The incumbents’ counterattack: De Beers, TGI Fridays, Schwab

De Beers fights the $20 carat

The substitution story of the week is diamonds. Bloomberg’s Big Take reported that last year, more than 60% of couples in the U.S. opted for a lab-grown ring — and it costs less than $20 a carat to grow one in a lab. The price collapse has been brutal: the average one-carat lab-grown stone fell from about $3,400 in 2020 to $1,200 in 2023. When the product is chemically identical and the price falls by two-thirds in three years, the incumbent’s moat is not chemistry — it is story and certification. m:…9730

De Beers’ answer is to sell the certification. Big Take reports the company is marketing a $5,500 scanner called ‘Diamond-Proof’ designed to distinguish natural from lab-grown diamonds in three seconds. This suggests the endgame for a disrupted luxury incumbent: when you can no longer defend the price, defend the proof — and charge the trade, not the consumer, for the privilege of certainty. m:…9730

TGI Fridays bets on 1,000 franchised doors

TGI Fridays’ answer is to stop owning the restaurants. CEO Ray Blanchette told Bloomberg Talks the company believes in its plan to reach 1,000 locations globally by 2030 — “we really do believe in this one, two, three plan that we can get to a thousand restaurants” — and is transitioning to an all-franchise business model. The growth is to come from other people’s capital, not the company’s balance sheet. m:…2991

This suggests the legacy-restaurant playbook for the next cycle: shrink the owned footprint, franchise the brand, and let operators fund the expansion. The risk moves with it — the company’s 1,000-door ambition is only as strong as franchisee economics — but franchising is the one model where growth no longer competes with the company’s own balance sheet for capital. m:…2991

Schwab’s answer is younger clients and an AI assistant

Charles Schwab’s disruption is quieter — fee compression — and its response is the client base itself. CEO Rick Wurster told Bloomberg Talks the firm brought in $190 billion of new client assets in the third quarter, an all-time record, with 70% of new-to-firm clients Gen Z or millennials. His verdict on the industry’s fee wars: “I look at it as a good thing because it’s putting more money back in the client’s pockets.” m:…6053

The delivery vehicle is AI: Schwab is launching an assistant named Charlie to engage clients directly. And the positioning underneath is conservative by design — “We never want a client walking into our offices and asking about our balance sheet, which is why we’ve never taken credit risk.” Three incumbents, three levers: De Beers sells verification, Fridays sells the brand, Schwab sells trust at scale — all aimed at a customer who is younger, cheaper to serve, and harder to impress than the one these companies were built for. m:…6053

The common thread

What ties the three together is the choice each made about what to keep. De Beers kept the authority to say what is real and let go of the price. TGI Fridays kept the brand and let go of the real estate. Schwab kept the balance-sheet conservatism and let go of the fee model — even celebrating its erosion. None of the three tried to win back the old economics; each picked the one asset that still compounds and rebuilt the business around it. That is the incumbent’s real counterattack: not nostalgia, but triage. m:…9730