Should You Buy Diamonds on the Internet?

A Giddy Finish to 20th-Century Jewelry Sales

On Polygon, he’s known as “The Commander,” but Chicago dealer Allen Lipscher wasn’t having much luck with his latest mission. He was searching for an unusual colored diamond but came up dry when he called his overseas contacts. So he put out a “buy” request on the Polygon trading network. Within minutes, he got a call—from someone in his building. “It was someone I knew but wouldn’t ordinarily call,” he says. “It just took a few keystrokes.”

Lipscher’s experience illustrates the main benefit of the Internet—it allows people to communicate and connect in often stunning ways. Yet even now, years after the rise of the World Wide Web, most retailers and dealers still prefer to do their trading off-line. “[Online trading] is still new and hasn’t reached its potential yet,” says Martin Rapaport, the price sheet publisher who also runs RapNet. “But people are starting to take it very seriously, and there are some big deals going down.” Polygon president Jacques Voorhees, while conceding online trading is still a “fringe thing,” says that “just two years ago, [Polygon had] $50 million in diamonds listed per day. Now, there’s over $250 million listed per day.” He notes that his network has evolved to such a point that people now want it to be more structured. “We are working on rules for things like mediation,” he says. “People want it to be more of an organization akin to the Diamond Dealers Club.”

Those embracing Internet diamond trading may be in the minority, but they’re a dedicated minority. It’s not uncommon to see the same dealers (as well as retailers) on the three most popular services, Polygon (polygon.net), RapNet (www.diamonds.net), and GemKey (www.gemkey.com)—mainly because once inventory information has been uploaded into one, it can easily be posted to the others. (At press time, a new service, www.diamondfloor.com, had premiered, with inventory mostly from Israeli dealers; see Diamond Notes, JCK, February 2000, p. 66.)

Users say that at its best, online trading leads to increased efficiency. “It saves me a lot of time,” says Tom Hart of Hart Jewelers, Grants Pass, Ore. “I post one message detailing what I want and then collect the e-mail. I don’t have to call people over and over.” And with more than $200 million available on all three services, there’s no shortage of inventory. “When I want something, I go on the diamond-buying channel, and within 30 minutes I will have 20 responses,” says Christopher Bramlett, owner of Christopher’s, a Concord, N.C.-based retailer. “The smallest jeweler in the smallest town is a player on the world diamond market.”

Retailers also like—and dealers grumble about—the competitive pricing on the networks. Even users agree that, by their nature, the trading networks are highly competitive. “If you don’t get a diamond for 35 below Rap, you’re not looking very hard,” says Bramlett. “What we see online is the same thing retailers have been faced with—[competition because] the guy down the street is willing to sell it for less.” The low prices are partly a result of the mix of companies offering stones, which include pawnshops and estate jewelry suppliers. But online vendors tend to offer short terms, a practice that drives down prices even in the “real” world.

Though some buyers purchase their entire loose inventory through the networks, most use them for special calls, rather than melee or “bread-and-butter” items. And even some who regularly buy online, like North Hollywood, Calif., retailer Cos Altobelli, a RapNet fan, do so only after they’ve queried their standard suppliers. “I prefer to deal with people who I know will send me what I want,” Altobelli says.

Why the reluctance? Why has the industry been slow to embrace Internet trading? Some point to its tradition-bound character. Miami dealer Derek Parsons notes that most of the diamond and jewelry people who are active on the Internet “tend to be younger—in their 20s. It just comes naturally to them.” And with so many wholesalers trying to sell the American market, some jewelers don’t see any point to the networks. “For loose goods, I can walk out the door and trip over a bushel basket of them. I don’t need a computer to bring them to me,” says Frank Pintz, owner of Franz Jewelers, Northbook, Ill., who nevertheless has found estate jewelry suppliers online. Indeed, many active online buyers are mom-and-pop stores in small towns that salespeople typically ignore. “Out here in the middle of the country, there’s not a lot of people coming to sell you,” says Steve Burstein, owner of Stephen’s Fine Jewelry in Prairie Village, Kan. “This gives you access to the same inventory as if I were in New York.”

Another reason for hesitancy may be that Internet diamond trading hasn’t progressed as much as other online services. “It’s not like Amazon.com, where you just push a button,” says Hertz Hasenfeld of New York’s Hasenfeld-Stein. “At the end of the day, you still have to talk to the person.” However, even that may soon change: Diamondfloor’s main selling point is its Amazon-type “shopping carts,” which let retailers and dealers buy stones using the standard tools of e-commerce.

Some see Internet trading as too impersonal. “You can hear from a jeweler, give him exactly what he needs, and send it to him. He’ll pay and the next day forget everything,” says Parsons. “It works for them, and it works for me, but there’s not a lot of bonding going on.” Many jewelers say they prefer to work with a limited number of dealers who can help them in a pinch. “I want to be important to my suppliers,” says Emil Girardin of Girardin Jewelers in Voldosta, Ga. “Suppose I get a real good deal on a diamond over the computer. Does that help when I need another one?”

Others argue that relationships can be formed online. “Granted, there’s less of a personal relationship when you’re buying over the computer,” says Barry Cole, Bere Jewelers, Gulf Breeze, Fla. “However, I’ve made a lot of permanent relationships on Polygon that started with one simple call.” And Bramlett says forums like Polygon’s conclaves create a different kind of community. “The Polygon fraternity takes the place of what we used to have,” he says.

Some also worry about the effect Internet trading will have on the wholesale diamond industry. Brokers and dealers make a living out of knowing who has what. But in a full-fledged “virtual bourse,” everyone’s customers and contacts will be revealed for the world to see. “It could eliminate the middle-of-the-road inventory person and the non-niche person,” notes Lincoln, Neb., retailer Tim Wright.

For now, the industry is still far from that point. The question is, how long will it remain that way?