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Image courtesy: <a href="" Target=_blank>Prosumer Diamonds</a>
Image courtesy: Prosumer Diamonds

An interview with Rapaport, the Diamond Maverick

Martin Rapaport is never short of words when it comes to diamonds. COLEBY NICHOLSON met with the industry nonconformist to discuss the current state of the international diamond market.

Martin Rapaport: most people in the industry will know the name, or at least recognise the face and signature bow tie.

The founder and chairman of Rapaport Group, which publishes Rapaport magazine and operates online trading platform RapNet among other products and services, began his career in the diamond industry in 1975 as an apprentice diamond cleaver in Antwerp.

His Wikipedia page notes that he has been called a ‘maverick’ within the diamond industry and probably rightly so.

I met with Rapaport in July to discuss the state of the industry and his often counter-intuitive and controversial stances on various industry issues.

At the time, he is quick to say that the diamond industry is in a period of large “transition”.

“Overall the diamond industry has settled, it’s not expanding,” he says. “You could say the pie is shrinking and people are fighting over the little pieces of the pie.”

Rapaport explains there are several reasons for this, first of which is the fact that the boom in China quieted down a few years ago.

“In addition, the US market has become more picky,” he continues. “Europe is gone, and with the oil price the UAE is gone – when I say ‘gone’, I mean that these markets are not a driving force in diamond demand.”

Rapaport also notes that there is some concern that recent rough sales, to the tune of about US$1.8 billion, are entering the Indian market.

“There seems to be a lot of rough coming in and there is no increase in polished demand,” he says. “So there is concern that inventory levels are too high, but again, we are chatting here now in July-August, and the Christmas season is around the corner where demand, specifically in December, can be triple or at least double the demand of the rest of the year.”

Evolving needs

The industry may be in holding mode but Rapaport says there is optimism about next year, as well as in the longer-term, and that many changes are taking place at the consumer end.

“The US is approximately 51 per cent of the market at US$42 billion – that would be diamond jewellery with metal. Rapaport Group expects the US market to probably pick up strongly next year,” he explains.

"The one good thing about synthetics is that it gives the natural diamond producers a kick in the butt."
Martin Rapaport, Founder and Chairman of Rapaport Group

“The consumerism issue is amazing in the US. First of all, you have the Millennials, who offer a whole different type of consumer demand. The Millennials are primarily focused on three things: an experience; customisation – their ring should be a little different, but it doesn’t mean customising from scratch; and finally, extreme customer service.”

Further to this, he predicts an increasing interest in social responsibility from Millennials.

“With this cultural shift in demand in the US is the emergence of what I would call the ‘we’ generation,” Rapaport explains.

“Everything is community and social. So the idea that people want to know where their diamonds are coming from is going to grow, and I believe it will evolve competition.”

He envisions a time when customers will shop around based on whether a retailer offers a diamond from a ‘good source’.

“A guy will come up and say, ‘My diamonds have a very good source,’ and I’ll go to another store and I’ll say, ‘That guy told me his diamond had a good source, what about yours?’ Consider what happened with XXX GIA certification. There was no cut grade. People didn’t ask for cut grades but now cut grades have come into the fore and everyone demands it.”

Matter of ethics

Rapaport, who played an integral part in the establishment of the Kimberley Process, adds that one of the biggest concerns today is the “greenwashing” utilisation of the Kimberley Process.

“Companies and countries say, ‘I have a Kimberley Process certificate, and therefore I’m in compliance with the anti-money laundering or counter terrorism funding,’ and that’s simply not true,” he explains. “The industry is still lying about the efficacy of the Kimberley Process certificates relative to money laundering. I see this as a tremendous risk to industry reputation because as you see there are more terrorist attacks taking place.

“I’m not accusing anyone of anything specific but I’m saying the industry is at fault, and I think those in the industry that say that the Kimberley Process protects the industry from anti-money laundering and terrorist funding are liars.”

When questioned whether such an issue has any real significant impact on a retail jeweller, given consumers, particularly in Australia, rarely ask if a diamond is ethically sourced, Rapaport is unyielding that it should be a focus for everyone.

“What’s the difference between a dog and a leader?” he asks. “A dog sniffs everybody else’s behind to see where to go and a leader says, ‘Hold on, this is where we need to go.’ The fact that consumers don’t ask about it is not a reason for the industry to be unethical.

“Are we leaders? Are we an ethical industry? If you say to me, ‘Well, we are not really as we only have to be an ethical industry if our customers ask for it,’ that is unacceptable by Rapaport standards. Second point is, as soon as god forbid, there is a problem, then it’s not just the reputational risk but it’s the tremendous damage that would come as the governments would start looking at us. Then people will start saying what are you doing? I think it’s wise to get ahead of the curve and we should always keep a clean house before people start to complain.”

Tied with the subject of ethics and transparency is the issue of ‘over- grading’ diamond certificates and the potential to severely harm consumer trust.

It’s fair to say that Rapaport went on a warpath in 2014 after banning EGL grading reports from listing on RapNet.

About three years on, is Rapaport confident that grading reports are more transparent?

“I think eliminating EGL was a positive step. People were not happy that we were reducing income from some people but the fundamental thing about honesty and integrity and recognising that the industry needs to maintain its reputation remains,” he says.

“I think the issue of the over-grading has definitely improved because people realised that we will not support it, and when we stop supporting these kinds of grading reports, they in fact more or less shut down.”

Natural vs Synthetics

Regardless, Rapaport believes that many other “problems” still exist in the industry.

One of the major advancements impacting the traditional natural diamond industry is the rise of synthetics.

Rapaport says consumer transparency is linked here too because despite the powerful marketing campaigns, synthetic diamonds are not identical to natural diamonds.

“That is a fundamental problem because the consumer is being misled by thinking that synthetic diamonds are identical, when they are not identical because there is no natural scarcity,” he explains.

Rapaport believes that there will never be a shortage of synthetic diamonds, stating that production is only going to increase, which will inevitably lead to a price collapse.

This, he continues, presents a challenge for retailers because they could be selling a synthetic today for US$10,000 but as the cost of production falls, that stone will have a value of US$100 in 10 years’ time.

“If your customer came back to you, it would look as though they were dealt a bad hand,” Rapaport states. “So if retailers want to sell synthetics, they need to tell their customer that the prices of these things will probably fall significantly more than natural diamonds.”

While this may be true, Rapaport says the natural diamond producers are not communicating the ‘scarcity value’ in an effective way.

“The one good thing about synthetics is that it gives the natural diamond producers a kick in the butt. So I think that’s excellent,” he states. “It’s high time that the diamond mining companies took responsibility for their product because essentially they are the people that claw back the profits.”

However, Rapaport says the matter is complex and references a recent announcement by the Gem & Jewellery Export Promotion Council that it would contribute US$2 million to the Diamond Producers Association – the international group backed by mining companies and developed to promote generic diamonds.

“I think it’s silly to give US$2 million to the mining companies because let’s say the industry gets together and promotes natural diamonds.

“Let’s say there is a lot of demand for these [natural] diamonds because of the promotion by the private sector industry [the non-mining sector]. Do you think that the rough diamond suppliers are going to lower their prices or raise their prices?” he asks.

“The story of the diamond industry is, if you get up there and you do too much promotion of generic diamonds, then the diamond mining companies raise the price and what you are doing therefore is creating higher prices for yourself.”

Rapaport believes that just as the industry shouldn’t be supporting synthetic diamonds if there is no wish for that support, the industry shouldn’t support generic natural diamonds unless there are assurances that the results of investments will be available to those making the investments.

“Don’t plant trees if someone else eats your fruit,” he says. “If the private sector here, the non-mining sector, spends money on generic diamond promotions, and the mining companies raise the price then that’s not rational. I mean, people can throw the money away, no problem, but it’s not fair.

“So if we spend money promoting it we should get the fruits of our money and we should not see increases in rough diamond prices.”

Wrapping up his assessment of the current state of the diamond industry, Rapaport says this is a period of re-assessment, re-configuration and re-doing.

“This doesn’t mean that there aren’t a lot of interesting changes taking place,” he concludes.

Oh, and that bow tie was present, naturally.

Martin Rapaport is the founder of Rapaport Group, an international network of companies that provides a range of products and services. The Rapaport Price List is said to have revolutionised the diamond trade by providing an independent benchmark that the global diamond industry uses to standardise, compare and negotiate prices.

Coleby Nicholson

Former Publisher • Jeweller Magazine

Coleby Nicholson launched Jeweller in 1996 and was also publisher and managing editor from 2006 to 2019. He has covered the jewellery industry for more than 20 years and specialises in business-to-business aspects of the industry.

Ellendale Diamonds Australia

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