Education: Diamonds

Diamonds are the hardest of all gems and therefore can be polished to exquisite brilliance and can, under normal care, last a lifetime. When we think of diamonds, we often relate them to the name DeBeers. The DeBeers name has been associated with diamonds since their modern day discovery. The company, based in South Africa with headquarters in London, quickly became the largest distributor of diamonds and soon thereafter was considered a monopoly, controlling more than 80% of the world supply of diamonds. A distribution method was set up whereby “sightholders” were invited to buy boxes of diamond rough. This division of DeBeers is known as the DTC or Diamond Trading Company.

The way the system works is that these sightholders (clients) are invited to buy diamond rough usually ten times per year. They do not get to view the diamond rough prior to purchasing. The boxes are sealed and the buyers do not know what the mix will be like. The DTC has a good idea what sizes and qualities the buyer needs so they do try to offer that selection. However, the price is set and non-negotiable. When the DTC decides to raise prices, the sightholders have to accept the new price. While this system seems unfair, it did work well overall and this method of distribution helped create even greater demand for diamonds worldwide. People knew that diamond prices would continue to rise over time because of this control. The DTC controlled the supply and the price of diamonds.

Over time, more large scale mining companies entered the diamond business. The market share of DeBeers began to decline. However, due to rising demand worldwide, DeBeers sales did not suffer. The sightholder method of distribution remained but was restructured. Many of these invited companies were no longer in this group which is now called Supplier of Choice instead of sightholder. DeBeers wanted this restructuring for many reasons including better marketing efforts by all diamond companies and shared responsibility. They also wanted to eliminate their monopoly status that had kept them from certain business practices in the United States. The market share of DeBeers is now below 50%.