By Russell Shor

Russell Shor Photo by Melissa Jacobs/GIA

Much of the industry took up the DTC challenge, if often grudgingly. Today, one can describe the results as mixed, at best.

Perhaps the diamond industry – and De Beers – could have saved themselves a great deal of hand-wringing and trial and error if they had taken a lesson from a product in a neighboring "showcase": cultured pearls.

Pick up any fashion magazine or trade publication, and you'll see that cultured pearls are today's hot fashion statement. Visit the pearl exhibitors at any major trade show, and it's immediately obvious that the entire industry has reinvented itself in the last decade. There are even retail stores devoted entirely to cultured pearls. In short, the transformation is astounding and was accomplished by an industry with, perhaps, five percent of the diamond trade's financial resources.

I offer a detailed analysis of the changes in the cultured pearl industry during the past 15 years in the Fall 2007 issue of Gems & Gemology, but it is critical to note in this column that the transformation of cultured pearls from your grandmother's heirloom to a fashion statement was purely voluntary – there was no DTC telling any cultured pearl producer or dealer what to do or how to do it.

Going back to the fall of 1992, the vast majority of cultured pearls came from a single source (Japan), were of a single type (round white akoyas), and were marketed in the U.S. and other countries through distribution channels that had been entrenched for decades. On the sidelines were two budding producers: Australia, which cultivated white South Sea pearls; and French Polynesia, which cultured black pearls – then an exotic and little-known product. And rumbling in the distance was what some dealers considered "pearl Armageddon" – freshwater goods from China.

The original Chinese freshwater cultured pearls were small "Rice Krispies"-style items that bore little resemblance to the round, lustrous products that had been produced in Japan since the early years of the 20th century. But reports that Chinese farmers were working on culturing semiround pearls that looked something like akoyas touched off fears that tons of these cultured pearls would hit the market at a fraction of the price of the Japanese original, and they would devastate any producer who could not offer consumers enough of a difference to pay a premium.

In the mid-1990s, the Australian and French Polynesian producers took a hard look at the market and decided they needed to differentiate their own products if they were ever going to grow their industries to a point where they could move out of the shadow of Japan and avoid being inundated by Chinese goods.

The Australians launched a promotional campaign that pegged their product as the ultimate luxury cultured pearl. The French Polynesians named their product after the main island in their group – Tahiti – and pegged it as an exotic fashion item. Like any branding campaign, this one took years to build, but by 2000, both groups had successfully established their niches and were able to rise above the tide of Chinese round goods that did, indeed, flood the market. (Ironically, the growing Chinese industry helped the Japanese pearl producers survive a devastating red tide that wiped out many of its oyster farms during 1996 to 1997.)

Later, pearl farmers in French Polynesia and elsewhere around the Pacific took differentiation one step further and assembled former "reject" colors such as green, blue, yellow and gold into interesting new products. This, in turn, helped excite noted designers such as David Yurman and Erica Courtney and, ultimately, transformed cultured pearls from the obligatory single strand in the back of the store to a hot fashion item – hot enough for a number of producers and distributors to move downstream into their own retail operations and for Tiffany & Co. to build an entire retail chain, Iridesse, around cultured pearls.

Pearl fashion may cool or grow stronger over time. But judging from how the pearl industry reacted to potential disaster in the 1990s – with marketing and innovation instead of complaints and resignation – it will surely be ready for new challenges.