For a long time, the jewellery industry has been protected against an increasingly commoditised world, where once-valuable goods become commodities in the eyes of the market.
Almost all retail categories have moved from differentiated to undifferentiated price competition; however, compared to other markets, jewellery remained relatively unaffected by the change for many years.
There are various reasons for this “delay” – jewellery, especially diamond jewellery, is purchased for emotional and aspirational reasons; price is not always the main motivator. In addition, the diamond-purchasing channels were traditionally controlled by trade professionals and were tightly restricted, which also offered the industry a barrier against commodisation.
Now, along with De Beers losing its cartel status, the internet has changed all that. With greater transparency in the distribution channels came the importance of grading. Diamond grading laboratories that initially only graded diamonds in excess of a carat now grade commercial goods down to 0.25 points. Certification now assumes a larger importance in all diamond transactions, so much so that industry experts argue that it is the labs that have now become the strongest “diamond brands”, often considered more important than the product itself.
Greater competition IN THE DIAMOND MARKET
These changes mean retailers who previously specialised in white diamonds and jewellery design now face greater competition because consumers have many more purchasing options and can shop around.
While that’s not a bad thing, it means that consumers are arming themselves with information from the internet that is not always correct. Faced with this misinformation, jewellers today find themselves fighting for every sale on price alone, often at the expense of quality, creativity, customer service and emotion.
The prevailing sentiment is that diamonds have now been highly commoditised, courtesy of these and other changes in the international market.
Well, that’s certainly true for white diamonds but not for coloured diamonds, which have not been commoditised, nor are considered commodities by consumers.
There continues to exist an air of exceptionality and exclusivity around coloured stones and Michael Neuman, director, Mondial Pink Diamond Atelier, believes there are many benefits for retailers who choose to specialise in coloured diamonds.
“Every coloured diamond is an individual, therefore they can’t be commodified and priced in the same way as other [white] diamonds,” he says. “Because there is no ‘Rap’ [Rapaport price list] for coloured diamonds, it makes it difficult for the consumer to simply go from shop to shop looking for the best price on an ‘identical’ diamond.”
Neuman’s father Fred opened his first jewellery store in Sydney’s King’s Cross in 1961 but the family’s love affair with pink diamonds began in the late 1980s which strengthened in 1993 with the establishment of the Mondial store in the Queen Victoria Building. Neuman believes that coloured diamonds are not only easier to sell because of their “individuality”, but also because they allow jewellers to create a point of difference over competitors.
“Because of the great variations in colour, which are easy for the consumer to see and appreciate as opposed to the difference between D-H colour whites, coloured diamonds allow greater creativity and individuality for a jeweller who wants to stand-out from the crowd,” Neuman says.
Neuman is a member of the Natural Colored Diamond Industry Association (NCDIA). Founded in 2003, NCDIA is a New York-based non-profit association that includes some of the world’s most prominent rough-diamond producers, diamond and jewellery manufacturers, designers and retailers.
Craig Leonard, another Australian member of NCDIA, echoes Neuman’s views about the benefits of selling coloured diamonds over white stones: “Pink diamonds have many benefits over white diamonds. Firstly, selling pink diamonds gives a jeweller the image of exclusivity, and pinks offer increased margins over white diamond profits.
Build a relationship with the customer WITH EDUCATION
“Secondly, because of the amount of colour variation, it’s almost impossible for potential clients to accurately compare and buy pinks from the internet so they must visit your store, which enables you to explain more about the uniqueness and rarity of the stones. It also allows you to build a relationship with the customer and close the overall sale.”
Highlighting the added characteristics of coloured diamonds is grading nomenclature. In addition to the four Cs on grading reports for white diamonds, three additional characteristics are graded – tone, hue and saturation. These characteristics help to determine the stone’s final colour description as either fancy light, fancy, fancy intense or fancy vivid – the latter is deemed the finest.
Leonard is a third generation jeweller and his family boasts an 80-year heritage. “Our family is Newcastle’s oldest business, operating out of the same store in the same location since 1932, and I first began working closely with pink diamonds in 2002. We were looking to do something that the local market was not doing and we found it gave us a complete new customer base.”
It’s not surprising to James Lehman, managing director, Lost River Diamonds, that independent jewellers are creating their own niches using coloured diamonds. He says there are many savvy jewellers using their names to build their own reputations and brands around the coloured diamonds in their collections.
“Customers now realise that the top jewellers are those whose name is a brand, and they are doing that using coloured diamonds,” Lehman says.
Lehman explains people don’t understand that the grading used to describe a coloured diamond is so broad, “and there’s a million different colours out there that have to fit in to a couple of dozen grades”.
“A white, round brilliant cut is now like a loaf of bread; you can buy it on any street corner,” he says. “You just go on to the net, you look it up and you order – anyone can buy it. Across the road, they’re selling it for 50 cents cheaper, and they’re cutting each other’s throats. There’s no money left, and now you’re selling something that’s not special anymore; however, you cannot buy a colour [diamond] from a picture on the internet. You will never get a photo that’s accurate. You also can’t go out and say, ‘Well, that pink diamond is the same as the one across the road.’”
Chris Soklich, director, Soklich & Co, is another who believes that coloured diamonds offer retailers greater margin and more creativity.
“Too many consumers are buying diamonds on the internet based only on price – it’s rampant for white diamonds – but it’s very hard to compare price on coloured diamonds,” he says. “When it comes to selling a coloured diamond, people can’t exactly walk into your competitor’s shop and say, ‘These guys are offering a fancy intense pink for $X so what can you do it for?’ They’re very individual pieces.”
Retailer margin
While margin is important for the survival of every business, so is the need to create a point of difference. Jewellers are in an enviable position of being able to not only add their own input to a product but also design and create items from scratch, customised specifically to meet a customer’s tastes and style. Plenty of other retail categories cannot do that.
Coloured diamonds offer other options as well, especially considering most white stones are sold as a four-claw basic setting, according to Brett Bolton.
“That’s the majority of what’s sold but coloured stones allow a jeweller to showcase their talents,” Bolton says. “Whether it be a chocolate colour or a pink diamond, the jeweller can stand out from the crowd by showcasing their creativity and design skills.”
Bolton’s Brisbane-based gemstone supply business Bolton Gems began cutting rough brown or chocolate diamonds in 2013.
“The other thing is that all coloured stones are unique. Whether you’re talking about a diamond or even other coloured gems, they’re all very unique, so you fall in love with them and they become a part of you,” Bolton explains. “The customers know there’ll never be one exactly the same so, from a retail point of view, customers can’t price shop. If you give them the right experience and they’ve already fallen in love with the product, what more do you have to do? Price is secondary.”
Price BECOMES less important WITH A BEAUTIFUL DIAMOND
Garry Holloway of Melbourne’s Holloway Diamonds is another retailer who specialises in coloured diamonds. He also agrees that price is often less important than the colour and quality of a coloured diamond.
“It’s more of a leap of faith for a consumer to buy a fancy-coloured diamond based on a grading report or just a photo rather than seeing in person and holding it,” he says, “so having a customer in your store can often swing the deal.”
Although Holloway operates two high-end jewellery stores in Melbourne, he is also recognised as a world authority on diamonds and is known for his contrarian views on grading and cut.
When it comes to price, Holloway adds that while retailers can make a larger margin on coloureds, so can the suppliers. Holloway describes this as a “double-edged sword” that can lead to “making the retail price difference often much larger than an online sellers price.”
“That said, many coloured diamond customers understand the need to pay a premium for good advice,” he adds, “and to actually be able to see and hold the stone for themselves. I have found that there is no harm in asking a customer in your store, who is giving you online prices to compete with, if they would really be prepared to buy a coloured diamond sight unseen.”
Holloway says the customer rarely answers “yes”, and he also recommends that “it’s a good idea for the retailer to check the diamond they have seen online because it may have strong blue fluorescence, which makes a fancy yellow look paler in Australian daylight”.
“Also, many fancy coloured diamonds don’t have a clarity grade on their report, which usually means the stone will have eye visible inclusions.”
Ron Kiven is another who bemoans some of the lowering standards of the jewellery industry.
“The business is getting more and more commoditised where the end user will go from shop to shop and ask them for a price of a normal white stone with a GIA certificate,” he explains.
“The jeweller doesn’t recognise that the consumer doesn’t realise within each of those grades of certificate that there are big differentiations. The consumer looks on the internet, gets a cheap price for some crappy stone and uses that as a benchmark [against the jeweller].”
Kiven agrees with Holloway: “With coloured diamonds, every stone is its own individual piece and you cannot buy a stone like that sight unseen. I don’t believe buying diamonds unseen is a way to go anyway but the reasons [for coloureds] are even more diabolical – you can have huge, variations in the stones. By having a range of coloured diamonds, you also create a bit of a difference for yourself.”
Kiven’s business, Blue Star & Kiven Diamonds, established in 2012, is a joint venture with the Indian-based diamond supplier making it a relatively new entrant to the local market.
The increased popularity of coloured diamonds, helped by greater output, new trends and a prevailing fascination with “celeb culture”, is reigniting some of the creativity and craftsmanship jewellers can provide for the benefit of customers. With this in mind, coloured diamonds can be a way for jewellers to find a niche in an increasingly competitive market.
Garry Holloway of Melbourne’s Holloway Diamonds is another retailer who specialises in coloured diamonds. He also agrees that price is often less important than the colour and quality of a coloured diamond.
“It’s more of a leap of faith for a consumer to buy a fancy-coloured diamond based on a grading report or just a photo rather than seeing in person and holding it,” he says, “so having a customer in your store can often swing the deal.”
Although Holloway operates two high-end jewellery stores in Melbourne, he is also recognised as a world authority on diamonds and is known for his contrarian views on grading and cut.
When it comes to price, Holloway adds that while retailers can make a larger margin on coloureds, so can the suppliers. Holloway describes this as a “double-edged sword” that can lead to “making the retail price difference often much larger than an online sellers price.”
“That said, many coloured diamond customers understand the need to pay a premium for good advice,” he adds, “and to actually be able to see and hold the stone for themselves. I have found that there is no harm in asking a customer in your store, who is giving you online prices to compete with, if they would really be prepared to buy a coloured diamond sight unseen.”
Holloway says the customer rarely answers “yes”, and he also recommends that “it’s a good idea for the retailer to check the diamond they have seen online because it may have strong blue fluorescence, which makes a fancy yellow look paler in Australian daylight”.
“Also, many fancy coloured diamonds don’t have a clarity grade on their report, which usually means the stone will have eye visible inclusions.”
Ron Kiven is another who bemoans some of the lowering standards of the jewellery industry.
“The business is getting more and more commoditised where the end user will go from shop to shop and ask them for a price of a normal white stone with a GIA certificate,” he explains.
“The jeweller doesn’t recognise that the consumer doesn’t realise within each of those grades of certificate that there are big differentiations. The consumer looks on the internet, gets a cheap price for some crappy stone and uses that as a benchmark [against the jeweller].”
Kiven agrees with Holloway: “With coloured diamonds, every stone is its own individual piece and you cannot buy a stone like that sight unseen. I don’t believe buying diamonds unseen is a way to go anyway but the reasons [for coloureds] are even more diabo