Editorial: The Day Diamonds Died
26 August 2016
How an industry committed business suicide
In my 45 years in the jewelry industry, the single biggest WTF moment I have experienced is the day I heard that some young diamontaire in New York named Martin Rapaport was publishing a wholesale price list of diamonds, and that the Rapaport Report was somehow getting into the hands of retail consumers.
It was at that moment that I knew the diamond industry as we knew it was fatally wounded. Fatally. A dagger to the heart.
The direness of the situation was made even clearer when a customer came to me with a Rapaport Report diamond quote from a website called DirtCheapDiamonds(.com). This place was selling diamonds on the internet at just over my wholesale cost, out of an apartment bedroom in some small town in upstate New York.
It seems that not only had this young diamontaire in New York put a dagger into the heart of the diamond industry, but the diamond manufacturers and cutters had twisted the blade to insure the wound would never close by making a wholesale diamond database available to anyone with a website. This action allowed anyone with a Rapaport Report and a website to go into direct competition with the retail jewelry industry, and do so at prices at which the established jewelry industry could not compete.
Suddenly, the diamond industry came crashing down. The decades old structure that had made so much profit for everyone in the established distribution chain was destroyed, and in its place was anarchy.
The worst part, it was the wholesale diamontaires who put this dagger into their own hearts.
By allowing a wholesale price list to be published, then allowing just anyone with a website to become a diamond dealer, it was and is the diamond cutters and manufacturers themselves who killed the diamond market.
Today, with the growing reality of lab created diamonds and their impact on the market, the future of diamonds is set: The diamond market is dying a slow and painful death.
Like Fawkes the phoenix bird from the Harry Potter books, the diamond market will eventually rise up out of the ashes, but in a much different form. The production of lab created diamonds will eventual do to diamond prices what lab created amethyst did to natural amethyst, cause a severe drop in value. The future diamond market will not look anything like what we see today.
This is not a “what if” scenario, this is reality. I have watched the diamond markets for over 45 years and this death spiral that the diamond industry put themselves into years ago is finally getting close to the ground.
The question now is not “if” the diamond markets are going to spiral into the ground, the question is: Is the retail jewelry industry going to ride that death spiral into the ground with the diamontaires responsible, or is the retail industry going to realize what is happening and pull the colored gemstone rip cord and bail out before diamonds hit the ground?
The colored gemstone industry is right now where the diamond industry might be in 5 or 10 years: a free market economy based on supply and demand.
There are four reasons why the future of this industry is in colored gemstones:
Colored gemstone markets require a level of professional education, knowledge and experience to participate. One cannot just get a price list and a database and materially compete in the colored gemstone industry.
Colored gemstone prices and values are based on actual market supply and demand, just as any successful free market operates.
The diversity and availability of colored gemstones around the world create a truly open market environment where a retailer has many avenues of supply from which to choose.
Consumers are ready for colored gemstones, they just need qualified, professional retailers to bring the colored gemstone markets to the retail level.
There is no other way to say this: The diamond market committed suicide.
To this day I am astounded that the Rapaport Report was ever allowed to materialize, or that the diamond industry would allow a wholesale database to be available to just anyone with a website. Certainly no industry in their right mind would cut their own heart out by publishing such a list and then allowing just anyone with a website to become a dealer. But that is exactly what the wholesale diamond market has done. The diamontaires, themselves, killed off their own market, and they have no one else to blame. It is a fatal situation and one from which the diamond industry will not recover.
The future of the jewelry industry is in colored gemstones. For supply. For market viability. For beauty. For consumer acceptance. For just about anything else you want to name, the future is in colored gemstones.
If any retail jeweler out there is not making serious plans to move your business into the colored gemstone revenue stream because you are not sure of how to do so, contact us at the ISG.
We have answers.
We have connections.
We have your future.
Robert James, FGA, GG
President, International School of Gemology Inc.
This editorial is available in the Archives of the ISG Global Network: The Day Diamonds Died
To learn more about your future in colored gemstone profitability, visit the ISG by clicking on the icon below.
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