Harvard Case - The De Beers Group: Exploring the Diamond Reselling Opportunity
"The De Beers Group: Exploring the Diamond Reselling Opportunity" Harvard business case study is written by Benjamin C. Esty, Daniel P. Gross, Lauren G. Pickle. It deals with the challenges in the field of Strategy. The case study is 21 page(s) long and it was first published on : Feb 21, 2017
At Fern Fort University, we recommend De Beers Group pursue a multi-pronged strategy to capitalize on the diamond reselling opportunity. This strategy focuses on leveraging existing core competencies in diamond sourcing, grading, and marketing while embracing digital transformation and innovation to cater to evolving consumer preferences. This approach involves a combination of vertical integration, strategic alliances, and new business model development to create a sustainable competitive advantage in the diamond resale market.
2. Background
De Beers Group, a global leader in the diamond industry, faces a unique opportunity in the growing diamond resale market. Consumers are increasingly seeking sustainable, ethical, and affordable options, driving demand for pre-owned diamonds. This presents a challenge to De Beers' traditional model, which relies heavily on new diamond production. The case study explores De Beers' options for entering the resale market, considering various strategies and their implications.
The main protagonists in this case are the De Beers Group leadership team, tasked with navigating the evolving diamond market and developing a strategy for entering the resale market. They need to consider the potential impact on their existing business model, brand image, and customer relationships.
3. Analysis of the Case Study
Industry Analysis:
- Porter's Five Forces: The diamond industry exhibits high barriers to entry due to the complex sourcing and grading processes. However, the growing online marketplace and increased consumer awareness of ethical sourcing are creating new competitive pressures.
- SWOT Analysis:
- Strengths: De Beers possesses a strong brand reputation, global distribution network, and expertise in diamond sourcing and grading.
- Weaknesses: The traditional model relies heavily on new diamond production, which is facing sustainability concerns.
- Opportunities: The diamond resale market is growing rapidly, offering a new revenue stream and potential for brand expansion.
- Threats: Competition from online retailers and independent sellers is increasing, and consumer preferences are shifting towards ethical and sustainable practices.
Strategic Framework:
- Value Chain Analysis: De Beers can leverage its existing value chain by integrating diamond resale into its operations. This includes sourcing, grading, certification, and marketing, allowing for controlled quality and brand consistency.
- Business Model Innovation: De Beers can explore new business models that cater to the evolving consumer preferences in the resale market. This could include online platforms for diamond trading, subscription services for diamond jewelry, or partnerships with sustainable jewelry brands.
Key Considerations:
- Competitive Advantage: De Beers' core competencies in diamond sourcing, grading, and marketing provide a significant competitive advantage in the resale market. By leveraging its expertise and brand reputation, De Beers can offer consumers a trusted and reliable source for pre-owned diamonds.
- Digital Transformation: Embracing digital technology is crucial for success in the resale market. This includes developing online platforms for diamond trading, utilizing AI and machine learning for pricing and inventory management, and leveraging social media for marketing and customer engagement.
- Environmental Sustainability: De Beers needs to address concerns about the environmental impact of diamond mining by promoting sustainable practices and sourcing recycled diamonds. This will be crucial for attracting environmentally conscious consumers.
4. Recommendations
De Beers should implement a multi-pronged strategy to enter the diamond resale market, focusing on:
1. Vertical Integration:
- Develop a dedicated platform for diamond resale: Create an online platform for buying and selling pre-owned diamonds, leveraging De Beers' expertise in grading, certification, and authentication.
- Invest in technology and analytics: Utilize AI and machine learning to optimize pricing, inventory management, and customer experience.
- Partner with sustainable jewelry brands: Collaborate with brands that prioritize ethical sourcing and environmental responsibility to offer a wider range of sustainable diamond jewelry options.
2. Strategic Alliances:
- Partner with online retailers: Collaborate with established online platforms for luxury goods to expand reach and access a wider customer base.
- Develop strategic alliances with diamond cutters and polishers: Secure a consistent supply of high-quality pre-owned diamonds through partnerships with established industry players.
- Explore partnerships with blockchain technology providers: Utilize blockchain technology to enhance transparency and traceability in the diamond supply chain, building trust and confidence among consumers.
3. New Business Model Development:
- Offer subscription services for diamond jewelry: Provide customers with access to a curated selection of diamond jewelry on a subscription basis, allowing them to rotate their pieces and experience different styles.
- Develop a diamond rental program: Offer a rental program for special occasions, catering to consumers who prefer to rent high-value diamond jewelry instead of purchasing it.
- Create a platform for diamond trading: Develop a peer-to-peer platform for diamond trading, connecting buyers and sellers directly and facilitating secure transactions.
5. Basis of Recommendations
These recommendations consider the following:
- Core competencies and consistency with mission: Leveraging De Beers' expertise in diamond sourcing, grading, and marketing aligns with its core competencies and strengthens its position as a trusted leader in the diamond industry.
- External customers and internal clients: The recommendations address the evolving needs of consumers seeking sustainable, ethical, and affordable diamond options while providing a new revenue stream for De Beers and its stakeholders.
- Competitors: The recommendations aim to create a competitive advantage by leveraging De Beers' brand reputation, expertise, and digital capabilities to differentiate its offerings in the crowded diamond resale market.
- Attractiveness ' quantitative measures: The recommendations are expected to generate significant revenue and market share in the growing diamond resale market. The potential for increased profitability and market expansion is supported by industry trends and consumer demand.
- Assumptions: The recommendations assume that De Beers can effectively leverage its existing infrastructure and expertise to enter the resale market, adapt to evolving consumer preferences, and navigate the competitive landscape.
6. Conclusion
By embracing innovation, digital transformation, and a multi-pronged strategy, De Beers Group can successfully enter the diamond resale market and capitalize on the growing demand for sustainable and ethical diamond options. This approach will strengthen De Beers' position as a leader in the diamond industry, expand its customer base, and create new revenue streams for the company.
7. Discussion
Alternative Options:
- De Beers could choose to focus solely on sourcing and grading pre-owned diamonds for other retailers, avoiding direct involvement in the resale market. This would minimize risk but limit potential revenue and market share.
- De Beers could acquire existing diamond resale platforms or companies. This would provide immediate market access but could be costly and require significant integration efforts.
Risks and Key Assumptions:
- Consumer acceptance: A key assumption is that consumers will embrace De Beers' entry into the resale market and trust its brand and expertise in pre-owned diamonds.
- Technological advancements: The success of the strategy depends on De Beers' ability to adapt to rapid technological advancements in the diamond industry and utilize digital tools effectively.
- Competition: The diamond resale market is becoming increasingly competitive, and De Beers needs to differentiate its offerings and build a strong brand presence to attract customers.
8. Next Steps
- Develop a detailed business plan: Define the scope of the resale market, target customer segments, and develop a comprehensive business plan outlining the strategy, resources, and timeline for implementation.
- Pilot test the platform: Launch a pilot program to test the online platform and gather customer feedback before a full-scale rollout.
- Build strategic partnerships: Secure partnerships with key players in the diamond industry, online retailers, and technology providers to support the strategy's implementation.
- Monitor market trends: Continuously monitor the diamond resale market and consumer preferences to adapt the strategy and offerings as needed.
By taking these steps, De Beers can successfully navigate the evolving diamond market and establish a strong position in the growing diamond resale market, contributing to its long-term growth and sustainability.
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Case Description
In September 2014, Tom Montgomery (SVP of strategic initiatives at the De Beers Group) and his team launched a pilot program in the United States to explore the $1 billion diamond market for pre-owned (recycled) diamonds. According to Montgomery, the motivation for the pilot program was to improve the consumer reselling experience and to enhance "diamond equity". Somewhat paradoxically, consumers typically received very low prices when they tried to sell diamonds (5-20% of the original retail price) leaving them reluctant to purchase diamonds in the future and making them into ambassadors of ill will. At a meeting scheduled for November 2015, the De Beers Executive Committee would have to decide whether to end the pilot program, extend it for another year to gather more information, or convert it into a new standalone business unit. Because De Beers had historically focused on producing rough diamonds (the "upstream" business), yet the new business unit offered an opportunity to enter and enhance the market for polished diamonds (the "downstream" business), the decision was particularly noteworthy.
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