Round Diamond with Baguettes

So what else can retailers do to increase profitability? BUY DIAMONDS FOR STOCK! Most jewelry stores do not do this – they either have diamond companies leave stones with them and pay when they are sold, or they call a dealer when they have a specific need. This practice is old and antiquated and in my opinion; those days will be over soon. Twenty or thirty years ago, jewelers could get items on consignment and make DOUBLE their money on it. Not anymore! Consumers are too educated for that. The internet has leveled the playing field in a big way.

In my business, we’re kind of a hybrid between a retailer and diamond dealer. We buy a lot of diamonds from the public, at auction, from dealers, from other jewelers, or any place where we can find good deals. So we OWN all of our diamond inventory. We sell to retail customers and to the trade on a regular basis. It gives us a huge advantage in the diamond world because we know where diamond dealers will buy (because we sell to them) and we know what their prices are. Any savvy jeweler can buy diamonds from dealers at a better price than their “list” or “consignment” prices. How? Pay cash up front. It’s that simple – just buy for stock.

How much can you save? That all depends on the stones you are buying. In my estimation, you can save anywhere from 10-30%. Think about it, diamond dealers/manufacturers are GIVING you inventory and WAITING to get paid. Don’t you think there is a HUGE premium on those stones for that reason? Well there is! Everyone wants to get paid right away these days.

If you were in your diamond inventory for 20% less, not only would you be increasing your margins, but you could also give your customers better deals, and these days, that’s important. Go try to tell Rolex, Cartier or Tacori that you want to pay them right away but want to get 20% off – hell, they won’t even give you 5% off!

Now, the argument against this is that jewelry stores have to pay for their high end jewelry lines and watches, so their cash flow doesn’t allow them to buy diamonds. This doesn’t make sense to me. If you buy into a bridal, jewelry or almost any watch line, (expect a few that hold value) you are usually buying a name brand. If you get stuck with items that you can’t sell, you have to take pennies on the dollar when you liquidate. Diamonds, on the other hand, are very liquid and if you buy right, you won’t lose a nickel when you have to sell. Doesn’t that make sense? It’s important to own something of value and pay a good price for it.

I would love to hear some thoughts from retailers on this subject.

P.S. I own a lot of diamonds and can sell to you for less than any dealer!

THE SKINNY:

The merchant receives 50 or 60% of the coupon that is bought and the other share goes to the daily deal site. We negotiated a 60/40 split on this one.

THE DEAL

The deal was $40 for $100 store credit. Plain and simple. Click here to see the actual deal. From the very beginning, I told them that $100 store credit at a diamond store doesn’t really mean anything to anyone. The deals needed to be for a higher dollar amount. They insisted that they do this all the time and this was the deal to run. We ran it and sold only 36. Out of that 36 people 18 redeemed their coupons. That means that Groupon and Samuelson’s kept all of of the expired coupon money. That’s how these guys make a TON of revenue – only a 50% redemption rate! Some people did spend a little more and half never showed up, so I’d say we broke even on it. Remember, in this case, when a customer buys an item for $100, Samuelson’s Diamonds only receives $25 of that. So unless they spend more, we lose on the deal. One could argue that you may lose, but gain a new customer. The Groupon customers were not our customers, probably because of the lower dollar amount offered on the deal.

Now Groupon called me for another deal. They will no longer do a half off deal, but now they want me to do $199 for $500 – that means that I get $119 for an item that we sell for $500 – I can’t do it. Then, they asked that I do a “Grouponicus” deal which is a product deal. So basically I have to find a pair of diamond studs that cost me $120 that “retail” for $500 to break even. IT CAN’T BE DONE UNLESS I OVER-INFLATE THE RETAIL PRICE. I am not willing to inflate a so called “retail price” to satisfy Groupon.

Here’s an example of a bogus “Grouponicus” deal. They ran a deal on a strand of pearls that were $79 with a “retail price” of $450. IT WAS A LIE. That means the merchant was getting $40-50 for each strand, that’s it. No upsell, no nothing. Everyone in the jewelry industry knows that freshwater pearls are available for $15-$20 a strand. So he (and ultimately Groupon) was lying on the $450 retail, being that it only cost him $20 – that is not ethical.

I will say that the only advantage is that we got a huge increase in traffic to our website that day and a little advertising from it. I don’t think I’ll do another. It’s really just a one-off. The other thing is that running a Groupon can be brand damaging. We sell fine diamonds – not cheap stuff. Groupon is more suited to restuarants.

Now, I did run a Living Social Deal that is not expired yet. This was a $250 for $500 and a $500 for $1,000. This was a better deal for us as merchants because the dollar amount was higher and the customers were better. I will give a full report in January when it expires.

THE TAKEAWAY

If you’re a jeweler, stay away from these deals. They will only annoy you because you really do have to give some stuff away. If you’re a restaurant, it may work out for you. Just remember, it’s to get a customer in the door for the first time, not to make money…

Goin' Viral!

A little while ago, I wrote a post titled, “Stop Sharing!”. My friend who works at ShareThis was mad about that one, but I was talking about business practices, but not fun stuff like pics, videos and blog posts. Well today a pic went around of a clever Halloween costume. A guy in dressed as a Jack Daniels bottle and his little boy dressed as a pack of Marlboro’s.

Here’s what Timothy Straub said on his page when this first happenned:

O.k. WTF? What is going on with my FB page. Yesterday I got 2 friend requests from people I don’t know. Today I find out I have 18 more. I have gotten 2 from people I do know and accepted them, but what’s up with all the others, all of the sudden? Anybody else have this happen?

This obviously wasn’t intentional. Then when he realized how much his picture got shared he said:

Due to the increased demand for my friendship I am now implementing a new friend accepting policy. If you so desire to be my friend please make your request the usual way through Facebook. But then also include a message explaining who you are and why you would like to be my friend. Requests without this extra documentation will be considered to be less important than those with. If I cannot determine who you are by your profile picture and info available to everyone on your wall I will be forced to assume you are phishing and deny your request. Please understand that my viral status has forced me to take these actions. Thank you for your understanding.

He actually made a rule about his friend requests. Right now, this picture has been shared almost 10,000 times!! This is a guy with only 117 friends! Does anyone else find this fascinating? That’s some BIG numbers.

Now can YOU think of a viral idea for YOUR business? It’s pretty hard to do it on purpose…

Let’s talk my favorite subject – DIAMONDS. Diamonds are an interesting category because they are not trading as a commodity on any exchanges (yet), but they certainly can be treated as an asset with real value in the market. Most jewelers don’t want to tell customers about diamonds as a commodity, or the value of diamonds in the wholesale market. They would rather “romance” the sale – much like the current and past Debeers ad campaigns. Most people in the diamond indusrty are still resistant to

This 9.19 Carat Emerald Cut Diamond Signed by Van Cleef and Arpels sold for $656,500 at Sotheby's in September

transparency. Well, it’s a new world and I’m here to educate and help people make informed decisions about diamonds, whether they are buying or selling.

Back in June, I wrote a blog post, JCK Las Vegas 2011 – Diamonds Are King!, and besides discussing how much fun I had in Vegas, I talked about the how the diamond market was BOOMING. I was getting top top dollar from buyers, especially from India and Asia, where the demand seemed to be high. Since that time, and especially in the past month, I’ve noticed a lot of hesitation from buyers. They are afraid to buy because they don’t know what’s coming worldwide – Europe is a mess and the US isn’t much better off. Bottom line is that each business has to prepare for natural downturns in the market and adjust accordingly. It’s like any business. My personal opinion is that diamonds will come back up as we get closer to the holidays and make a strong run into 2012.

Martin Rapaport, who some may say is the diamond market maker, summed it up recently with this quote:

“The diamond trade must accept the fact that diamonds are part of the real world and that diamond prices go up and down. Price volatility is to be expected and accepted as a normal part of doing business. Firms should develop strategies for dealing with downward moving markets. Smart sellers recognize that inventory cost should be based on replacement cost rather than historic cost. They remain profitable and support market prices by selling cheap and buying cheaper. Lower prices are a healthy part of the economic cycle as they create excellent buying opportunities and higher profits for smart buyers who ensure that diamonds remain an excellent value in uncertain times.” said Martin Rapaport, Chairman of the Rapaport Group.”

Like any smart investor, we look at a little downturn as an excellent buying opportunity. If you’re in market for a diamond, it’s a GREAT time to buy. Just remember that, “Diamonds are part of the real world…”

Of course, I’m not looking to get rich writing a book about The Grateful Dead, I prefer to just listen. However, when it comes to buying/selling jewelry, I take it very seriously. About 3-4 years ago, I was asked to speak at the JCK Las Vegas Jewelry Show – the topic, Social Media of course. I said yes and went with a friend, who owned an email marketing company, to give a talk. The first year it was not very popular, but once Facebook caught on, it got more a lot more attention. I went on to speak at JCK for a few years and at The Couture Show, the JA Show, The Instore Show and other jewelry trade shows. After doing all of this, I sat back and thought about why I was doing it. Although my father was proud, he often asked me, “Why are you giving away your secrets? Don’ tell nobody nothin’!” For me, it was a combination of ego, the need to become an industry thought leader, and not being able to say no…and also somehow buying into the myth that the more I talk about this stuff, the more I will grow as a businessman. After about the third year, I had spent a lot of my time on this and was not getting paid for my time. (directly) I did make some nice connections, but my time is money and most of these trade shows did not pay, except for a trip. So I stopped, sat back, and watched the other guys talk about the same topics. Well, since then, we’ve been doing a lot more actual business and using my techniques to make real money, so I’m happy – although I’ll admit I miss it a little.

However, something recently happened to me that validated my father’s words. I told another person/acquaintance/friend about what I was doing in the diamond buying industry. Not every detail, but a little. My current partner also spoke to him since they used to do business together. Now he’s copied my site and even took some identical pictures and logos from my site. I’m not really worried about it because once you have a website up, it’s for public consumption. Also, the other site happens to be a terrible offering. However, it did remind me that’s it’s not always cool to tell people about your business or post about your business, even if it gets a lot of “likes” and comments. Remember, no one cares about your business more than you do and everyone has an agenda, whether they admit it or not, or whether it is conscious or not. So my lesson is BE CAREFUL OF WHAT YOU SHARE – online or real time. The one thing that I do take comfort in is the fact that it’s all about EXECUTION and I am confident that we know how to do that!

I feel like this has inhibited me a little bit with my creativity. You know, the videos, facebook stuff, and the other ideas that make us who we are. So I’ve been Lost in Transactions. Is it a good thing? Isn’t the whole point of creative marketing efforts to get new customers and create business? Well, it is and we are doing it, so I’m not complaining. But I do need to make time to be more creative.

On that note, keep an eye out for a few more videos – the next one will have to do with our Living Social Deal – it’s a doozy! We are also planning something for our Diamonds Facebook Fan Page when we reach 1 million fans. We’re at 916,000 right now, so it’s coming soon – we may even giveaway a big diamond!

View from room at Cosmopolitan

venue than the Sands at Venetian. We stayed over at the new Cosmopolitan. GREAT hotel – best rooms in Vegas by far. All rooms have a terrace so we were overlooking the Bellagio fountains every night. That made it hard to get over to Mandalay though – the Cosmo is right in the middle of the action and there are great restaurants and bars in there like STK, Blue Ribbon Sushi, Milos, Bond, to name a few. You know how Vegas gets, it’s hard to know what you’ll be doing at any given time and we were just going with the flow.

So with all that fun – and the Antiques and Estate Jewelry Show (I worked that show Saturday) across the street at Paris, I only made it to the JCK Show on Sunday.  Then Sunday night there was a big party at Mandalay that I missed, although I may have gone if they had a better act than Bruno Mars (really?). While I had a very successful show, (sold some nice stuff) I did miss out on seeing some industry friends, as I was not around the heart of the show and hotel most of the time. As I flew back, I regretted that – however, I will admit that it was somewhat of a conscious decision. We are doing so many exciting and innovative things around here, I didn’t want to get in any conversations and spill the beans.

25.09 Fancy Vivid Yellow Radiant Cut Diamond

Now let’s talk about what I saw in the diamond market. It’s getting very interesting these days as the US is slowly losing it’s status as the world’s largest consumer of diamonds to China and India. With young people in China starting to get more connected and having Western engagements, they will start to consume more diamonds. Not just more but a TON – like billions. India is the other country that has a rising middle class and also a billion people. The Indian diamond dealers are paying big money for stones and buying up as much as they can, often for extremely high prices. Even melee’ prices (diamonds smaller than 1/4 carat) are starting to rise. We are getting paid well for it, and the big stones are moving for big premiums.

How long will this diamond surge last? No one knows, but it looks like a great time to be invested in diamonds, I know I am!

Steve and Paul evaluating silver

My father and I work there on Wednesdays and it’s been a nice break from the monotony of every day here in Baltimore. The other day we ate lunch together and it’s really just a pleasure. To think where we came from 90 years ago (on Pennsylvania Ave here in Baltimore) and even 5 years ago, it’s just mind blowing. Not to mention that we’ve bought several diamonds, (LARGE and small) a lot of gold/silver coins and bars, a ton of sterling silver flatware, and other beautiful jewelry. My brother-in-law, David, has been a rock star. Our store manager and expert buyer, Paul, is killing it. The entire Samuelson’s team has done a great job – it’s just so gratifying.

Ron and David

I look forward to being down there more and growing our new DC presence. It’s amazing all the business we’ve done without any street presence, signs, billboards, banners…nothing. Strictly online ads (and videos) and even some repeat business. You can’t even find us on Google maps – but you can on Foursquare!

Just wait until we really get there – it will only get better! I am determined to buy more gold, silver, estate jewelry and (of course) diamonds than anyone in the DC area while delivering an honest, fair and superior customer experience.

Please make an appointment to stop by and say hello. We would love to see you!

Then it was my turn to speak. The subject was “No Pressure, No Diamonds: Selling Luxury Products in a Recession”. Instead of opening with my usual Facebook Diamonds Page/Social Media shtick, I wanted to pick up on what the rabbi said. The first thing I talked about was how we treat customers when we buy diamonds and jewelry from them. This may be the most valuable thing that my father taught me as I grew up and worked in the pawnshop. We often dealt with people who needed to borrow money on their their items. My father was their friend – he always treated them with dignity and respect, and was sensitive to their needs. As we carried our business over to buying engagement rings from people, we adopted this same philosophy of being sensitive to people’s needs and their situation. When someone is getting divorced and is selling their ring, it can be a sad experience or a liberating experience. We understand this and that’s why we do it so well. When someone is selling jewelry simply because they need money, we treat these people with fairness, dignity and respect so the seller can be happy about their transaction.

And that’s what I think customer service is all about.