At the De Beers forum at this year’s JCK Las Vegas show, CEO Philippe Mellier surprised attendees by declaring that one of the industry’s biggest problems was diamond trade-ins. When consumers receive low prices for their used gems, he pronounced, that adds to a low opinion of the product.
Just two months later, De Beers launched the International Institute of Diamond Valuation (IIDV), which is nothing less than an attempt to reinvent diamond buying. The service is built around a New York City lab that will value trade-ins for retailers. So far, it’s signed up four jewelers, representing 14 stores—R.F. Moeller, the three-store chain in Minneapolis; two out of nine Rogers Jewelers stores; some Reeds stores; and Padis Gems, San Francisco—in what it stresses is only a pilot project.
And while the stores JCK spoke to caution the program is still in its early days—Padis hasn’t even started yet—the owners hoped that it just might make diamond selling a less painful experience for consumers.
“I think it will stop bastardizing the jewelry business,” says R.F. Moeller owner Mark Moeller. “There is a lot of value it’s adding back into the equation. If the consumer has something to sell and doesn’t get a lowball number, that won’t undermine the value of the diamond. The consumer is going to be much better served dealing with the world’s largest diamond company.”
Bart Marks, CEO of Rogers, feels that for many consumers, selling their diamonds “is a depressing experience. They are getting pennies on the dollar. A lot of the places that say ‘we pay the most’ actually pay the least.”
Part of the problem is in the nature of the transaction, he admits.
“If I’m sitting in front of the consumer and they need to sell their diamond, I need to explain to them that what I’m going to offer is not the retail value,” he says. “To you and me that makes sense but it doesn’t always to a consumer. There is retail and there is wholesale, and what I’m going to pay you is not what I’m going to pay my normal diamond supplier because he gives me lot of perks and gives me what I want.”
De Beers, of course, won’t pay retail either, but what it calls “the highest possible price …on the secondary, wholesale market,” But by evaluating the stone out of the mounting in its lab, it can be “more accurate in the assessment,” Marks says. “You are starting from the right benchmark. You aren’t calling a G stone a J. And if you can take the piece out and see any possible chips or problems, you avoid the necessity of lowballing to offset the possibility that you are making a mistake.”
The IIDV is also pledging to buy whatever is offered—which many independents can’t do.
“The problem is the ability to liquidate what you don’t want,” says Moeller. “Let’s say an 8 ct. diamond walks in the store. That is a diamond you are going to sell once every two years. You won’t buy it for inventory and if you do, you buy it for as cheap as possible.”
The problem so far, Marks says, is that consumers must send their diamonds away to the IIDV for a two- to three-day evaluation. And not all of them have the patience for that.
“Our experience is people would rather get an offer right there and be done with it,” he says. “That is what everyone else does. So the consumers say just give me an estimate of what they will say, and then you are back to square one.”
(De Beers does give consumers the option to receive an in-store evaluation from the retailer, followed by a quick quote from the IIDV, which it warns will be lower than if the stone was thoroughly inspected. Still, that requires communicating with the lab to receive its judgment—and Marks says some consumers are too impatient even for that.)
If the program works, the retailers foresee two advantages. While the retailer will make less on the diamond than if he or she bought it for stock and then sold it at retail (with every piece De Beers buys, it remits a small markup to the retailer), their payment will be both faster and guaranteed.
“If I put it in my store and try to get retail, it may take me a year or two,” Marks says. “Here you make a small margin on it, but you are doing it right away.” (The retailers also have the option to buy the diamond for stock at the De Beers-derived price.)
Moreover, if the store consistently pays the top price for its diamonds, that should bring in more sellers and more traffic. Still, that would require letting people know about it, and while De Beers plans some online marketing, that is also in its early days.
“The goals of the program are laudable,” Marks says. “But they just have to work the bugs out.”