The rise of buying by certificate is bolstering online diamond sales.
Diamonds sales have changed over the years as consumers have increasingly relied on certificates, making stones much easier to buy online. With price matching out of the question, Rachael Taylor looks into how e-tailers can offer such low prices and considers how high street jewellers can fight back.
Diamonds are inextricably linked to moments of celebration in life – an engagement, the birth of a child, a diamond anniversary, or even a diamond jubilee – but while the majority of moments in life that are furnished with the gift of a diamond are priceless in our memories, the stone itself has become more and more connected with pounds and pence.
With the explosion of the internet and the fierce flow of diamond information available (Google “diamond” and you’ll be faced with 974 million pages offering advice), consumers are up to speed with the four Cs and more often than not, as the process is referred to in the trade, they are buying diamonds off a piece of paper.
But while they might be able to converse in clarity, cut, colour and carat, confusion still reigns over price, and this is something that the internet has made worse, not better.
Mallory Jewellers in Bath is a traditional retail jeweller that has been serving its local area since 1898. It has no transactional website and no plans to introduce one, and manager Andrew Manders says that companies selling diamond jewellery online are making it harder for his staff to sell diamonds on the high street.
“The diamond ring market is disastrous,” says Manders. “Unfortunately people are buying online and you can’t compete. The margins they are taking are low, near 10%, and it’s confusing for a client when they see a 1ct diamond online for £5,000 and it’s in my window for £10,000.”
Manders says he believes a lot of the online diamond retailers are actually controlled by diamond dealers based in Antwerp, which is the reason that they can afford to offer such low prices. Shoppers coming into the Mallory store often ask the retailer to price match diamond jewellery they have seen online, but Manders says that for the store to hold onto the 40% margin that it likes to make on diamond jewellery – and with an experienced staff and luxury store in a prime retail spot to support – it just cannot do this.
A general perception of online diamond retailers is that they can offer such low prices because of low overheads, but this is not the case for all e-tailers out there.
Diamondgeezer.com is a family-run online diamond jewellery business that was set up by the Billing family, originally jewellery wholesalers to the trade. The company is run out of the Cotswolds, where it has two nearby retail businesses, one for silver jewellery and another for fashion jewels, and director Luke Billing believes that his overheads are actually higher than a high street jeweller.
The business is selling between 10 and 15 diamond rings a day – it also sells other diamond jewellery – and makes all of its rings in house to order. To support this it has a full workshop with five full-time goldsmiths. The goldsmiths are traditionally trained – skills Billing believes his business wouldn’t be able to survive without – but it also has some cutting-edge technology, such as its engraving machines that allow it to engrave fingerprints onto the inside of ring shanks, and it sets its own diamonds under microscopes. “We invest in people here,” says Billing.
The way that Diamondgeezer.com keeps its prices low is by using its workshop to make everything in house and also by buying diamonds direct from source.
But Billing is also dogged down by other websites in the market that are selling diamonds for tiny profit margins. “There are a few people out there that we could class as our competitors that are silly Billies and are selling their diamonds for nothing,” he says. “There are a lot of people doing it out of their back bedrooms who can afford to make £100 on a ring, and they’re happy to sell five rings a day on that margin.”
Despite such aggressive competition online, Billing is still of the firm mind that high street jewellers are expecting too high a margin on their diamonds.
“I don’t understand retailers who say that they can’t compete with us,” he says. “I would say that we have more overheads than a retail jeweller, so it’s not that they can’t compete it’s that they don’t want to.”
In the US many jewellers have lowered expectations on diamond sales and a 20% margin has now become the norm, and both Manders and Billing believe that the UK will soon be forced into following suit and reducing margins on diamond jewellery.
“The way people are buying diamonds now is that they are buying on certificates so there is less need to go into the shop to buy it,” says Billing, pointing out that retailers will soon need compete on price with online retailers to hold on to shoppers.
Manders concedes that there is truth in this and while he is not willing to compete with online retailers on price, he does make sure that shoppers buying from his store are treated to a luxury experience they would not get sat in front of a computer screen.
Another tactic many jewellers are employing is to offer exclusive cuts of diamonds that claim to offer superior sparkle, such as CMJ brand MasterCut and Ernest Jones’ Leo Diamond, giving shoppers a better diamond for the money and also a branded experience. Such diamonds allow retail jewellers to work more creatively with shoppers’ budgets to find them the stones of their dreams at a price that suits both shopper and retailer.
Diamond brand Mireya has taken the concept one step further. It has its own special cut of diamond designed to bring more fire and sparkle to the stone but has recognised that shine is only one element of a diamond – size is important too. So to answer this issue cost effectively, it has created a diamond jewellery range it calls the Iddeal Star, which surrounds one regular cut stone with a circle of smaller special-cut diamonds that have been set using an illusion setting so that from a distance it looks like one large stone.
Mireya’s Rahil Shah says that the copyrighted design offers the illusion of a stone three times larger, so for example a .33ct stone in this setting will look like a .99ct. “[Shoppers] want the entire world on a small budget,” he says. “Of course they want that single solitaire but they can’t afford it so this is the alternative.”
Andy Bass at diamond wholesaler Bass Premier offers another alternative to give shoppers more for their money is to talk them into switching from the classic round brilliant to a cushion cut, which offers a similar look but is up to 25% cheaper.
While high street retail jewellers are unlikely to be able to compete on price there are ways to work with a customer to bring them a great buying experience and sweeten it with products that offer value for money, such as superior cuts or advice on cheaper stone options. But it is important to move fast as the online retailers are playing these games too; certainly Diamondgeezer.com is investing in its own brand of ideal cuts called Triple X and an impressive level of customer service.
Diamond jewellery – the bridal sector in particular – has long been the bread and butter of jewellers, made particularly sweeter by the margins available on such sales, so the concept of following jewellers in the US is a bitter pill to swallow, but with online gaining more power and sales, dipping margins could soon be the only way to stay in the game with any sort of clout.
This article was taken from the April 2012 issue of Professional Jeweller magazine. To view a digital version of this issue online click here.