Rough Cut To Retail

A year after settling a long-running U.S. antitrust suit, De Beers has opened its first American retail business in New York City. Last month some 1,500 customers thronged to the unveiling, which featured the Millennium Star, one of the world's largest flawless diamonds, weighing 203 carats. Also in attendance: protesters from Survival International, a charity that has dogged the De Beers Group for allegedly helping push the bushmen of Botswana off their land. De Beers LV, the retail joint venture with LVMH, is operated independently of the parent company but has still drawn the ire of human-rights activists. Undaunted by such controversy, De Beers LV CEO Guy Leymarie says, "Our business here is to seduce the consumer with a mythic name."

De Beers' move into retail may be motivated by its shrinking share of the rough-diamond market. In part because of new competing mines in Russia, Australia, Canada and Angola, De Beers' cut has fallen from 80% at its height in the late 1980s to 50% today. The move is controversial. When De Beers announced this venture in 2001, rival retailers stocked with De Beers stones saw it as "the ultimate threat," says Matthew Runci, Jewelers of America CEO. De Beers has promised to refuse its retail spin-off sweetheart deals. Adds Runci: "I've heard people adjusting, as they must." --By Matt Smith