That diamonds, more than any other stone, are associated with engagement rings, is the direct result of the efforts by one company and one family. In one generation, the Oppenheimers, who controlled De Beers for more than 85 years, changed the way consumers in the United States thought about, bought and kept diamonds. Here’s how they did it and the perhaps surprising reason behind it.
For the trade, the announcement was as stunning as it was historic. Last week the Oppenheimer family announced it has sold its 40 percent stake in De Beers to Anglo American for $5.1 billion. The sale gives Anglo American 85% control of De Beers with the government of Botswana holding the remaining 15%. The sales ends the Oppenheimer family’s 85-year control of the giant diamond company.
Ernest Oppenheimer, later Sir Ernest Oppenheimer, was a diamond trader with a British company in South Africa when World War I broke out. Sensing opportunity, he organized the Anglo American Corporation of South Africa (yes, the same company which has bought De Beers used to be a sister company). The Anglo American Corporation and later the Oppenheimer Consolidated Diamond Mines company were the vehicles he used to acquire German gold and diamond holdings. The Germans were fearful that if they lost the war, their holdings would be confiscated anyway. As a result, they traded their properties for stock in the newly created companies.
De Beers had been an independent diamond company, founded by two Afrikaner brothers and the object of an epic struggle between Barney Barnato and Cecil Rhodes and Charles Rudd, one which Cecil Rhodes eventually won. By 1902, De Beers controlled 90% of the world’s diamond production.
After WWI, in 1926, Ernest Oppenheimer bought a seat on the board of De Beers and the next year 1927 assumed chairmanship of the company.
In the 1930s as world demand for diamonds weakened in the Great Depression, Oppenheimer created the business model that would define diamond distribution and prices for the balance of the 20th century. He called it “single channel marketing” and defined it as “a producers’ co-operative including the major outside, or non-De Beers producers in accordance with the belief that only by limiting the quantity of diamonds put on the market, in accordance with the demand, and by selling through one channel, can the stability of the diamond trade be maintained.”
This was the cartel. Diamond producers had to join the cartel or see the world market flooded with diamonds similar to those they were producing. (This of course would result in prices for those diamonds crashing.) De Beers also limited the supply of certain diamonds to keep prices stable. The cartel held an iron grip on the diamond market until 2000 when a number of diamond producers in Australia, Russia and Canada made the then risky decision to sell outside the De Beers channel.
It was also under the leadership of Ernest Oppenheimer that De Beers created one of the most, if not the most, successful advertising campaign in advertising history. The “A Diamond is Forever” campaign, created by a copywriter with N.W. Ayers, an advertising company, and launched in 1947 changed forever the perception of diamonds. Not so incidentally, the campaign also virtually destroyed the secondary market for diamonds as couples now saw them as heirlooms to be kept within the family.
Ernest Oppenheimer died in 1957. His grandson, Nicky Oppenheimer, became chairman of De Beers in 1998 after the retirement of his father, Harry Oppenheimer.
Contrary to trade speculation that the deal was months in the making, Nicky Oppenheimer claimed in a Mineweb interview that the possibility was raised on three and a half weeks before the announcement of the sale.
So, what impact will the sale have?
Anglo American says its first order of business is to meet surging demand in new markets. A company spokesman says that “In 2005, India and China represented about 8 percent of demand. By 2015, India, China and the Gulf will represent about close to 40 percent.”
Others hope for a new business model. Bloomberg News quotes Charles Wyndham, a former De Beers sales director and founder of WWW International Diamond Consultants, Ltd., “I hope it will be liberating,” he says. “Hopefully they will move away from the old business model, treat diamonds as the commodity they are, and get down to being a proper business rather than a ghastly little club.”
I wouldn’t bet the ranch on this.
The decision by the Kimberley Process to readmit Zimbabwe into the Process and thereby allow exports from Zimbabwe’s Marange Field highlights the benefits and vulnerabilities of a sincere effort to eliminate blood diamonds from the international marketplace.
As pearl and bead stringers, the Kimberley Process may seem somewhat remote. However, as members of the trade we have a responsibility to informed on major issues affecting it. Moreover, clients will ask about blood diamonds or the Kimberley Process and it’s important to be able to answer them knowledgeably. Most directly, some of us use diamond beads in our work.
For two years the Kimberley Process has attempted to block exports of Marange Region diamonds to the world market.
When the vast alluvial deposits were found in the Marange Region a few years ago, the government of Robert Mugabe moved quickly to seize the field. It ousted the British owner of the mineral rights and seized the company’s equipment. It then moved to eliminate local people mining the field by brutally killing them and torturing those it didn’t kill.
Then, to retain the loyalty of the army, Mugabe allowed various army units to rotate through the region with results that you can imagine for the local populace. (Remember, too, these diamond deposits are alluvial, meaning they are at or near the surface. Mugabe’s effort to pay off the military with access to alluvial deposits meant little new investment on their part.) This is in addition to the creation of state owned mining companies funneling revenue directly to Mugabe and his family.
The abuses were clear, documented and incontestable and in 2009, the Kimberly Process moved to block diamond exports from Zimbabwe.
What followed was a circus.
The net result: Not much change in Zimbabwe mining practices and a serious weakening of the credibility of the Kimberley Process. Most observers agree in fact that the decision to allow KP certified sales of Zimbabwe diamonds was simply an effort by the KP to “get past” the issue and salvage the Process.
It’s also important to remember that the Zimbabwe deposits are huge, they could account for 25% of the world diamond market, according to some observers. But the deposits are alluvial, meaning that when they’re mined out, they’re gone. So, while the government of Zimbabwe funnels money into its pockets, the people of Zimbabwe who could benefit from this resource have been the loser. Will the new accord change this? Dubious.
The major weakness of the Kimberley Process is that not only is it voluntary, its concern is with the internal issues of a country. While governments can initiate changes internally, it’s difficult for outsiders to initiate internal change in other countries. They resent and resist it, as Zimbabwe did.
The strength of the Kimberley Process is that it can and does draw attention to human rights abuses. Non-governmental organizations, in particular, can marshal publicity about the abuses, drawing consumer attention to the issue.
Various reports in the trade suggest the diamond industry is divided about continued support of the Kimberley Process in the wake of what is an uncontroverted debacle. And, it’s difficult to point to solutions going forward. How does the most well meaning organization intervene effectively in the internal affairs of a sovereign nation?
Nevertheless, the Kimberley Process has made real strides in highlighting human rights abuses and has been a credible vehicle for educating the public about these very important issues.
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Just this weekend while at a gem show, I was told by a dealer that the material I was looking at was jade. In reality the stones were serpentine.
This is what is called an unfair or deceptive practice.
Anyone who makes jewelry, including pearl and bead stringers, must be aware of the Federal Trade Commission’s (FTC) Guides for the Jewelry, Precious Metals and Pewter Industries. The jewelry industry relies upon the Guides for best practices in describing and advertising jewelry and for disclosure guidance.
We normally hear about the Guides when a jeweler or a company violates them or has to defend advertising claims. But it’s important to understand that the guides also apply to “claims and representations about industry products including…words...or through any other means.” So, if you make jewelry, anything you say or claim about about it is covered under the FTC Guides.
The Guides are intended to protect consumers from unfair or deceptive information about products. So for people who make jewelry and who are honest and knowledgeable about their products, in general the Guides aren’t an issue. However, they can cause some confusion.
Some years ago, I began hearing the term “Biwa freshwater pearls” to describe any number of freshwaters. Lake Biwa, from whence the term originated, was an early source of freshwater pearls and “Biwa pearls” referred exclusively to pearls from the lake. But it stopped production long ago. So, I thought these dealers were misidentifying the source of the freshwaters to gin up interest in their products.
I was wrong. FTC Guides had been amended to allow the use of the term “Biwa” to describe any freshwaters cultivated in Japan.
Similarly, gemologists used to use the term “cultured pearls” to refer only to Japanese saltwater pearls nucleated by a bead. Now, cultured pearls include any pearl in which mankind has intervened to produce the pearl, including freshwaters, saltwaters and South Seas pearls.
The FTC can issue “cease and desist” orders to jewelers and companies who violate the Guides and it can levy penalties.
Here is some general advice for staying in compliance:
It’s also important to note that the FTC recently announced that beginning in 2012, it will be revising the Guides. The process is expected to take some time as it is the first major overhaul since 1996. The process will be covered — and probably debated — in trade periodicals. It would be worthwhile to follow it.
The dealer I ran into this weekend intentionally tried to mislead me. By reviewing the Guides and learning what we can about our materials, we can guard against unintentionally misleading clients about the jewelry we make.
Pearl and bead stringers and those of us who love jewelry history may be in for a treat. Last week, the Hollywood Reporter announced that Tiffany & Co. has signed a deal with Warner Bros. and the producers of the new Great Gatsby film. The film, the seventh remake of The Great Gatsby is due out in December, 2012. Tiffany will supply jewelry, china, flatware and other home accessories for the home of Jay Gatsby, the lead fictional character.
According to the Hollywood Reporter, costume designer Agnes Martin was drawn to Tiffany because F. Scott Fitzgerald was a Tiffany customer and apparently Louis Comfort Tiffany owned a home on Long Island ran around with the social crowd described in Fitzgerald’s masterpiece.
Now, this is of course nitpicking and maybe even nitpicking for the fun of it, but we jewelry buffs may be excused for raising a small question.
Louis Comfort Tiffany was a towering figure in design. In 1902 he became design director for his father’s already legendary company, Tiffany, and he was almost single-handedly responsible for introducing and popularizing Art Nouveau in the United States.
Art Nouveau is the movement that began in Europe under various names in 1890 and lasted until about 1910. Art Nouveau is characterized by soft, flowing lines, sharp curves (the so-called whiplash curve), and an emphasis on nature and organic themes. Tiffany incorporated these themes into his work which included lamps, tiles, glass, enamels, interiors, desk accessories and more. He also designed Art Nouveau jewelry, although many believe his achievements in this area have been under-recognized.
As a movement, however, Art Nouveau was over well before the beginning of World War I.
Overlapping Art Nouveau and extending somewhat beyond it is the Edwardian period, named for King Edward VII and his wife, Alexandra. Edwardian jewelry is characterized by the use of platinum (which jewelers had just learned how to work), diamonds and pearls.
The Roaring 20s ushered in the Jazz Age, a territory F. Scott Fitzgerald made his own. 1920 also saw the emergence of Art Deco in jewelry whose straight lines, geometric shapes and bold bright colors reflected the temper and dress of the times. Jewelry was modern and sleek and ignored previous conventions regarding the use of gems by grouping what had been seen as “clashing” combinations, for example, emeralds with sapphires, jade and amethyst, etc.
Of the major jewelry firms, the French firm Cartier, not Tiffany, is associated with Art Deco. Most jewelry historians agree that Cartier generally ignored Art Nouveau during the time when the movement flourished, focusing instead on the creation of Edwardian jewelry. But beginning about 1909 (the same year Cartier opened its New York office), Louis Cartier, influenced by Diaghilev’s Ballets Russes, began to experiment with bold color juxtapositions within a geometric context. Cartier calls these early designs “the Modern Style” but they are recognized as the beginning of what became the triumph of Art Deco.
The Great Gatsby was written in 1925 and is often called “The Great American Novel.” Whether you agree or not, it does capture the spirit of the Jazz Age. It’s set in Long Island and New York City between spring and autumn, 1922.
According to the Hollywood Reporter, Tiffany will create one-of-a-kind jewelry for the new re-make of The Great Gatsby. The question for this nitpicker is whether Tiffany will create Art Nouveau, Edwardian or Art Deco designs.
There are some clues. The Hollywood Reporter says Tiffany will create platinum set diamonds and strands of pearls which sounds much more Edwardian than Art Deco. In addition, it’s worth noting that Cartier apparently lent part of its Art Deco collection to the 1970s remake of The Great Gatsby which starred Robert Redford and Mia Farrow.
Nitpicking aside, whatever Tiffany creates for the movie, it’s bound to be spectacular a treat for those of us who love period pieces in which jewelry has at least a supporting role.
I recently stumbled on a new resource that might be of interest to pearl and bead stringers.
It is an auction website called www.propertyroom.com. It’s apparently been around since 2001, but it is new to me and may be new to you.
The site works with over 2000 police and sheriff departments to source property that has been seized or forfeited or used in criminal cases. At some point–after a trial, for example, or after a certain amount of time has passed–ownership of the property transfers to the state.
The problem for these police departments, however, is that their property rooms get over crowded and storage becomes an issue. And although police departments will conduct their own auctions, the managing and hosting of such auctions can and often does cost more than the revenue generated.
Enter propertyroom.com. It coordinates with police and sheriff departments to sell the overflow. According to news sources, the company keeps a portion of the sales and returns a portion to the operating funds of states and municipalities of participating departments. Jewelry and watches apparently make up about 60 percent of sales.
I spent some time on the website recently. Most of the jewelry is low grade commercial jewelry, however, the costs are extremely low and the opportunity for pearl and bead stringers is to pick up jewelry that can be broken up and used for components.
For example, yesterday the site was auctioning what it called a pair of “genuine South Seas earrings.” The pearls looked like freshwaters to me, but ear wires were 14K and the starting bid was $1. Even with standard shipping charges that’s a tremendous savings over the wholesale cost of gold ear wires.
A number of pearl and bead stringers are using chain in their designs. At this writing, the site offers a number of pendants on chains that can be bought for similar savings.
According to JCK, (Jewelers Circular Keystone), propertyroom.com employs a gemologist who evaluates the higher end jewelry and the website claims to make a “good faith” effort to accurately describe the goods it sells. However, basically, you’re on your on.
Nevertheless, I think the site might be a low-cost resource for pearl and bead stringers looking for jewelry components.
As pearl and bead stringers, we may use diamond beads in our jewelry. However, apart from whether we use them ourselves, diamonds are a key part of the jewelry trade, familiar to everyone, and desired by most.
This means that we must familiarize ourselves, at least broadly, with major issues affecting diamonds so that we are prepared to discuss them with clients.
“Blood diamonds” is one of those issues where it’s vital you have an informed response to a client query.
The following is offered as a broad backgrounder to the issue of blood diamonds and the extremely fragile status of the Kimberley Process, the solution to blood diamonds developed by governments, the industry and various NGOs (non-governmental organizations).
The Kimberley Process developed in response to wide-spread repugnance at brutal practices associated with “blood diamonds” – diamonds that fueled conflict in Africa, especially Sierra Leone, in the decade of the 1990s.
In the West, mainstream journalists became interested in the conflict in Sierra Leone and also in Angola and began reporting on it. Various human rights organizations, including Global Witness, Amnesty International and Partnership Africa Canada, publicized the brutality. A prominent Congressman (Tony Hall D-Ohio) helped draw attention to the issue. And, nearly a decade after the outbreak of conflict in Sierra Leone, the United Nations passed a resolution supposedly “breaking the link” between illegal diamond trade and armed conflict.
Consumers, now educated on the subject, began to demand something be done. In this country, diamonds are permanently associated with engagement rings and for obvious reasons people did not want a tainted gemstone. (Conflict diamonds later became a suspected source of funding for al Qaeda, however, that did not become a concern until after the Kimberley Process was established.)
In May, 2000, governments, NGO (non-governmental organizations) and the diamond industry came together in Kimberley, South Africa (where large scale diamond mining began about 150 years ago) to endorse the Kimberley Process. The aim of the process was to halt or at least effectively combat trade in conflict diamonds. To accomplish this, the process calls for:
In all, 52 governments signed off on the Kimberley Process. The Kimberley Process can also call for restrictions on nations in which human rights violations occur.
In 2011, the focus of the Kimberley Process has shifted from Sierra Leone to Zimbabwe’s Marange Valley, home to vast alluvial diamond fields worth up to $800 billion, according to some estimates.
And, the Kimberley process, once hailed as an example of cooperation between governments, NGOs and the industry is, according to one trade publication, “disintegrating before our very eyes.”
The Marange Valley deposits were discovered in 2006. Ironically, DeBeers once owned the mining rights to the 46 square mile area, but let them lapse over concerns about Zimbabwe’s political and economic crises and because it believed there were no significant deposits in the area.
In 2008 the Mugabe government seized the fields, killing 200 people in the process. And, immediately reports began to surface of human rights abuses, including rape, child labor and mass killings as the government forced locals to work in conditions approaching slave labor.
In 2010, over the objections of the United States and the World Diamond Council, two Kimberley Process sanctioned diamond auctions were held. Currently, the Process is at an impasse and some press reports indicate that Zimbabwe, which regards the KP as “nonsense”, and its potential diamond buyers are simply waiting for the KP to crumble.
Marange Valley diamonds are making their way to cutting centers around the world in a couple of ways.
Despite the best efforts of Kimberley Process participants, the Marange Valley issue has exposed a number of perhaps fatal flaws.
Meanwhile, violence has broken out in Central African Republic Diamond fields, violence that has industry observers worried that about full scale civil war.
The Kimberley Process has been criticized as a public relations stunt by the diamond industry. That’s not true. Up and down the chain of custody, the trade is committed to supporting ethical mining practices. The Rapaport Group, for example, has said it will expel members of its global Rapnet diamond trading network if they sold Marange Valley diamonds. Moreover, most retailers here and in Europe attempt to sell only certified diamonds.
The key pressure point, therefore, is not the trade, nor is it the participants in the Kimberley Process. It is the corrupt and renegade governments that torture their citizens for power and private gain.
Nevertheless, consumers can help keep the blood diamond issue alive. Advise your clients to ask retailers if the diamonds they are selling are certified.
Keeping up the pressure is the best way to ensure a continued commitment to keeping diamonds conflict free.
As tungsten carbide becomes more popular, professional pearl and bead stringers may wish to familiarize themselves with the pros and cons of using this material in their work. In addition, it’s not unlikely that a client may ask for a recommendation regarding this material, a material that is attracting attention and controversy.
And, it’s important to note that a recent settlement by the FTC into jewelry advertising claims suggest that the benefits and risks of tungsten carbide may not be so “settled” after all.
in late August, the Federal Trade Commission announced it was closing its investigation of an advertising dispute between jewelers Scott Kay and Frederick Goldman. Both men own respected companies. And, both are well known for their wedding jewelry.
As the price of gold soars, jewelers and consumers are turning to other materials to fabricate wedding bands. One of these materials is tungsten carbide and it is quickly becoming a popular choice for wedding rings. It’s good looking, very affordable and available in a number of designs. Frederick Goldman, Inc. is a leading supplier of tungsten carbide wedding rings.
And, here is where the trouble started. Scott Kay challenged a number of Frederick Goldman advertising claims including claims about tungsten carbide’s strength, scratch resistance, and its ability to be removed safely from the finger.
Although both sides claimed victory after the settlement, it seems clear the practical and moral victory is really with Scott Kay.
The “win” for Goldman is that the FTC objected to Kay using the term “fragile.” However, it is permitting Kay to describe tungsten carbide as “brittle.”
There appears to be no doubt about the accuracy of this assertion. Here is a link to a short video illustrating the point. This also appears to substantiate Kay’s assertion that tungsten carbide isn’t a suitable material for wedding bands.
Tungsten carbide is extremely scratch resistant, but it can be scratched, for example, with a diamond or a sapphire.
There is apparently some question about the ability of local emergency rooms to remove a tungsten carbide ring. Kay successfully defended his claim that a line of Kay wedding bands can be removed safely. However, another manufacturer of tungsten carbide wedding bands, the Robbins Group, contacted local emergency rooms and determined all had the means to remove their bands.
The reaction of consumers to tungsten carbide rings is mixed. Here are a couple of reviews posted on overstock.com that focus on how brittle tungsten carbide is.
Although the focus of the tungsten carbide controversy has been on wedding bands, it is becoming increasingly available in a variety of products, including pendants and chains, elements you may wish to include in your jewelry designs.
In addition, as a professional pearl and bead stringer, you may be asked for a recommendation about buying tungsten carbide.
It seems pretty clear that there are some issues associated with subjecting tungsten carbide to the accidents and risks of every day ring wear. Nevertheless, it is good looking and as manufacturers develop new products, we might see some wonderful beads, pendants and chains we can use in designs for necklaces and earrings where the jewelry isn’t as at risk as rings.
Here is some good advice from a jeweler posting on the JCK website.
Years ago a first time client asked me to identify the green gemstone she was wearing.
When she asked, she was considering buying an ivory necklace–legal back then–from me. Whether or not she consciously framed it in this way to herself, the request was a test. Did I know gemstones? Was she buying from an expert or from an amateur? Could she be comfortable with what I was telling her about the ivory?
It wasn’t hard to identify the stone as a tsavorite. It was small, under a carat, a deep forest green and it was bright, far brighter than an emerald.
She had just bought the gemstone and was proud of it. It was important to her that I recognized the stone, understood its rarity and knew its source. She may have bought the ivory anyway, but she went on to become a client for many years, a development directly tied to the fact I was able to recognize a relatively rare gemstone. And, not only did she take my advice on jewelry she bought from me, she asked my advice on jewelry she bought from others. That’s because she trusted me.
When we sell jewelry, whether they recognize it or not, clients often impose a test. Usually the test isn’t as direct as the one cited above. Instead, the test comes in the form of a need for reassurance. At its most basic the client wants to be reassured we are honest. For people reading this, I assume that’s not an issue, but I would point out that a reputation for honesty really is priceless.
Clients also want to be reassured we know what we are selling. I can’t stress this enough. Clients want to know about the materials used in the jewelry. Is the amber reconstituted? Is the turquoise treated? Is it lapis or dyed howlite? Clients are rarely put off by knowing a piece is treated. What will put them off is learning the gemstones are treated after the sale has been made. Back when I ran a gallery that showed studio jewelry, I was frequently surprised and frankly, irritated, by artisans who showed me work that included materials they couldn’t describe. Metalsmiths and pearl and bead stringers would choose a material for its design impact and not take the time to identify the gemstone which was often just as simple as asking the dealer.
In addition to knowing about the materials, that is the gemstones and metals used, clients also often want to know how the piece was manufactured. As manufacturers, pearl and bead stringers should be able to discuss the materials they’ve used and why they made a specific manufacturing decision.
So, honesty and product knowledge are foundational for sales. But there is another level, often ignored by many people in the trade, that can contribute in a substantive way to sales. And that is overall industry knowledge.
In general, people who buy jewelry, love jewelry and they are interested in a host of subjects relating to it. If you sell your jewelry, you’ll find yourself fielding questions about trending topics, for example, the recent controversy over tungsten carbide wedding bands. And you’ll also find clients asking time tested questions such as telling the difference between real and fake pearls and whether the tooth test is reliable.
Some, like the client I mentioned above, will ask you to react to jewelry he or she is wearing or has just bought.
This isn’t to suggest that you try to know everything about the industry. You can’t. And if you don’t know the answer to a specific question, just say so. I know, for example, I disappointed clients when I failed to recognized the names of specific — usually commercial — jewelry designers, an area I was and am not especially interested in.
But I did make the effort to stay abreast of industry news and I made it my business to know the characteristics of every gemstone I sold.
It wasn’t hard. After all I love jewelry.
If you are a pearl and bead stringer who sells your jewelry, take my advice. Provide important reassurances to clients by guarding your reputation for honesty, knowing your gemstones and staying up on industry developments. Then share your expertise.
Instead of pulling back during hard economic times, the jewelry industry is engaged in a creative ferment that might influence the way we look at jewelry for many years. Here is a review of some major trends.
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