Is the American jewellery-buying public ahead of the curve compared to general consumer buying? Despite the country’s ongoing economic ills, with obstinately high unemployment and a housing market still in a state of disarray, U.S. consumers have been increasing their purchases of jewellery for most of this year.

    Indeed, whereas the American market has been underperforming Asia in other areas, when it comes to jewellery it is doing a better job of keeping pace. According to U.S. government figures, jewellery store sales for September jumped 14.6 percent on the year in the first three-quarters of 2011. And, while it is still early days yet, reports from the jewellery sector following the critical Thanksgiving Day weekend, which is traditionally regarded as the start of the Christmas shopping season in the United States, have been almost universally upbeat.

    In general, the mood of the American retail market is better than it has been in a while. Led by discretionary purchases, sales in October increased by 0.7 percent from September and by 4.7 percent over last October, the National Retail Federation said. However, the strong rise could have been due to early holiday promotions. “Retailers’ seemed to strike the right chord with shoppers last month,” said National Retail Federation President and CEO Matthew Shay. “Knowing the economy is still a big factor in customers’ shopping decisions, retailers will continue to offer great deals and exceptional value throughout the holiday season.”

    And the widely watched U.S. Conference Board Consumer Confidence Index, which had declined in October, showed an improvement in November, rising to 56.0 from 40.9 in October. The Present Situation Index and the Expectations Index both rose. “Confidence has bounced back to levels last seen during the summer,” said Lynn Franco, Director of The Conference Board Consumer Research Center.

    “Consumers’ assessment of current conditions finally improved, after six months of steady declines. Consumers’ apprehension regarding the short-term outlook for business conditions, jobs and income prospects eased considerably. Consumers appear to be
entering the holiday season in better spirits, though overall readings remain historically weak,” Franco added.

    What’s behind the rising sales in the U.S. market? According to noted diamond jewellery analyst Ken Gassman, one should look past the once-declining consumer confidence index or the fact that the American political system is deadlocked.

    “I say, ignore those factors,” Gassman said. “Unemployment is still high and the housing market is still very bad, but it is amazing that these factors do not seem to matter. They simply do not correlate to consumer sales. You would think that when times are bad, sales
would also drop sharply, but that is not the case.”

    “There is a wellknown expression that when the going gets tough, people go shopping. Frankly, it is that simple. As far as jewellery
is concerned, people are shifting money from other categories in order to give themselves a treat. After going through a tough period over the last three years, people want to reward themselves with something special. Americans are born to shop, and although there has been a slowdown in the past few years, the basic consumer mentality has remained in place,” he added.

    Gassman said that data from the U.S. Commerce Department showed that sales of jewellery were up 14.6 percent in the year to September despite rising prices for precious metals, while sales measured in dollar terms were up 12 percent. However, he believes a rise in the mid-to-high single-digit range seems more likely. “Over the next couple of years, I estimate that rises in jewellery sales gains will be around 4 percent annually,” Gassman said.

    Up-market jeweller Tiffany & Co. reported a 63-percent rise in fiscal third-quarter earnings, with solid sales growth in each of its eographic regions. Tiffany reported a profit of $89.7 million for the quarter ended October 31, up from $55.1 million from a year earlier. Sales surged 21 percent to $821.8 million, or 17 percent when stripping out currency fluctuations. Total samestore sales soared 16 percent excluding currency fluctuations, compared with a 7 percent rise last year. Meanwhile, sales soared 24 percent at the company’s Fifth Avenue flagship store in Manhattan, boosted by the record number of tourists visiting New York.

    Tiffany has posted double-digit rises in profits in each quarter this year. In addition, same-store sales have been stronger than those its mid-range competitors with its consumers more willing and able to spend on gifts and other discretionary purchases. The firm reported
a 17-percent increase in sales growth in the Americas, which accounted for most of the total sales.

    Further evidence of the rising strength of U.S. jewellery sales is seen in the financial turnaround at retail giant Zale Corp which operates more than 1,800 stores in North America. Indeed, the firm’s stock jumped close to 23 percent on one day in late September after
Chief Financial Officer Matt Appel gave investors reassurance that its three-year turnaround program was working.

    Appel said that Zale was “trending in the right direction,” aided by the replacement of underperforming staff, rising revenue at stores open at least a year, and partnerships with celebrities such as Vera Wang and Jessica Simpson on exclusive product lines. The current
situation is a large improvement on the decline the company underwent following the onset of the global financial crisis exactly three years ago.

    Zale Corp’s revenue figures slumped during the recession of 2009, hit by consumers slashing nonessential spending, difficult credit conditions as banks reduced their lending, and high unemployment. It has closed hundreds of stores over the past two years and moved top management around, as well as letting some go, as part of its turnaround program.

    As for the general U.S. jewellery market, the boost in jewellery purchases could be coming from middle-level income earners making at least $100,000 who are feeling better about the economy and the super rich, according to research firm Ipsos Mendelsohn. A
study by the company based on interviews with more than 2,000 affluent people and 1,000 non-affluents over two months found that their consumer optimism was strong.

    But not all the news was good, as least from the jewellery sector’s perspective. The Ipsos Mendelsohn study also found that the consumer’s idea of what a luxury purchase was is changing and is highly subjective, with a two-hour massage, or a facial in a spa frequently fitting the bill. In other words, consumers are lowering the luxury bar, with many items far cheaper than jewellery fitting the bill. “That is a new component in the evolution of luxury,” the report said.

    Although traditional luxury brands were cited, such as Cartier, Louis Vuitton, and Patek Philippe, respondents also said luxury was less an issue of price than an experience, which could mean chocolate truffles, a fancy coffee machine, or imported cheese. Testimony of the changing nature of what constitutes a luxury product was provided by two-thirds of affluent respondents saying they define luxury differently today than they did even five years ago.

    In addition, affluent consumers do not believe that value pricing hurts a luxury brand. Among affluent people, 90 percent of affluents admitted to going out of their way to find the best price. “Fewer than half said true luxury is worth any additional cost and fewer than half also said true luxury does not go on sale, and even fewer said when a luxury product goes on it sale it lessens the perception of luxury. So consumers are bringing a very strong value orientation even to highest-ticket items.”

    “There is a strong sense that luxury is not stereotypical, but personal. Back in 2005 or 2006, there was a more shared sense of what luxury is, but today it’s much more personal and idiosyncratic. It’s about a feeling of ‘I deserve’ more than anything. And rarely were they talking about how it appears to others; it’s much more about self-gratification.”

    This holiday season, the question for spouses and lovers receiving diamond jewellery shouldn’t be whether he went to Jared. It should be where those diamonds came from before they got to Jared — or Tiffany, or Macy’s, or any corner jewellery store.

    An international agreement among diamond importing and exporting countries meant to prevent consumers from inadvertently buying so-called blood diamonds has been declared a failure and a lie by one of its main architects, the London-based NGO Global Witness, which has bailed out of the programme. The Kimberley Process, implemented in 2003 to end the trade in conflict diamonds, not only has failed to do so, the group says, but it may well be helping tainted stones make it to the market under cover of its own guarantees.

    “Nearly nine years after the Kimberley Process was launched, the sad truth is that most consumers still cannot be sure where their diamonds come from, nor whether they are financing armed violence or abusive regimes,” Charmian Gooch, a founding director of Global Witness, said in a statement. “It has become an accomplice to diamond laundering—whereby dirty diamonds are mixed in with clean gems.”

    Global Witness’s very public vote of no confidence is just the latest blow to the Kimberley Process’s credibility over its handling of diamonds mined by Zimbabwe, considered by many to be the first real test of the scheme’s ability to ensure that diamonds mined in contravention of basic human rights are not permitted into a retail display case. The issue of conflict diamonds first came to light at the turn of the century, when bloodthirsty rebels in Sierra Leone hacked off the limbs of civilians to scare them away from that country’s rich mines, allowing the rebels to sell gem-quality diamonds into mainstream channels to finance their campaign of terror. Sierra Leone’s plight was highlighted in the 2006 Leonardo DiCaprio movie Blood Diamond. Lately, however, Zimbabwe has become the poster child for conflict diamonds.

    One of 75 Kimberley Process participants, Zimbabwe has rampant human-rights abuses at its Marange diamond fields that have been documented not only by organizations such as Human Rights Watch and news networks such as the BBC, but by the Kimberley Process itself. Since 2006, government forces loyal to President Robert Mugabe’s Zimbabwe African National Union–Patriotic Front party (ZANU-PF) have
plundered the diamond fields, beating, killing, and sexually assaulting civilian miners. State security units use forced labour and child miners to dig their diamonds.

    If ever there was a situation the Kimberley Process was meant to address, this seems to be it. But rather than act decisively to kick Zimbabwe out of the club and condemn its actions, the Kimberley Process has allowed it to continue. At issue, at least in part, is its own definition of conflict diamonds, which are defined as those mined by rebel groups fighting against an established government. It doesn’t address violent tyranny by a
government against its own people.

    Bowing to political pressure from Zimbabwe’s regional neighbours—and hamstrung by its perplexing policy that every decision, including whether to suspend a member for noncompliance, must be unanimous—the KP greenlighted Zimbabwean exports this summer, declaring them to be in compliance with its rules. That means that in the eyes of the Kimberley Process, Zimbabwean diamonds are just as conflict-free as Russian or South African diamonds.

    That decision has led to a blowback in the diamond community, whose continued credibility in the eyes of the shopping public hinges on its claim that retailers aren’t selling blood diamonds to unsuspecting buyers. Martin Rapaport, who runs one of the world’s largest independent diamond exchanges, banned Zimbabwean diamonds from his network, whether or not they have Kimberley Process certificates. It was yet another no-confidence vote in the KP’s ability to keep the supply lines clean.

    Just two months after the Kimberley Process declared Zimbabwean stones to be conflictfree, Human Rights Watch reported on August. 31 that “Zimbabwe police and private security guards employed by mining companies in the Marange diamond fields are shooting, beating and unleashing attack dogs on poor, local unlicensed miners.”

    Global Witness, which first raised the issue of conflict diamonds in 1998, had finally had enough. “It’s really time to acknowledge that it just isn’t working,” said Annie Dunnebacke, the organization’s senior campaigner, from the group’s headquarters in London. “It’s become such a lie—to consumers and to all the diamond-mining communities to whom the KP is represented as a mechanism that can protect their interests.”

    Dunnebacke said a particular concern was the possibility that diamond revenue could be used to finance a crackdown on Mugabe’s opponents leading up to next year’s election. “We don’t want to lend our credibility to, or be associated with, a scheme that could very well end up having blood on its hands if all this cash that KP has endorsed is used to fuel violence,” she said. “We don’t want to be a part of that.”

    Global Witness’s departure from the Kimberley Process comes two and a half years after another major supporter defected from the programme for similar reasons— the way the KP was dealing with Zimbabwe, among other complaints. Ian Smillie, one of the founders of the Canadian NGO
Partnership Africa Canada, who helped shape and implement the Kimberley Process, sympathizes with Global Witness’s decision. “I think it’s perfectly understandable,” he said. “I got out of it two and a half years ago. I couldn’t stand to be part of a system that was taking two steps back for every step forward, and I think they finally realized that just staying in was not advancing the cause, that they could have more impact by leaving and working outside than by working inside.”

    Global Witness’s departure, he said, “is certainly significant. Whether it will have any impact on the Kimberley Process or not is another question. They seem impervious to criticism. They’ve been criticized for years … and it hasn’t made much difference.”

        Indeed, Eli Itzakhoff, the chairman of the World Diamond Council, whose job is to try to speak with one voice for the entire international diamond industry, called Global Witness’s move “regrettable,” but said he hopes that the coming year, in which the United States will assume the Kimberley
Process’s rotating chairmanship, will be “very productive.” Regarding Zimbabwe, he referred to a statement posted on the World Diamond Council website that claims exports from certain companies operating in partnership with the Zimbabwean government have been certified as conflict-free.
The Kimberley Process will “continue to hold the Zimbabwe government to account,” it reads, “and to allow only exports from those operations in Marange that have demonstrated compliance.”

        Such a promise rings hollow for its critics—the Kimberley Process isn’t meant to determine Mr Eli Izhakoff, President of the World Diamond Council addressing the Ms Annie Dunnebacke of Global Witness Kimberley Process plenum whether individual mining claims are compliant with its rules. “The Kimberley Process is a country compliance scheme, it’s a g o v e r n m e n t - t o - g o v e r n m e n t certification,” said Dunnebacke.
“As a whole, Zimbabwe is not compliant with the Kimberley Process. There is no ‘company compliance’ with the KP … that is absolutely not what the KP is about, it’s not what it’s meant to do, it’s not what it’s equipped to do.”

        The World Diamond Council does share at least some of Global Witness’s concerns, however, especially with the Kimberley Process’s seeming inability to evolve. Like other critics, Itzakhoff blames the KP’s requirement for consensus on every decision, as well as its being an agreement among governments, which can be glacial in their pace of reform.

        “Industry is on the same page as the NGOs,” he said. “We want to have this thing done in a perfect way. It’s in our interest to do that. We’re doing everything in our power to make it happen. Moving along governments is not easy. You’re talking about [the need] to move mountains sometimes, but we have done so. There’s been a lot of pressure on governments to move and sometimes the pressure works. And this Global Witness walkingout will be another notch of pressure, but we didn’t need that because the pressure is there anyway.”

        That may be thin consolation for holiday shoppers looking for diamonds. As it stands now, a retailer can truthfully claim that a diamond in a necklace was certified as conflict-free by no less an authority than the Kimberley Process when it was a rough stone (the certification covers only rough diamonds, not polished ones), but still be from the hellish mines of Zimbabwe. So what’s a consumer to do?

        “The best thing that they can do is ask a lot of questions,” said Dunnebacke. “Our office is in London right near the Hatton Garden district, where all the diamond shops are. If everybody who went shopping for diamonds at Hatton Garden over Christmas, if every single person went into the jeweller and said, ‘I’ve heard there are blood diamonds from Zimbabwe, I don’t want a diamond from Marange, show me the work that you do to show me that you’re not selling blood diamonds,’ that would change things overnight.

        “If enough consumers ask for it,” she said, “then industry will have to come up with it. If you’re going to buy a diamond, buy from jewellers who are open about what they actually do and don’t know.”