CAN A SMALL DEALER AFFECT THE COLOR TRENDS OF THE INDUSTRY IN THE SAME WAY THAT BUTTERFLIES AFFECT THE WORLD’S CLIMATE?Nov 01, 2005 - I am a veteran of the trade and I’ve heard lots of stories, which were told to me by prominent or less prominent figures in the trade. But this last story I heard, which is unfolding in the jewelry industry right before our very eyes, has astounded me.
Just before breaking my arm very badly in Bangkok and realizing that cracks in bones are really much worse than cracks in gems, I had an opportunity to meet with a dear friend of mine, a connoisseur of gems and yet not one of the biggest dealers of all. What he told me amazed me.
He started by saying “you know, everyone in the trade thinks that brown and brownish colors are unattractive to our customers. When you so much as mention brown in conjunction with a certain gem or a certain color, your customer always thinks that it is inferior.” Then he hit me with his declaration, “Can you believe I have changed this concept in the jewelry trade this year?”
Well, it was only lunchtime and he was certainly not drunk. He is a serious person so I began to wonder what on earth he is talking about, to which he unfolded the following story.
“About a year and a half ago I visited Africa with my dear better half, to enjoy Safaris together and to show her what her husband does as a gem buyer. In one of the offices a dealer came to me with a bunch of cut, brown stones and asked me if I would be interested in buying them, to which I immediately uttered, “really brown, you must be joking! Who would buy such gems?” Though being silent most of the trip to Africa, my better half suddenly showed intense interest in those brown gems saying, “wow, aren’t earth colors very popular with everything today?” Well, he tells me, ‘I decided there and then to take my wife’s word for it to buy almost a kilo of this brown rough’.
“Time passed, a few months went by and I sent the parcel to be cut, only to receive many more brown stones, which I knew had no chance on the market, unless a miracle would happen.
By chance, I took the stones with me to the U.S. with all the rest of my goods, all very saleable blues, greens and reds. Sales were mediocre. Then at the last minute, I decided to show my customer, a very prominent jeweler, those very peculiar brown colors. I don’t think that he was really impressed until his wife suddenly walked into the meeting room where I was showing him those brown stones, looked at them and said, “Wow, Earth Tones”. I immediately realized that these were no longer “brown stones”, but from then on, “Earth Tones”. To cut a long story short, he bought the lot from me and since then, suddenly, one can see plenty of jewelry with Earth tones stones set into them.”
‘I don’t want to be too big headed,’ he tells me, “but I believe that I have changed the concept of people to those colors in the same way that butterflies can affect the world’s climate.
” What on earth (tone) is he talking about? That I leave for you to decide, but would you believe that only a couple of weeks ago I received a call from one of my customers asking for... Earth Tones!
Copyright IDEX Magazine 2005, all rights reserved.
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Chains of jewelry shops were scarce and at most included only a few shops. Thus, the orders to fulfill such jewelry designs never included more than a few dozen stones, or a few hundred stones of the same size, which were fairly easily bought through the existing dealers. With the appearance of jewelry mega chain shops, however, consisting of hundreds or thousands of shops and the appearance of TV selling channels, the jewelry world has gone through a major change, affecting all levels of suppliers deep into the pipeline, mainly the cheaper stone pipeline, hence the Indian pipeline.
The possibility of a single piece of jewelry, consisting of 30 diamonds of 3 points each, being shown on television, and selling 1,000 pieces within one hour has imposed orders in the range of 30,000-100,000 pieces of the same size and quality. No single dealer was capable of supplying such vast quantities of uniform material. Thus, a new position was created in the jewelry pipeline, called the Mega Accumulators. Since no single factory could produce such quantities of uniform size of diamonds, these Mega Accumulators had the right connections with many diamond suppliers and cutters, and were able to fulfill such orders in a relatively short time. The small suppliers found themselves, in many cases, unable to join the party and they had to either expand considerably and cater for such orders or specialize in a special niche in the diamond world or remove themselves from the game.
Such uniform, vast quantities of orders had a strong effect on the diamond pipeline. Producers, in order to keep up their position in the supply, sometimes have intentionally cut diamonds to the size required, although they were losing on the yield. Many suppliers have supplied higher quality goods to accomplish the number they were committed to just so that they could keep their commitments. These have created abnormalities in dealers and manufacturers’ stock since only certain sizes were in demand, and the excess, odd to this order sizes or qualities, remain unsold in the stock.
The Mega accumulators only purchased the sizes that were suitable for their mega orders. At certain times, it seems as if the whole market was looking for the same size and type of stone. This abnormally uniform demand, although met with an adequate supply, has deformed the stock remaining in the hands of the manufacturers and dealers. In many cases, when an order for, say 5 points of KLM color, was thrown into the market at a certain price point, it affected the price of same size, higher quality goods which were not required.
THE EFFECT ON THE JEWELRY DESIGNS
Certainly, the jewelry design world has undertaken a tremendous change, too. Since these TV Mega sales had to cater for the taste of the very many, the designs had to be to the liking of as many as possible people. Unique pieces became obsolete. The only gauge for beauty and uniqueness was the number of pieces of jewelry sold within a certain period of time.
We call it the “Jeansing” effect where a simple design is to the liking of the many. Such designs have to be relatively simple, mediocre in beauty. Another point to bear in mind is that very few designers working for a Mega jeweler, can affect a considerable portion of the jewelry sold, creating some kind of homogeneity where the non-unique is the desired uniqueness.
Virtually the same affect was apparent in the Mega jewelry chains, where hundreds of shops carry identical pieces of jewelry and for which the orders usually came in hundreds or thousands of pieces of jewelry.
Since this jewelry was all made in vast quantities, their cost of production was relatively low - leading to a relatively low cost, very attractive to the consumers.
The direct TV sales have ignored the traditional position of the retailer and directed the jewelry to the cheap to very cheap market end. The small, local shops had to fight in order to survive. In many cases their customers have required jewelry similar to those on TV and also similar prices. Hence, many of them were forced to include within their display TV-like pieces of jewelry.
Soon a new position of jewelry suppliers was created. Such a supplier has specialized in TV-like pieces of jewelry which he supplied to the many small shops which didn’t belong to the Mega chain but needed such jewelry.
All in all, the effect on the world of jewelry has been not very different from that on the clothing and fashion industry, where the effect of a single designer could determine what would be bought in thousands of shops.
Regards The GemEwizard Copyright © IDEX
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The longer you are in the gem and diamond trade, the less you know you know.
In the early days, when I was an apprentice jeweler in London during the day and studied gemology at night, passing my gemology exams with distinction, I was sure that within a few months, or at most a couple of years when I would handle more gems, I would know practically all there is to know about the gem world.
Five years passed by and I was handling and learning about many more gemstones when I realized that there is undoubtedly much more to learn about them. And now, after 33 years, everybody else seems to think that I’m an expert in gems, but I, myself, know that there is so much more to learn about them all and everyday and every new stone may prove that I’m right and teach me something new.
Diamonds prices are accurate in the eye of the beholder or diamonds have no value - they are just a percentage off.
Everybody in the trade is familiar with the leading diamond pricelist. This is said to represent certain prices of diamonds and yet, depending on your position in the trade, these prices may be as much as 50% off the actual price. In fact, most diamond dealers do not talk about actual dollar prices but say, for example: “minus 28%”, meaning that the value of the diamond is 28% off the current pricelist. Others will argue that it is more valuable, only minus 24%.
Somehow nobody seems to mention the actual price - only a percentage off! Can you imagine in your mind walking into a shop and asking the price of a kilo of cucumbers and being answered: “12% off”?
The first gem you meet in a parcel is either the best or the lousiest of the lot!
Please don’t ask me why, but it doesn’t matter what size parcel you are examining, somehow the first gem you pick up is either the best or the lousiest. Never one that actually represents the average price of the parcel.
When I asked a fellow gem dealer if he agreed with this assumption he said yes and continued: “Don’t you know that the first person that you meet in a new city is either the priest or the prostitute?” It took me many years to understand what he meant but since then I have always tried to avoid the priests and the prostitutes of the parcel and concentrate on examining the crowds.
Gems look worse after being purchased by you and much more attractive after you have sold them!
Usually the day after you have purchased an important gem when you know that it is yours, and you examine it carefully devoid of the excitement of the purchase, the stone tends to look slightly less attractive. It is somehow, when not under the influence of the illusions of the gem, that the stone reveals its true self.
However, once you have sold it and it belongs to somebody else, again the stone will acquire all its original charms and illusions.
Copyright © IDEX
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You never really know what they mean because, honest to god, nothing could be further from the “same” as what you asked for. Even after a while (30 years in my case) I could not grasp exactly what they meant. Sometimes it means that the buttons are the same and sometimes that it is the same manufacturer, and sometimes it means “you asked for a shirt, these are trousers that look similar...”. But recently I finally got it. Ok, you ask yourself, what has all this got to do with gems?
A few weeks ago, I crossed the street from my office to visit a friend in the Diamond Exchange. He used to deal in gemstones and now, they say, he is very strong in fancy color diamonds. And since we are working very hard to adapt the Gemewizard Color Assessment Module to the colors of diamonds using some consultants within the trade, I decided that I should try to convince such a knowledgeable person to join our team of consultants. So there I was, gazing at many colorful diamonds, from light yellow to vivid yellow, from pink to brownish orange to slightly violet, and a one-carat pinkish reddish diamond quite heavily included, proudly reigned in the center of the display. Suddenly it hit me. I have exactly the same colors in my fancy sapphire production. I asked him to bear with me for a while and rushed to my office to show him my beautiful new production and collection of fancy sapphires. Well, we took a beautiful vivid yellow diamond from his collection and matched it with exactly the same color as my natural yellow sapphires, I asked him how much his gem cost and he answered about $16,000 per carat where my gem cost $550 per carat.
Then we looked at one of his 2+ carat pinks and compared it to the same color 2+ carat gem deep pink sapphire (mind you, my sapphire was deeper and brighter than his diamond.) How much? I asked. He replied around $70,000 per carat. My sapphire was $1,200 per carat. But the big blow to me was his reddish, heavily included diamond. I have the same color beautiful red sapphire in 4 carats and mine is gem clean. People urged me to define it as a ruby but I insist it is a sapphire. Anyway, he asked me how much I want for my 4 carat sapphire and I proudly replied $3,000 per carat. He asked if I would accept $2,500 since he wanted to give it to his wife to celebrate their 12th wedding anniversary. How could I refuse such a request, especially when a husband and wife's relationship was at stake? I accepted.
I asked him how much he wanted for his heavily included ugly reddish diamond. He became thoughtful and said: “Ugly you call it? Well, from you, I want only three hundred for my included red.” I was so glad one of my sapphires was more valuable than his diamond of the same color even though mine was free of inclusions. I decided on the spot to buy it just in order to show it to my customers and prove to them that the same color sapphires may be more attractive than a diamond and more valuable. So I said: will you accept $275. He became serious and asked me how I would pay and I said: “The same way you’ll pay - cash!” He suddenly realized that I had not understood him and said: “I meant three hundred thousand per carat, yes?” and told me a one carat diamond like the sapphire he had just bought from me was sold for $900,000-plus several years ago.
I packed my beautiful sapphires and as I walked back to my office, I kept thinking: “Same, same but different!".
Copyright © IDEX
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Call it Murphy’s Law, call it whatever you want but it applies to the diamond and jewelry trade just as it does in every other trade and walk of life. Here are some of the examples I have come across.
Losing in the gem and diamond world is really making money
Gem and diamond dealers are like babies, the more they cry about their misfortune the more they grow (in business). As I asked one of my friends: “How, in the name of all gems, if you lose and lose, did you become so big and rich?” To which he replied that he lost a great deal. “But how can you lose a lot and still look very good?” His simple answer was: “I sold to other dealers who lost even more”. And how are they now, I asked with astonishment: “Oh, they are fine, even richer than me”.
You never have enough of the right size that your customer asks for
No matter how big your production is, and how precisely you aim to fill your customers’ needs, you’ll never have enough of the “right things”. In my early days as a gem cutter, when I used to cut parcel productions of maybe $10,000 in total, and displayed the cut goods to my potential customers they never found enough of the sizes they were looking for in my parcel. At those times I longed for the days when I would produce enough so that a customer would find all his needs fulfilled with my goods.
And then I grew and started producing productions of say $50,000 at a time, cutting many beautiful stones, waiting in anticipation for my customers who looked at my parcels and still did not find all they needed and asked for goods I did not have. And then with God’s help and some luck I reached the stage today where I am producing really large parcels with practically all sizes and shapes which I show to my customers. They, of course, never find enough of what they are looking for.
The further you are from the source the bigger the discount you get and the longer the terms of payment
In the mines, close to the digging place of gems you always, but always, have to pay cash and rarely get more than a few percent discount. In the cutting centers, such as in Bangkok and Jaipur, you may ask for 30 days terms but still get only a real 10 - 20 percent discount. In the consuming countries your business customers will demand 90-120 days terms and 30 percent discount. And finally to the actual consumer in the shop where the goods are sold at a 50-80 percent discount and with very long term credit, some even give the buyer mileage points.
I am still trying to figure out this phenomenon, because using my poor judgment, one is better to buy gems as a private customer, and sell it to the mines. He or she will get a better price and have the money way before payment is due. And then I remembered Einstein and his theory of relativity...
And last, but not least: the beauty of gems is not necessarily in the eye the beholder.
IDEX MAGAZINE | NO 183: GEMS
Copyright © IDEX
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