De Beers

De Beers

De Beers was created by British financiers who were worried that they'd lose money in diamond mines when even more mines were discovered in 1870 and took control of supply by becoming a cartel. To control demand (since prices collapsed in the 30's, only 10% of engagement rings had diamonds, and in Europe, diamond engagement rings were not a thing), their ad men at NW Ayer pushed free diamonds onto celebs/socialites, coined "A Diamond Is Forever" in 1947 even though diamonds can be shattered/chipped/discolored, and invented an idea that a ring should be a month or two's salary. Then small diamonds from the Soviet flooded the market, so De Beers invented "eternity rings." To prevent second-hand supply, retailers will not repurchase diamonds and due to the markup being 100-200%+, it wouldn't be profitable to do so. Furthermore, diamonds have varying grades, cuts, color, and quality, so they are nowhere near as fungible as metals like gold and price consistency is non-existent. So even thieves are surprised by the low prices they're offered.

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Categories: CorporationFinance

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