The very nature of innovation is that it involves a step into the unknown. When De Beers Auction Sales first pioneered online rough diamond auctions, we didn’t know whether they would prove to be popular in the long term. In fact, there were many who suggested that the nature of the industry meant auction sales wouldn’t work for rough diamonds.
Nearly a decade on and the rough sales landscape has significantly changed with nearly all producers using auctions as a channel to sell their rough diamonds.
But with every success, there comes new learning. We don’t always get everything right first time and that’s why it’s so important for us to keep testing our assumptions when launching new initiatives, rapidly accumulating and applying what we learn to try and deliver the most compelling offering to customers over time.
Our recently-launched fixed price forward contract programme is a great example of this. We began running forward contract sales in 2013 as we knew a lot of our customers wanted a way to secure near term future supply that spot sales could not easily provide.
When we first designed these contracts, we linked their prices to our existing spot auction sales. This gave our customers the security on future supply they were seeking, but meant they would be committing to purchase rough diamonds at an unknown future price.
However, as time went on, it became clear that there might be an even better way to provide forward contracts to customers. We began to see the opportunity for an enhanced forward sales proposition whereby we could offer our buyers the chance to lock in future supply at a known, fixed price, instead of one determined by future, unknown industry dynamics.
Last month, for the first time we held a series of events offering 15 products for delivery in April, May and June 2017. Customers could secure supply volumes over any of these delivery periods to suit their business requirements. The total value of lots offered was just over US$11m and demand from customers easily outstripped our availability on both a volume and value basis, with a healthy spread of demand across geographies, from all different types of customers.
We believe this is the first time for De Beers and the industry that rough diamonds have been sold forward at a fixed price using online, global auctions. As such we see it as another significant step in the evolution of selling practices in the diamond industry that we are proud to have pioneered. Consistent with our approach to innovation we will apply the learning from these first sales to try and accelerate the development of a forward market for De Beers rough diamonds.
And we won’t rest on our laurels. We’ll continue to look for new opportunities, we’ll keep listening to our customers and key stakeholders, and we’ll remain focused on finding further ways to make the diamond industry in general, and De Beers in particular, even more successful.
Indeed, through our innovative efforts we try to create and shape the future everyday. Because the future is nothing more than an opportunity that’s yet to be fully formed.
By Neil Ventura
Executive Vice President, De Beers Auction Sales
