Diamond sales, up or down?

Jewelry Discussion
1

I am getting some wildly conflicting My diamond dealers
are saying that diamonds are selling pretty well in these hard times.
NJ Magazine just ran a headline about diamonds being the big thing
for 2009. I have actually sold more diamonds myself in the past 2
weeks than I usually do, so these messages seem to ring true.

BUT, Reuters News service reports that DeBeers just took out a 500
million dollar loan to get them through a slump in sales and NJ
Magazine also reports that GIA is laying off staff. This does not
sound to me like we are really in a boom market for diamonds.

Personally, I am a metals guy. I only care about diamonds because it
is part of the business. I don’t make that much on diamonds. The
internet discounters have made it impossible for me to be competitive
and make much of any profit for the risk and time it takes me to
arrange a sale. I personally think that other stone choices offer a
lot more for the money, both profit for me and value for the
customer. But diamonds are a big part of the culture and
unfortunately we need to be fluent in diamond speak to be taken
seriously as fine jewelers.

So I ask that collective font of wisdom that is Orchid, are diamond
sales really up? Or is it all smoke and mirrors by guys that want me
to sell diamonds and my own small up-tick in diamond sales is only a
fluke?

Stephen Walker

2

Stephen

Diamond sales are down. Store doing ONLY bridal have told me they
had a good Jan & Feb. But overseas, in India, diamond cutters are
cutting back to working 3 days a week, some places have closed.

So be thankful
But it will come back.

David Geller
David S. Geller
www.JewelerProfit.com

3

Well first of all don’t believe the diamond dealers. As good
salesmen, even if diamond sales are down, they will try to put up a
good front. Who wants to be thought of as not doing any business?
Personally my diamond sales are consistent with my overall sales.
When sales are good, I’m selling diamonds too. When they’re slower, I
sell less diamonds.

Daniel R. Spirer, G.G.
Daniel R. Spirer Jewelers, LLC

4

Depends. Melees and fullcuts for repairs and custom are steady.
Don’t discount the value of selling melees, they add up and carry a
much better percentage. You can ‘try’ to sell a carat stone and make
maybe a grand or you can definitely sell a carat of melees and make
more. Easier sale, more prospects. Which would you choose?

Significant stones…Its been falling for awhile, since before the
fertilizer hit the ventilator. But recently I’ve had some activity,
not ‘take the rest of the day off’ level but enough to be
encouraging. All memo, I would not invest in larger stones for
inventory, the return is too small and turnover too. Besides,
everybody wants something different. Make a call, have it tomorrow. A
large diamond is not usually an impulse item so the time lag is not
a detriment so far.

I’ve been kicking around long enough to have seen markets come and
go, up down all around, crumble to ashes sometimes. I think the
thing is to be diversified. That being said if suddenly I had a hot
streak of two-caraters, I’d make a call and get a longer term memo
selection.

5

Last week I met a woman who was wearing a 2.75 carat diamond center
stone engagement ring surrounded by baguettes and round brilliants.
She said she just got it, but then informed me that she bought it in
San Marteen or some so-called islands where the jewelry is so much
cheaper. Then on her other hand was another ring from the same place.
It was at least twelve mm wide and was covered in blue and white
princess cut diamonds. I guess that’s where the wealthy folks shop
now.

6 
My diamond dealers are saying that diamonds are selling pretty well
in these hard times. NJ Magazine just ran a headline about diamonds
being the big thing for 2009.

Was that headline before or after the one saying “Palladium Sales
Will Eclipse Platinum by July - Industry Experts Agree” or "Top
Designers Predict Men’s Jewelry Will Be the Hot Category This Season

  • Are You Ready For the Rush"?

It seems to me that the trade magazines have a tendency to try to
use journalistic predictions as a way of marketing certain things
from time to time. The men’s jewelry headline has been there on and
off for as long as I’ve been reading them, and I’m still waiting for
the big demand to start. Some of the recent palladium predictions
have also been more than a little off the mark. I’m not sure I would
say it’s a conspiracy or anything, but it is interesting that the
headlines and articles usually seem to coincide with a couple of
seemingly unrelated photo spreads of new lines and rags-to-riches
stories of designers and manufacturers that just happen to be
specifically tied to the predicted new trend.

And like Daniel said, of course the diamond dealers are going to put
on a happy face, we all should. People don’t buy from people that
don’t smile at least a little bit. The funny thing to me is when they
tell me demand has been so strong for SI to VS E to G 1 carat rounds,
that they’d like to send me a couple on memo for 90 days, and they’ll
pay shipping. Why on Earth would they cold-call and volunteer to send
me a couple of stones on memo if they were selling so strongly that
they can barely keep them in inventory?

Watch for marketing disguised as journalism. If you start looking
for it you’ll see it not just in the trade mags, but everywhere.

Dave

By the way, I’ve got some chocolate pearls I bought last fall that
have been all the rage. I’d love to let you in on the action. They’re
going to be even hotter this spring than they were for Christmas I’ve
heard, so let me know if you want some soon before they get so hot I
actually sell a strand. :wink:

7

The term ‘melee’ in my home is generally used in reference to XBox
conflicts of epic scale & import to national & interplanetary
significance, mainly on HALO 3. May I ask what melee stones are? I am
guessing they are small stones in flurries or groups. Makes sense.

Also, I must say, I really enjoyed your ‘fertilizer hits the
ventilator’ phrase. Mind if I use it? It works in company where more
colorful terms require sanitizing. Makes them stop & think and
entertains in the end. Thanks…Sharon

8

The term melee generally refers to diamonds that weigh.17 ct. and
smaller.

Daniel R. Spirer, G.G.
Daniel R. Spirer Jewelers,

9 
Last week I met a woman who was wearing a 2.75 carat diamond
center stone engagement ring surrounded by baguettes and round
brilliants. She said she just got it, but then informed me that she
bought it in San Marteen or some so-called islands where the
jewelry is so much cheaper. Then on her other hand was another ring
from the same place. It was at least twelve mm wide and was covered
in blue and white princess cut diamonds. I guess that's where the
wealthy folks shop now.

This is the hype that the island jewellers sell.

Believe me, there is no free lunch when it comes down to ‘cheap’
jewellery on the islands.

All of it is lower quality stones, bad gold, lots of plating and
poorly constructed.

I know, because I melt down the junk, refine the gold, recut the
coloured stones and make it into proper jewellery all the time.

They sell the illusion of cheap jewellery, using sky high appraisals
as the vehicle.

Cheers, Hans
http://www.meevis.com
http://hansmeevis.blogspot.com

10

we need to displell that myth of stuff being cheaper in the "islands"
people must be stupid NOTHING is cheaper on an island if you think
about it you are stuck on a rock where every amenity has to be
shipped in from the outside across an expanse of ocean which would
make anything more expensive ? there must have been a marketing
genius involved but then people from the frozen north depressed from
winter hardship must believe anything in the throes relief from the
cold when they get on the criuse ship.

goo

11 
Watch for marketing disguised as journalism. If you start looking
for it you'll see it not just in the trade mags, but everywhere.

You are so right Dave. Remember the old saw, “the pen is mightier
than the sword.” I have been saying that all news is propaganda for
years. This is not the same as saying it is all lies. It is just that
all most all news is trying to make a point or influence opinion.
Sometimes in a big way but usually in a subtle way. But either way it
can be powerful stuff. This is why news releases are so effective. I
will admit that I use them myself with pretty good success. A vast
majority of news stories begin with a news release, news conference
or publicity stunt. Often that publicity stunt is a “study” or a
“poll” that was specifically designed to create a newsworthy buzz to
push an agenda. One of the things I really like about Orchid is that
we have intelligent people giving their (usually) honest opinions in
a generous and helpful way. Anyone can disagree and point out the
flaws of someone else’s thinking or offer a better or at least
different perspective. Our fearless leader keeps it all civil, but as
far as I can tell he does not censor point of view.

Back to the topic of diamond sales. I was talking to a jeweler I
dropped in on during a ski trip this weekend. His take was that
Christmas sales were down because people buying for a list of people
were cutting back on their spending. Nearly as many sales but much
lower spending totals. But since then with birthdays, Valentines day
and anniversaries the quality and price of the gifts have been much
better than the disaster of November and December would have you
predict. He thinks this may be a trend, but I think it may be that
guys that feel like they cheaped out at Christmas are trying to make
up for it one gift at a time. Who knows?

12 
The term 'melee' in my home is generally used in reference to XBox
conflicts of epic scale & import to national & interplanetary
significance, mainly on HALO 3. May I ask what melee stones are?

Stones weighing 10 pts (.10 ct) or smaller

13 
The funny thing to me is when they tell me demand has been so
strong for SI to VS E to G 1 carat rounds, that they'd like to send
me a couple on memo for 90 days, and they'll pay shipping

Bingo, David. The more the phone rings, the more hungry they are is
really the only rule here. And it’s been ringing at least every day
for quite awhile now. Latest about 10 minutes ago…

I could have things to say about DeBeers in recent years, and the
role of Rappaport in the industry, and more than that, but nobody
asked me… Don’t get me started…;<}

$60,000 for a decent three carater…nice work if you can get it…
Fifteen years ago that was an eight carat diamond… Not so far back.

14

Hey Stephen,

He thinks this may be a trend, but I think it may be that guys
that feel like they cheaped out at Christmas are trying to make up
for it one gift at a time.

I sell online and experienced first hand that November and December
sales #'s were down. The number of pieces being sold were the same.
However, the ticket price was less. Products with quick turnover
were under $ 250.00. Besides the uncertainty over the economy, I
think an election and the transitional twilight zone between the Old
Pres and the New Pres also made an impact. It has picked up over the
last couple of months. I guess those who did hold out at Xmas got
confident or made up for Xmas. Whether it’s a trend (I hope not)or
not, only time will tell!

As far as the Islands go, that just a bunch of balderdash. I used to
appraise jewelry for customers who were promised 3 times the value
for their jewelry purchased in the islands. Most times, it was the
same at purchase value if not (10%-15%) lower than the purchase
value. It used to be difficult to explain customers why their
precious jewelry was appraised so close to their purchase value. I
remember a customer bought a pair of diamond studs with promises of
returning to their head offices in NYC within 30 days if there were
any problems. She got the run-around from the company during the
return period and then they said her time was up. Just a shame!!!

Yours truly,
Ravi K.
Graduate Gemologist, GIA
AdamasIndia.com

15 
NOTHING is cheaper on an island if you think about it...

My daughter spent about 6 months in Juneau Alaska(which is an
island), working for one of the jewelry companies that has stores in
all the great vacation spots on this globe. My wife and I visited
her, so I got the opportunity to ‘check out’ the store, talk to the
salespeople, peruse the goods, and the quality was no better than you
will find in the average national chain store in a mall- just
commercial grade.

Most of the salespeople travel around from store to store, according
to the seasons, and they told me the big benefit of buying in the
islands is that its ‘duty free’. People seem to respond well to that
gimmick because they are ‘beating the man’. People love it when they
think they are getting a special deal, and its a one-chance-only type
of deal. But most of those places use like a 6-10 time markup so
theres plenty of room to wheel and deal.

I get alot of this same stuff in my store when they come home,
needing sized, repaired, batteries, etc… and I have found a fair
number of markings, stampings, that are not correct, and sometimes
illegal. Occasionally I’ll see a watch that says’Lifetime Mainspring’
printed on the dial, yet it needs a battery replaced to run. Thats
amazing since battery/quartz watches DO NOT have mainsprings. Many of
them will state ‘Swiss’ somewhere on the watch, yet when I open the
watch it has a Miyota/Citizen brand movement - Calibre 2030, from
Japan- singles cost about $4 wholesale. But they ‘saved’ $1000 off
the ‘regular price’ of $2000, cause its ‘duty free’. Ha! Yet you can
buy the same watch anywhere in USA for $200 or less.

Also, alot of gray market stuff - watches meant for selling in other
countries, hence parts are often unavailable in the USA, and models
that didnt sell well anywhere when it came from the factory 5 yrs
ago. A $200 retail, 3-5 yr old watch, marked up to $600, and marked
down to $300, so theres still room to deal with the vacationers with
fat wallets.

One thing I did find cheaper in Juneau than at home in Indiana, was
Pamela’s brand chocolate chip gluten-free cookies. $4 here, $3
there. Go figure. I think my wife may be addicted to these cookies
tho - bought 6 boxes tonight. They are really, really good.

Ed

16 
the big benefit of buying in the islands is that its 'duty free'.
People seem to respond well to that gimmick because they are
'beating the man'.

THE most important lesson to know in the diamond business is that
all diamonds are the same price. Yes, you heard that correctly - all
diamonds are the same price, all over the world, every nook and
cranny. That is obviously not literally true, but it is essentially
true and here’s why:

DeBeers (actually the CSO) doesn’t have quite the stranglehold it
once had, but it has plenty. Just about everybody it doesn’t control
outright has contractual agreements with it.

As a matter of policy, the CSO sells all goods to it’s sightholders
at the same price. Which is to say that it won’t play favorites, and
F/SI rough goes at the same price to everybody in every parcel. From
there, a good half of the sight might be sold right off to the
secondary market. All those sales are going to be at roughly the
same markup because it’s a competitive marketplace. Those that
aren’t dumped get cut, all at the same price, again because it’s a
competitive marketplace.

That is to say that all the New York cutting is at New York prices,
all the Belgian is Belgian, etc. Obviously.

Then the finished goods are sold, all at the same markup, because
it’s a competitive marketplace. And we have finished diamonds, all
at the same price, all over the world.

Clearly, that is not to say that each and every stone is precisely
the same price - that’s ignorant. It IS to say that if I buy a one
carat, F/VS diamond for $5,500, and I buy it above a certain echelon
in the pecking order of dealers (some “wholesalers” are actually
virtually retail), that nobody is going to get the same stone for
$3,000. Those people in the Virgin Islands are paying $5,500, just
as I am. Yes, maybe it’s $5,250 on a given stone. But it’s not, and
it CAN’T be, $3,000.

And what THAT means is that if you are presented with two stones of
the same numbers - F/VS - or a shopper who tells you of a
competitive stone that’s 30% cheaper, then there’s a reason. The
grading is misguided or fraudulent or more often than not it’s an
off make. Somebody showed me a (30% cheaper) stone from Blue Nile
and was a recut - the stone was chipped and had been re-bruted and
the girdle (which was about 1 1/2mm thick) had been repolished.
Looked like an OEC… As always, volume buying gives an edge, and
the estate/used market is a significant difference, often. Buyer
beware, as always - if it sounds to good to be true, etc…

Ain’t no free lunch in the diamond business…

17

John, I have to respectfully disagree with your assessment of
diamond prices. If the price of diamonds was the same everywhere,
nobody would bother with multiple suppliers. The fact is that the
price of a diamond from a specific supplier has very little to do
with the cost of the rough from deBeers, and everything to do with
the financial needs of the supplier combined with THEIR ability to
buy favorably from cutters, jobbers, salvagers, and the public. Have
you ever sold a sizeable diamond to a diamond dealer? It is a lot
like you see in the movies - They offer you 25 cents on the wholesale
dollar, you counter with 60 cents, maybe you settle for 35 or 45
cents on the dollar, maybe the highest they will go is 30%; if you
need the money, you sell. The dealer is then free to sell for
whatever they can get. Millions of diamonds enter the wholesale trade
this way every year, some at prices far less than this transaction.

There are many layers of diamond dealers across the world. Some
diamonds may have passed through a dozen or more hands before they
reach a retailer, each of which demands a profit to stay in business,
and each of which buys at a different price.

Of course, this has nothing to do with any perceived price
differential between ‘the islands’ and the mainland US. That
difference, when it exists, is due in large part to the sheer volume
of sales in a ‘duty-free’ tourist jeweler compared to a
brick-and-mortar store, assuming that both are selling out of bought
inventory and not depending on memo or special orders. Who can sell
an in-stock 2 carat diamond solitaire cheaper, a Zales store in
Dayton, Ohio who has maybe 5 serious prospects per year for such a
piece, or a store on St. Martin, who sees several thousand prospects,
each of who is perfectly capable of paying for an expensive cruise,
per week? I guarantee that the more you buy, the cheaper you can buy
wholesale for, and the more competitive you can be on price. Of
course, when you can fall back on overpriced appraisals in the
islands, who needs to provide extra value?

Can these ‘island’ stores compete with the tradeshop or
hole-in-the-wall office willing to memo in a $20,000 diamond and sell
it for $500 or $1,000 over cost? Of course not, they want to not only
stay in business, but provide a good return on their investment! But
the ‘island’ jeweler IS paying less for that diamond than the guy
flipping it for what amounts to a few bucks in his pocket.

Lee Cornelius
Vegas Jewelers

18 
Can these 'island' stores compete with the tradeshop or
hole-in-the-wall office willing to memo in a $20,000 diamond and
sell it for $500 or $1,000 over cost? Of course not, they want to
not only stay in business, but provide a good return on their
investment! But the 'island' jeweler IS paying less for that
diamond than the guy flipping it for what amounts to a few bucks in
his pocket.

lee - i would like to see document that " island cheaper " claim you
are making - goo

19 
I have to respectfully disagree with your assessment of diamond
prices.

No, Lee, You’re not really disagreeing, just taking it farther. My
view was intentionally simplistic, for people to understand the
system. It is still essentially true, though. If I buy a 1 Ct. G/VS1,
then November Rap is $6600/ct. I’ll get 30 or 35 (sometimes 40) back
of that. As Lee points out, there are many variables, including
individual pricing of larger stones, profit margins, etc. They are
not LITERALLY all the same price. But nobody, including Tom Shane, is
going to buy that stone for $2500. If a person is buying goods from a
bona fide wholesaler, and the other guy down the street is also, then
if there’s a huge price difference it’s because they are not actually
the same stone. That G is really an I, the VS is really an SI3, or
it’s crooked and poorly polished. I’ve gone head-to-head with some of
the majors around here on those sorts of stones, and the price
difference has been miniscule every time. If it sounds too good to be
true, it probably is.

20

Lee,

I agree with you in much of what you say. In the same way much of
what John said is also correct However, I live on St Maarten, and I
am
a jeweller outside the ‘island jewellers syndicate’ So I can say with
dead certainty that 95% of the diamonds that I have come across that
were sold on this island are of inferior quality, or sold under
misrepresentation.

I have, with monotonous regularity seen diamonds that are graded
incorrectly. For instance say the diamond is graded SI2. Yes, it has
only SI2 inclusions, but is has twenty of them. That is not SI2 in
my book. Or, medium to thick girdle. Indeed the girdle is 1mm thick
and makes it a forced 1 carat stone. Blue diamonds sold as
untreated…at $1500/carat. I once overheard a salesman telling a
cruise ship passenger that their white gold was far superior to the
competition because they owned their own white gold mine. A classic
example is in my latest blog entry on Ganoksin here

http://meevis.ganoksin.com/blogs/2009/02/27/two-unusual-rings/

…The solitaire shown is yellow gold, but was sold as an 18kt white
gold.ring. It was simply plated, and when the plating wore off there
was one seriously unhappy camper. I could go on.

The island shops do go for high volume, low markup to the cruise
passengers, but it is incorrect to say the cruise ships tours are
expensive. The opposite is true. The cruises have become so cheap
that the cruise passengers of a lower income bracket can afford
them.These people have less disposable income to spend on expensive
jewellery.( I do not mean to denigrate cruise ship passengers in any
manner whatsoever, I merely am making a point.)

So, to keep up the volume,the jewellery is made as cheap as
possible. That means that the diamonds and the coloured stones and
the physical jewellery that is sold on this island is plated, cast,
made in the east,sold under false certification, which, quite
frankly, often borders on outright fraud. I always refine any old
gold that is bought on this island if it is brought to me. Often, my
returns are under what would be expected with regard to the starting
cartage of the gold. Ergo, the gold was under caratage.

Duty free means nothing. Transport costs,high rents and the high
costs of the utilities far exceed the benefit of low taxes on
jewellery. And any which way, as I understand it, USA citizens are
supposed to pay import tax on any jewellery above $400 dollars, so
that would negate any duty free stuff.

In an ironic way, all these shenanigans benefit me. I target the
time share market, and because I am straight down the line, my
clients remain very loyal to me. I am not cheap, but there is no BS
and what you see is what you get. My niche.

Regards, Hans
http://www.meevis.com
http://hansmeevis.blogspot.com