"This Is A Very, Very Good Business To Be In"#
With China, India and the Middle East poised to collectively take over the US in diamond purchases by 2015, major diamond miners and jewelers have continued to invest heavily in marketing and expansion, with China becoming a particular point of focus in recent years. Steadily growing middle-class demand, as well as regular bidding at auction on rarer and larger pieces, has enticed most of the world's major diamond brands to enter the mainland China market or, at least, Hong Kong, creating a retail battleground in cities like Shanghai and Beijing. To set themselves apart from the pack and get in front of Chinese consumers, in recent months we've seen Britain's Graff Diamonds prepare for a Hong Kong IPO on June 8 that could raise upwards of US$1 billion to fuel further China expansion, while Van Cleef & Arpels recently launched a Shanghai exhibition of 370 rare pieces from its archives at the Shanghai Museum of Contemporary Art. Looking to attract younger consumers, Harry Winston recently flew in "Gossip Girl" stars Leighton Meester and Ed Westwick to inaugurate its first flagship in Shanghai, while Hong Kong-based Chow Sang Sang announced plans to open 50 new stores in the Mainland within the next “one to two years.”
Despite broader concerns about discretionary luxury purchases by middle-class Chinese this year, amid an environment of cooler economic growth, global diamond leader De Beers has no intention of falling further behind these and other competitors in China. As De Beers Group CEO Philippe Mellier recently said, his company plans to open "at least five" new stores in China this year, adding to the three it currently operates in Beijing, Tianjin and Dalian. As Mellier put it at this year's Reuters Mining & Metals Summit, "We are looking at expanding our shops in continental China big time in 2012...We are growing the business where the biggest growth is - in Asia."
Currently, the Group's 50/50 LVMH Moet Hennessy joint venture diamond jewelry business has 49 stores around the world, and with sales of US$7 billion a year, De Beers now accounts for 10 percent of the total global diamond industry. In mainland China, however, the brand is still comparatively new, having opened its first location at Beijing's Shin Kong Place last June. Aside from its mainland China locations, De Beers has two stores in Hong Kong and one in Macau.
As part of its push to attract more Chinese consumers, De Beers has also indicated that it plans to upgrade its flagship stores in London and New York -- regular stops for wealthy outbound Chinese tourist-shoppers. While this, and the brand's overall China expansion effort, is important, an expected slowdown in the luxury industry growth rate in China this year and an increasingly crowded jewelry market there means De Beers will likely need to kick up its digital marketing efforts and figure out how to court "entry-level" middle-class buyers in Xi'an, Kunming and Harbin as well as ultra-wealthy Beijingers on New York shopping sprees.