From Russia with Diamonds…

Isaac Mostovicz writes that Russia has a growing stockpile of diamonds...


Here’s an interesting article on the state of the diamond market in Russia–they’re stockpiling diamonds while they wait for demand to return to protect the market in the long run. They’re also beginning to take charge in advertising diamonds generically the way De Beers used to. At the end of the article, the author sums up the major problem in the diamond industry, but also points to the solution:

“We have to tell people that diamonds are valuable,” [Aleksandr A. Malinin, an adviser to the president of Alrosa] said. “We are trying to maintain the price, just as De Beers did, as all diamond producing countries do. But what we are doing is selling an illusion,” meaning a product with no utility and a price that depends on the continued sense of scarcity where there is none.

At the Alrosa unit that receives diamonds, called the United Selling Organization, where about 90 percent of the output of the Siberian mines arrives for processing, Elena V. Kapustkina pours about 45,000 carats of diamonds though a stainless steel sieve every day to sort them by size.

“It’s just a job,” she said.

When asked whether diamonds had lost their romance for her, Ms. Kapustkina paused, looked down at the pile of gems on her table and blushed.

In fact, she said, her husband, a truck driver, gave her a half-carat ring 22 years ago. “Of course I love it,” she said. “It’s from my husband.”

I hope Malinin’s cynical comments won’t undermine the industry. The industry should really be focusing on people like Elena Kapustkina, who feel an emotional connection to their diamond. Understanding how people interpret luxury and how luxury can give people positive reinforcement will give marketers a distinct advantage–it’s the direction in which luxury marketing is going.

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