonds and certainly not aimed at gifts between men and women in particular,” he told AFP.
But while the China diamond market remains key, Cleaver said it was unlikely to ever reach past heights of more-than 10 percent growth.
“Coming off the base it is now, I think it’s unlikely you’ll see growth of that scale again,” he said.
The report identified millennials — categorised as those born between 1981 and 2000 — as a driver for future growth as they are like to reach their “most affluent life stage” in 10 years’ time.
Researchers found that the generation still valued diamonds highly among their most desired gifts, but were likely to buy them later in life than previous generations.
In 2015, millennials spent $26 billion on diamond jewellery in the four biggest markets — the US, China, India and Japan.
Cleaver said he was “pleasantly surprised” at the result, but added that retailers would have to adapt to more interactive strategies in order to maintain the age group’s interest.
“Retailers will have to think about what millennials like, need and desire,” he said.
“We know they’re less interested in traditional things — they’re interested in experiences.”
Diamonds came in behind overseas holidays, weekend getaways and personal electronics as most desired gifts, the report said.