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!

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…”

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!

But a phone call from a customer during the 2009 holiday season put the future into better perspective, says Diane Irvine, Blue Nile’s CEO.

“We had one gentleman, a customer who called us from a chairlift and placed an order for a product of over $40,000,” she recalled. “So we knew there was something there.”

Yes Diane, it’s smart for you all to be thinking about mobile and the fact that young guys getting engaged may want to buy diamonds on their phones or iPads. But what struck me the most was this retort from Signet Jewelers, one of the largest jewelry companies in the world:

But Signet Jewelers (SIG), which operates Kay Jewelers and Jared, two of the largest jewelry store chains, says Blue Nile’s strategy to allow more price comparison via mobile devices won’t dent its sales.

“Our customers tell us the in-store experience is the most valuable, particularly when you are trying to talk customers through carat, color, clarity and cut” of diamonds, said Signet spokesman David Bouffard.

David, you are missing it! What you should be thinking is how to beat Blue Nile at their own game. You should be

WAKE UP!

thinking about how to make a bigger and badder mobile app and experience for your customers. Do you still think that the internet is going away? I wish I had your cash and resources so I could do some really cool stuff, but I don’t…yet. However, Signet and Zale Corportaion, whose revenue was down 14% from last year, need to think outside the box.

From the Wall Street Journal:

Jewelry stocks like Signet Jewelers, owner of Kay Jewelers, and Zale suffered even more because they depend on appetite for high-dollar purchases.

Maybe they could use a few $40,000 purchases, dont’ you think?

WAKE UP big boys or you”ll be gone soon!

This is the real deal and it will only promote the Sotheby’s brand and draw more people to their auctions. Check it out:

On the inside (in the dealer to dealer world) I see caution from buyers. With the economy still in bad shape, some diamond brokers are only willing to buy larger fine goods. In my mind, diamonds are a commodity (sorry all you “Romance Retailers”) and if I see an opportunity, I will buy anything at the right price.

Looking at the average US retail market (white diamonds 1-2 carats) we are seeing a nice flow of engagement ring customers and that’s good news. However, I believe what drives our diamond business is the fact that we educate and sell diamonds for what they are. Sure they are a thing of beauty, but they are also a commodity with real value and demand in the market. That’s what we teach our customers and that’s why we’re not seeing a drop off in retail diamond sales.

24.78 Fancy Intense Pink

It’s also interesting to look at rare colored diamonds. It seems that this market has not taken a hit at all. In fact, the “Bulgari Blue” diamond just hit a record price of $15.7 million, and there’s a 24.78 fancy intense pink diamond coming up for sale that is expecting to reach $38 million.

Only time will tell what happens this season. I will say that if you’re in the market for a diamond, now is a GREAT time to buy. The market is still strong, even with the economy so uncertain. Happy trading!

The emails and comments that I received from people in the industry is that they loved it and it was right on. I also got some comments from Blue Nile customers that they were satisfied with their ring and with Blue Nile. Please know that I am not knocking Blue Nile in this video. Can’t knock a successful company, competitor or not. Blue Nile is the biggest and baddest and I respect their business. They are commoditizing diamonds which isn’t such a bad thing, and they have actually helped my business.

I am making a statement about today’s customers. In fact, you may remember this post, “Looking at Diamonds…and Myself”, that got me my bad yelp review, which was the inspiration for this video.

I am also making a statement about jewelers today and how to handle customers. It’s not like the old days, so us jewelers need to change with the times. We must learn to provide value beyond the etailers in order to survive – plain and simple. I think buying diamonds for stock (and not on consignment from dealers) is one way to beat diamond etailers all day.

Oh yeah, and if you bought a Blue Nile diamond and want to sell it, please contact me!

SECONDHAND PRECIOUS METAL OBJECT DEALER/ PAWNBROKER ACT
COMPLIANCE ADVISORY

New law prohibits hotel shows, home gold parties; requires dealer name, license number on advertisements. On October 1, 2010 HB318, which will change the way secondhand precious metal object dealers and pawnbrokers conduct business in the State of Maryland. The following changes will take place on Friday, October 1, 2010:
1. Dealers and pawnbrokers will no longer be able to transact business at a location other than the fixed business address except under certain limited conditions.
After September 30, 2010 dealers and pawnbrokers will no longer be able to conduct hotel shows or home “gold parties.”

Finally! It took long enough for the state to realize that these fly-by-night hotel and gold party outfits were not operating under the same laws and provisions that honest jewelers and pawnbrokers are. In a previous law, the State of Maryland prohibited internet transactions. I applaud this new law and I hope this sets a precedent for buying jewelry in other neighboring states like Pennsylvania, Virgina, New Jersey and Delaware. It seemed that every former mortgage broker was asking me how to get into the gold game when it was hot. Gimme a break.

What’s the good news? The good news is that Samuelson’s Diamonds is buying gold, diamonds, silver and estate jewelry at our location. We’ve been at the “gold party” for the past eighty-eight years and we’ll be here for years to come.

So come to a place where “Trust is a Family Tradition…”

I’ve been taught by my father and grandfather this tradition of community, giving back, and standing behind my product and my word as a staple in our business.  And it posed the question that maybe young people aren’t learning this lesson. It seems that in this virtual world, everything is just a number, or in this case a piece of paper. And it’s very frustrating. Hopefully, that’s what social media is doing, giving a human touch to what used to be an information driven internet. So it’s not just a sale, but a business philosophy down here. A diamond is not what a laminated piece of paper says, but each has it’s own beauty and uniqueness.

It reminds me of this blog post I wrote back in November 2008 entitled, “How to Look at a Diamond”.

Francois Curiel, head of Christie’s international jewelry division says this:

Question: What makes a stone great?

Answer: “Its ideal proportions, its life and whether it talks to you or not. We had a group of young gemological students come to our New York viewing in October. We sat them behind the showcases, like real professionals, so that they could examine the diamonds. What struck me was that the first thing they did when they picked up a stone was to loupe it. I smiled because this is what I did when I started in the business and this is what all gemological schools teach you to do. When one gets a bit older, the loupe comes second and one first looks at the diamond in one’s hand. Do I like it? Even though the proportions might not be perfect by GIA [Gemological Institute of America] standards, do I want to own this stone? Ten people look at a gem, 11 opinions. So, what makes a stone great? Your eye and appreciation of it.”

We are real people.  We would love to meet you and talk to you about diamonds and explain what you should really be looking for!