Drill, Fill and Memo

April 1998

Diamonds:News

Drill, Fill and Memo

The JA Show's Diamond Day was dominated by debates on the disclosure of diamond treatments and margins

A day of debates and workshops concerning diamonds dominated the final day of the JA International Jewelry Show seminar program, held Feb. 4 in New York City, as industry suppliers and jewelers compared notes and explained their positions on several important issues.

Disclosure Ethics
The morning began with a preshow debate on the floor of the show, moderated by Rob Bates, diamond editor for National Jeweler, published by Miller Freeman, owners of the show. Among the speakers were two representatives of companies that produce clarity-enhanced diamonds – Ron Yehuda of Yehuda Diamond Co. and Eli Zabid of Goldman Oved Diamond Co., both of New York City; lawyer Ben Kinsler of the Diamond Manu-facturers and Importers Association; retailer Lee Berg of Lee Michaels Fine Jewelry, Baton Rouge, LA; and appraiser Ralph Joseph, ISA, CAPP, G.G., of Three Bridges, NJ.

The panel debated the ethical decisions involved in disclosing laser drilling and fracture filling of diamonds. There was consensus that all jewelers should factually and positively tell customers when a diamond is laser drilled and filled. But the speakers parted ways on revealing laser drilling alone (especially after the group viewed a segment from a Philadelphia investigative news report featuring an irate customer who felt betrayed when the drilling on his diamond wasn't revealed).

Ben Kensler of DMIA said his group believes laser drilling needn't be disclosed because it's permanent and does not affect a stone's durability. He cited FTC guidelines that say the same thing.

Joseph and Berg strongly disagreed, citing ethics, public relations issues and other factors. "Consumers are angry whether it's the law or not," said Joseph. He complained that too many underqualified jewelers value diamonds far above their actual value at the point of sale, a problem exacerbated by non-disclosure of drilling and filling. Berg pointed out that until insurance companies agree they will accept appraisals only from valuers who are gemologically trained, the problem will continue.

The panel also discussed a positive approach to disclosure of drilled and filled diamonds. Both clarity-enhanced diamond companies said they help retailers disclose in a positive and ethical manner, with point of sale literature and sales training.

Margins and Memo
A workshop held later in the day brought together New York City-area experts such as Long Island retailer Eric Freedman, CGA, president of the American Gem Society; Eli Haas, ENH International, president of the Diamond Dealers Club of New York City; diamond dealer Ronnie Vanderlinden, Diamex; and Martin Rapaport, publisher of the Rapaport Report. They discussed how dwindling margins profoundly affect the diamond business.

With characteristic candor, Rapaport warned that unless retailers begin to pay for diamonds again, instead of running memo businesses, dealers increasingly will sell directly to the public. He says dealer margins are paper-thin already – acting as de facto banks for jewelers who don't stock inventory. Freedman pointed out this is happening already – he sees diamond brokers in the New York City area selling direct.

A retailer in the audience, however, said many of her relationships with dealers began when they offered her memo as she started in the business 12 years ago. Now, she complained, some of those same dealers will no longer work with her on the basis of memo. "I know I'm a junkie," she said, "but they were the rules I learned."

Rapaport also warned the audience about another danger of retailers obtaining diamonds on memo only. With De Beers reducing its release of larger diamonds into the marketplace (to meet lessening demand in Asia), retailers will begin to feel the pinch in larger stones by summer. "The retailers who have money to buy diamonds will beat out the memo jewelers in obtaining stones," he predicted.

Ben Janowski of Janos Consultants, New York City, a consultant to the diamond industry who was in the audience, said that with larger goods getting scarce, now is the chance for jewelers to make a better profit. "Good stones will be fewer and demand will build; good associations between retailers and dealers are going to be critical to get the stones you need," he said. "Build your relationships up now – before shortages start."

Ownership of Diamonds
Though most retailers may see more of the burden than the joy of owning diamonds, Rapaport said part of what made sales "rock & roll" in the old days was owning your own diamonds. "The jeweler used to have a relationship with his goods," he recalled. "The jeweler sweated and worked to sell them because they were his." Other panelists agreed, saying that memoing goods makes retailers brokers for stones and incapable of competing on anything but the lowest price – where margins disappear.

Adding Value
Everyone agreed retailers need to add value to the diamond at the point of sale to make decent margins. Selling on price and certificates alone is a recipe for disaster, panelists said, because the Internet, televised selling and other "blind" buying methods will dominate on price. Instead, they said, retailers should sell the value of buying from an experienced jeweler who can intelligently discuss cut and other factors that make each diamond unique.

The best way to add value, all agreed, was to continue getting an education so your expertise wins over suspicious customers. From marketing and technology to pricing and appraisals, jewelers must continue learning to stay in business and thrive.

Independent jewelers, in particular, should study the different outlets that sell diamonds today to analyze their offerings, the panelists suggested. Mall jewelers will sell a different inventory than on-line or home shopping services. None will offer the diamonds and diamond jewelry that an independent can. None will offer the one-on-one personalized service. And if a jeweler plays his or her cards right, none of those other outlets will have the quality of education and the authority that comes with it. That's added value.

- Peggy Jo Donahue






Copyright © 1998 by Bond Communications.


 

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