Why Do Consumers Buy Brands?
De Beers’ 2022 Diamond Insight Report focused on the importance of brands — no coincidence given the miner’s own emphasis on its consumer-facing labels in the past couple of years. Jewelry from a trusted name commands a significant premium, and this trend goes hand in hand with an increased interest in the corporate values behind products, the company explained.
Last Thursday, Rapaport News spoke with two of the miner’s executives — Esther Oberbeck, senior vice president for strategy analytics and insights, and Marc Jacheet, CEO of De Beers’ brands — to find out more about the results of the report and the mindset of the consumer.
How important is the diamond brand for De Beers at the moment?
Oberbeck: What we’ve seen [in research] over the last decade is that people [saying] “yes, [the diamond I acquired] is branded” has doubled in [the past] 10 years. But what is even more interesting from the side of this report is that the Gen Z-ers, the 24-year-olds and younger, are much more likely to claim to have acquired brands. It’s become disproportionately important to the younger generations, and they are the ones that are going to shape the future of the industry. [Also, what] we see is this convergence and acceleration of trends that are, on one side, very value-driven and, on the other side, very brand-driven. Those younger people...look for brands to enhance their own personal brands.
What is the price difference between a branded and an unbranded diamond at retail?
Oberbeck: Our own brands carry a premium, but also brands in general carry a premium over the unbranded. [De Beers later confirmed that consumer spending on branded diamond-jewelry pieces averaged $3,477, compared with $2,525 for non-branded goods, citing a survey.]
How has the value of a sustainable diamond developed in the past year?
Jacheet: What we learn from the research is that about 40% of Gen Z right now in the US, for example, are seeking information about ethical credentials. And what is more interesting is that 50% of Gen Z are more likely to buy when they know the positive impact...that the diamond has, particularly at the point of origin. It’s the first time in history that we see that data.
The diamond world has been driven by value. [This has been based on] a [description] of what the product is — [the] 4Cs — for more than five decades. We believe that the next 50 years are going to be driven by values. And it’s not the 4Cs only. It’s the 4Cs and what we define as the three Ps: provenance, the people and the [impact on the] planet. [Consumers demand] provenance [information] as a marker of trust on the one side and quality [on the other].
Sociologically, when you look across the world, fewer and fewer people are voting. And more and more people express their behaviors, their beliefs through brands because it has a “badge” value that you can immediately catch and because it’s shareable in the digital world.
How has the Russia situation affected the way consumers view the question of origin?
Jacheet: Every crisis calls for reassurance and trust. Covid-19 [is an example]. And every crisis stresses the importance of the source. Mad cow disease was when you started to get [interest in] the origin of the meat. But this one is another layer of crisis, where directly, on one category, united governments all over the world have taken massive decisions to just ban [Russian imports].
Oberbeck: We’ve taken a number of studies and surveys to see that this generation will have a higher awareness of the social ramifications of their purchases. It’s got to be more purposeful than previously, be it for protection of people or planet. But that requires a certain authenticity and transparency to the value chain, and that’s only going to increase. In the research, often the younger generations are quite skeptical about just claims and greenwashing or marketing for marketing’s sake. They really want to see what’s happening.
One of the themes that came up in the report was phygital retail, the metaverse and non-fungible tokens (NFTs). What is De Beers doing in this area?
Jacheet: Online in the US today [accounts for] about 25% of diamonds in value and about 31% in volume. That number is 42% [for] Gen Z. And if you look at what those numbers were in 2015, they were 14% of value, 18% of volume. It’s almost doubled in less than six or seven years. It’s enormous, and it’s steady post-Covid-19. So it’s a massive cultural change…that’s just going to accelerate.
[Regarding the metaverse,] this promises close-to-reality if not enhanced reality experiences, and we can easily predict that a significant portion...of people will go and live on these platforms in the coming years. It means that we’re going to be able to provide immersive experiences in a way that we didn’t think about two years ago. You’re going to be able to go into the [diamond] discovery stage. You’re going to be able to become a cutter and polisher yourself, to do it yourself. You’re going to be able to visualize a 3-D representation of your own creation. The creativity and the 3-D component are going to be at the very heart of the change. That will necessarily affect the industry.
What is the state of the retail market going into the holidays?
Oberbeck: I think everyone is watching the economic picture deteriorate and then stabilize and deteriorate a bit further, and with geopolitical tensions it’s a cautious environment. Our view is that the US consumer still has savings from last year and the year before. And parts of the population that are in the market for diamond jewelry will be able to buy, if the industry offers enticements with good brands and an experience and products that will attract them. But there’s no doubt that inflation and the cost of living will make this a very competitive season for diamond jewelry. So our expectation is not totally negative. But every week seems to bring different facts...so let’s wait and see before making a final statement.