The Trade Targets Rapaport—Again

At the latest President’s Meeting in Tel Aviv, Israel, the trade once again cast a weary eye toward Martin Rapaport’s price list and the outsize influence it commands.

“There are people who, before Friday [when the list comes out], are too scared to sell because they don’t know what will happen with prices,” says Ernest Blom, president of World Federation of Diamond Bourses. “We want more communication with him and more transparency.”

What makes this latest round of Rap-bashing potentially significant is that groups are now developing alternative products—including a new price list out of Israel and RapNet competitor out of India.

First, the list. Since the Rap sheet is not just used as a price indicator but as a price benchmark and communication method (“below Rap”), some Israeli manufacturers want to create their own yardstick that will appear only once or twice a year. 

“The intention is to create something stable,” says Shmuel Schnitzer, president of the Israel Diamond Exchange. “Then let the market work out the discounts and the premiums. So instead of everyone laboring under a constant question mark, you would have a standard list, and then let the market decide.”   

Ideally, he’d like Martin Rapaport to produce it, though he doubts Rapaport would ever agree.

Sure enough, Rapaport wasn’t interested. “Would I be serving my customers by publishing once a year?” Rapaport asked me. “What if the discount hit 80, 90 percent? You can’t just have a price list for sellers. I owe it to the buyers. Most sellers do not want their customers to know when diamond prices go down so they can continue to protect themselves.

“Markets move around,” he continues. “If we see changes in the market that are significant, we are going to reflect them. We don’t change the benchmark just on a whim every week. We look at the market in tremendous detail. We are careful about how we change the prices…. Right now we think diamond prices are on the way down, but we will probably drop [the list] in the right way.”

As far as the Indian RapNet alternative, Rapaport has heard that the proposed portal will list goods without prices, which to him makes no sense. “That’s like having [website] Kayak without any prices,” he says. (GJEPC did not return repeated emails for comment.)

These new schemes, of course, run counter to the global (and industry) trend of increasing transparency. My sense is that the new list and pseudo RapNet won’t be any more successful than all the other attempts to dethrone the list. 

Sure, Rapaport has caused controversy; he even courts it. Today people complain he lowered prices too much. In 2004, he didn’t raise them fast enough, and in 2008 he hiked them too fast. No matter how well-intentioned, hardworking, and plugged in Rapaport is—and he is all those things—it is not logical for one man to have such a huge say in diamond prices.

And yet there must be a reason people stay with his list. Maybe it’s because, while the list was once a genuinely radical concept, today it reflects the trade’s ambivalence toward transparency. 

Rapaport is right that retailers need and deserve price information and wouldn’t use a list that never changes or declines. But they also don’t want that information falling into the hands of their customers, which the Rap list has. 

That may be why the trade favors Rapaport’s idiosyncratic and daunting-to-outsiders list over its more scientific and transparent rivals (including RapNet’s). Rap’s flagship sheet charts “high New York asking prices” and can’t be mastered without understanding its unofficial system of discounts. It’s mostly static, moving less frequently than the overall market. For all the calls for more stability, Rap’s list changes maybe once a month.  

Today we have the ability to track price movements by the day, even by the minute. But the trade doesn’t seem to want that; even the Rap imitators largely follow his weekly format. The industry would rather stick with what it knows, and if that means Rapaport makes the occasional surprising or dramatic change, so be it.

So yes, many dealers will continue to be nervous on Thursday nights. For many, the alternative is scarier.

JCK News Director