The ‘ins’ & ‘outs’ of colored stone marketing

Last November, JCK published a letter to the editor from Michael Dymant, president of Eastrade Inc., New York, N.Y. He was responding to commentary I had prepared for the Gem Pricing Update column that runs in each month’s Indicators section of JCK. I had said, “Prices for rubies are soft due to plentiful supply and a lack of confidence in treated material. Emeralds continued to lose market share as confusion, misinformation, and a lack of confidence in stone integrity rises….” Dymant expressed a genuine concern for our industry and offered this partial list of “Ins” and “Outs” that he thinks reflect the state of the jewelry business today.

What’s In What’s Out

Memos Courage
Certificates Knowledge
Treatments Conscience
Excuses Responsibility
Trade shows Relationships
The Internet Romance

Memos and courage. Somewhere along the way, buying on memo replaced courage. Perhaps the colored stone business simply followed the precedent set by the diamond business. Jewelers changed their buying habits, keeping the bare minimum on hand or stocking only best sellers. For wholesalers, this was the “Nightmare Before Christmas.”

Jewelers seem to forget that someone must pay the high price of doing business on memo. If wholesalers carry the inventory with no risk to the jeweler, the latter must pay higher prices. Yet, jewelers often complain that prices are too high and competing is difficult. They lower their prices to be competitive, but end up paying more for their merchandise – the fastest way to a failing business.

Jewelers can increase margins by negotiating with suppliers and purchasing more inventory at lower cost, assuming the inventory sells in a reasonable period. They must train themselves to buy smarter or this formula won’t work.

Recently, a local jeweler sold a ring. The customer came to me for an appraisal and later told me what he’d paid. When I called the retailer to ask how he could sell the item so inexpensively, he said he had purchased the gem eight months earlier after negotiating a great price with the salesman. He then passed the savings on to the customer, so he could “be competitive and sell low.”

After calculating the interest for having the item in inventory for eight months as well as the overhead of operating a store, I wasn’t sure this jeweler made any profit. This is where courage comes in. The goal is to buy low and sell high. The jeweler could easily have charged 10% more and still been competitive because he had negotiated an exceptional price with the wholesale supplier. Buying inventory has its advantages if you utilize the power it represents.

Certificates and knowledge. Certificates are here to stay, so get used to them. In fact, they can play an integral role in your business. Right now, with confusion over gem enhancements, having a certificate from a qualified independent laboratory describing the treatment may be advisable.

Emerald has been the subject of much recent controversy. Last summer, an appraiser and two retail jewelers (one of them author and gemologist Fred Ward) were found liable for allegedly failing to disclose treatment of an emerald. Then came a TV exposé in November. Now many jewelers will sell emeralds only with a laboratory report. Lori Watt of Mayer & Watt, Maysville, Ky., says her company avoids selling emeralds because of the controversy. She also has noticed more customers asking for lab reports on all major colored stones she sells, not just emeralds.

Obtaining certificates increases the cost of business, which ultimately gets passed on to the consumer. But many jewelers feel it’s worth paying for peace of mind. If you choose to obtain an outside opinion for a customer, be sure to explain the added work and expense this involves. Make this a way to set your store apart, since not all stores will go to the trouble.

When a colored gemstone is sent to the Gemological Institute of America laboratory, it identifies when treatment is present but won’t go beyond some basic statements. A GIA report will tell you if corundum has been heat treated, but won’t identify potential glass-filling of surface fissures due to heating with a borax compound. GIA says this glass filling does not add weight and is only a by-product of the heating process. Other labs, such as American Gemological Laboratories in New York, do note such in-filling on the report.

For emeralds, GIA will state “evidence of clarity enhancement is present,” but will not distinguish between the types of oils or Opticon fillers. Again, other laboratories attempt to identify fillers with as much certainty as possible given the complexity of the various emerald treatments.

Today’s growing reliance on certificates discourages jewelers from gaining their own knowledge. The incentive to learn how to identify treatment is gone when jewelers can rely on others for the information they need. Michael Dymant reflects, “The source of expertise used to be in the hands of knowledgeable, ethical dealers. The lab was only supplemental. Today the dealer’s word is dismissed by the word of a lab. All dealers are lumped together. My 22 years of experience are meaningless when a new dealer with no knowledge or experience can start tomorrow with a lab report in hand and start selling. I think there is too much power in the hands of those [laboratories] that hold themselves out to be experts.”

Remember that certificates, or “certs” as they are known in the trade, are laboratory reports only. They actually do not certify. They only identify.

Treatments and conscience. Yes, treatments are in, and they test the ethics and principles of both treaters and sellers. Since full disclosure is the only way to keep a treatment ethical, we must find a way to move conscience from the “out” list back onto the “in.” The American Gem Trade Association has worked hard to bring ethics to the forefront of business by endorsing the Gemstone Enhancement Manual and requiring that all its members adhere to its codes. (See sidebar above.)

The industry is slowly coming around to the importance of disclosure because non-disclosure, as parties to last summer’s emerald lawsuit discovered the hard way, serves no one in the end. When I stated that ruby prices were soft due to lack of confidence in treated material, this – like many other published reports – was an accurate reflection of the market which should serve as a wake-up call. Boosting ruby prices and regaining confidence in the market will require honesty in treatment reporting.

Ralph Mueller, Mueller & Associates, Scottsdale, Ariz., sums it up this way: “The treatment issues regarding emeralds and rubies have definitely affected the market for these stones. It becomes more a point of credibility and confidence. Once the consumer or jeweler no longer has confidence in the product they are buying, they either switch to another product or a completely different luxury item like a car or a fur. The key as I see it is full and complete disclosure. I personally have no objection to any of the current treatments as long as they are fully disclosed.”

Excuses and responsibility. We hear excuses all the time. No one wants to take responsibility for anything that goes wrong. But there is no excuse for jewelers to avoid gemology education and training on current treatments. If a jeweler is sued, the court considers him an expert, even if he lacks the proper training.

Last summer, I received a call from a West Coast jeweler who took in for repair an emerald ring purchased at auction. The jeweler sent the ring to a repair shop. When it was returned, he could see a foreign substance on the bottom of the emerald. The jeweler asked a local gemologist for advice. He learned that an Opticon-type filler had seeped out of the emerald when the repair shop steam cleaned it. If this situation had evolved into a legal situation, all three parties – the auction house, the jeweler and the repair shop – could have been held responsible for the damaged stone. But the jeweler would probably be the first to be sued. To say you are unfamiliar with Opticon treatment is no legal excuse.

Trade shows and relationships. Once suppliers spent a great deal of time and money visiting jewelers in various cities to sell their wares. Today, the number of trade shows has increased to the point where a jeweler could attend one every month. Many sales associates use shows to set up appointments with jewelers. After all, if a jeweler plans to attend a major event such as The JCK Show in Las Vegas, why should the supplier bother to visit that jeweler’s store in coming months, if at all?

Shows may shift many costs from sales associate to jeweler, but they also offer them some advantages. First, a jeweler can see several suppliers at once, view a greater range of products and shop more competitively. Shows also give jewelers an opportunity to combine business with some leisure time.

While Dymant placed them on the “out” list, relationships actually can benefit from many trade show opportunities, both formal and individually planned. But jeweler and supplier must work together or trade shows will become just a series of massive aisles with nameless faces on both sides of the counter.

The Internet and romance. The influence of the Internet is being felt by everyone. Diamonds, jewelry, boats and cars are all being purchased on-line – not in great quantities, of course, but it is happening. Many jewelers worry about the decline of personal interaction. But romancing the product without personal interaction has always been a problem; many consumers are more interested in price than in romance.

An ad on the Internet poses the same problem as one in the paper or on the radio. If jewelers use the Internet as just another advertising device to get people into their store, then they can work on romancing the product.

Building trust. Dymant pointed out that “[one must] distinguish between experienced dealers and their ‘fly-by-night’ counterparts.” This is more critical today than ever before. Jewelers must build trust in their suppliers. They must ask for full disclosure and a reasonable guarantee of the gems being sold. A treated product may be perfectly acceptable to a jeweler and his customers, but all must know about the treatment process.

Jewelers, in turn, must not ask too much of their suppliers. They themselves have a responsibility to learn about what they are selling. There is still much uncertainty surrounding gemstone treatments and much to be learned. Lori Watt sums it up by stating: “The crux of the whole problem is that we expect absolutes. We have lost the ability in our society to accept error. This goes for all walks of life including the medical and legal professions. We sometimes ask for perfection when it is not possible.”

Richard Drucker is the president of Gemworld International and publisher of The Guide, a pricing publication he began in 1982. It is used worldwide for prices of colored stones and diamonds. He is an international gemstone consultant and currently lectures and conducts seminars. He has published numerous books in the jewelry industry. His company can be reached at (888) GEMGUIDE or (847) 564-0555.

3. A GIA identification report will say when treatment is present (in this case, it found none), but will not distinguish the types of fillers used.

Disclosing gem treatments

The following information has been abbreviated from the Gemstone Enhancement Manual 6.1 Edition (1997)

Gems are divided into three basic categories:

N – Only used for natural stones which are not currently known to be enhanced. Can also be used for stones that have not received any enhancement. The seller must provide a guarantee and commercial document (invoice, laboratory report, etc.) to support this fact.

E – Routinely enhanced. Since many enhancements are difficult to prove definitively, it is best to assume that enhancement has been done unless otherwise stated, in order to protect both the seller and the consumer.

The third category covers enhancements not covered by the “N” or “E” symbols and addressed with the following codes.

B – Bleaching. Chemicals or other agents to lighten or remove color.

C – Coating. Use of lacquer, enamel, ink, foil, films to improve appearance or add color or special effects.

D – Dyeing. Coloring matter added to change or improve color.

F – Filling. As a by-product of heating, solidified borax or similar colorless substances visible at 10X.

G – Gamma/electron irradiation. Gamma and/or electron bombardment to alter color. May be followed by heating.

H – Heating. The use of heat to alter color, clarity and/or phenomena. No residue of foreign substance is visible at 10X.

I – In-filling. Intentional filling of surface-breaking cavities or fractures usually with glass, plastic, Opticon with hardeners and/or other hardened foreign substances to improve durability, appearance and/or weight.

L – Lasering. Use of laser and chemicals to reach and alter inclusions in diamonds.

O – Oiling/resin infusion. Intentional filling of surface-breaking cavities with colorless oil, wax, natural resin, or unhardened man-made material to improve appearance (i.e. oil, cedarwood oil, Canada Balsam, etc.)

R – Irradiation. Neutron or other combination of bombardment and/or heat to alter color.

S – Bonding. Use of a colorless bonding agent (commonly plastic) for durability and improved appearance.

U – Diffusion. Use of chemicals and high temperatures to produce color and/or asterism.