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New To Loose Diamond Industry


jkang
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Hello....

 

I am just starting out in the loose diamond industry....

 

Finding out it is a very tough industry......

 

I have a good source of polished cut diamonds I buy from overseas (none from Africa, too scared of conflict diamonds) but I am learning as I go.... and finding out it is an expensive industry and finding out it is tough to find buyers in this industry, most times I get hung up on when I cold call or turned away when I try to go into shops..... but I do have acouple of buyers who seems to be happy with price and quality.... I have them calling everyday to see what I have.....

 

But anyone else in the loose diamond business and what was your experience like when you first started out and also any feedbacks and tips would be great.....

 

thanks in advance.... ;)

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As you point out, it’s a tough business. Frankly I wouldn’t recommend it for a newcomer who’s not well connected and who isn’t personally an expert in both the industry and the products. Why did you decide to become a diamond dealer?

 

Assuming you pass the above test and you still want to be in the business, you need to decide who your customers are and what value you are adding to the mix to justify your paycheck. The days of murky deals where you can make a buck based on the difficulty of finding good suppliers are long gone. If your plan is to sell to jewelers and the value you are bringing to the table is that you’ve got the contact information of a great supplier and they don’t, I think you’re in for trouble. Jewelers and their suppliers, at least most of them, are smarter than a lot of folks give them credit for. If you’re not adding something of value, both will benefit by cutting you out of the loop and both sides have the wherewithal to do it. If they don’t do it, their competitors will and you’ll all fail together.

 

Here’s a good exercise: Write for us an advertisement of why a store (as opposed to a consumer) should buy from you. Don't include your contact information because you'll be against the rules of the forum for self promotion but you can blot it out or just use a fake name. Assume that your customers know who your supplier is and that they could buy directly from them if they wanted to. They do and they can.

 

So … why buy from you?

 

Neil

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I do have good connections overseas....

 

reason why I got into the business:

 

#1 my background is in cellphones.... I used to work for a wholesaler that on an annual basis did over $100 million in sales.....

 

the most valuable lesson I learned is to flip a million dollars 4 times in a month that trying to make 4 million dollar off of one buy...

 

#2 because of my contacts from overseas (none from africa) I have been told I am lower than most NYC wholesaler on comparable diamonds.... (in other words I don't mark up like other importers).

 

I do know alot of diamonds are passed on from importer to wholesaler to retailer and everyone is making their markup in between, I want to skip the wholesaler and sell directly to retailer..... and those who are buying from me currently are happy with me as their contact....

 

I don't have a fancy office nor a showroom, my diamonds are stored in a bank vault.... since I don't have a big overhead, I don't need to add in the cost into the merchandise.....

 

Also paying cash to my suppliers, as well as my contacts, I have been getting the best prices. Someone I know in the industry has told me the prices I have been getting is better than he has been getting.... and he has been in the industry for well over 20 years.....

 

There are other things I can write, but all is a waste of time. I strongly believe in showing my products and prices. Words are useless if I can't deliver. Again I haven't been doing this long, but I do have a small, yet happy customer base.

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You’re not skipping the wholesaler, you are the wholesaler. There’s nothing wrong with that but you should be aware that it’s a seriously competitive business and it hasn’t been going well for most of your competitors for the last several years. That’s why so many of them are turning into retailers (which has it’s own set of issues). I see 3 or 4 direct importers a week walking through my building trying to sell stones using the pitch that they’re cheaper, that they buy overseas, that they have low overhead and that people should buy from them because they’re just such nice folks. Most leave without ever making a sale. The sales are going to people who understand that words *DO* matter and who have thought through an offer with a bit more substance to it.

 

Neil

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I do have good connections overseas....

 

The connections I'm refering to is connections to sell, not connections to buy. To be sure, there are more customers outside the US than there are here so if you've got an overseas customer base then you've got a huge leg start. Selling in eastern Europe, India and China are the big growth markets these days.

 

Neil

Edited by denverappraiser
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after doing alot of homework on this industry it shows that alot of people are making a huge markup thus not producing sales..... why make a huge mark-up when there is no point in doing so?..... I have oversea buyers and suppliers..... one of my biggest buyers is a guy out the US..... when I say I don't make a huge mark-up from the time I buy I mean I don't make a huge mark up..... I would rather sell qty over pricing any day..... turning the cash 4 times a month is better than turning it over once a month..... simple business model.....

 

I get a shipment in on Monday.... I am sold out by Wed..... making an order on Thursday.....

 

As much as people are saying it's not a good business and times are tough.... then why is a putz like me making it with little or no knowledge when I started?

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Also companies were started with people having little knowledge about the industry and doing very well..... BlueNile comes to mind as being very successful in the diamond industry....... and after reading Mark's biography..... it's amazing what he has done with his company..... even with all the odds stacked against him.....

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It sounds like you’re happy with what you’re doing and you've found a market that needs your niche. Congratulations.

 

Most of the serious importers that I encounter are working with single digit margins although I agree that there are some that want to try to make a killing on each sale. I suppose it depends on what you consider to be a huge markup. If you can reliably turn your inventory every week as you say, a 1% yield is a darned good return on your investment (52%). As with all investments, that reliability is an important component. For most merchants this is the difficult part. I also certainly agree that the high price, high mark sellers are not generally the most successful although that strategy seems to be more common among the retailers and the pretend wholesalers (retailers who describe themselves as wholesalers) than with those who are trying to make an ongoing business in the wholesale trade. Not that it's working all that well for retailers either.

 

Neil

Edited by denverappraiser
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Also companies were started with people having little knowledge about the industry and doing very well..... BlueNile comes to mind as being very successful in the diamond industry....... and after reading Mark's biography..... it's amazing what he has done with his company..... even with all the odds stacked against him.....

 

Odds stacked against him? Blue Nile has injected more capital faster into their marketing than any jeweler in history. They're a poster child for the power of advertising and Google adwords. I agree that BN has been a successful venture and that they continue to do it pretty well but they are hardly representative of the marketplace.

 

Neil

Edited by denverappraiser
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Indeed, nothing serndipity about Blue Nile.

 

The fact that Vadon is well connected to the VC Funds that started out staking him to the tune of hundreds of millions of dollars certainly helped :lol::rolleyes:

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I'm curious why you think buying in Europe means you aren't buying conflict diamonds..

 

Anyway, yes, loose diamonds is a very tough business and I know that at the store level many buyers won't even talk to new sellers.. We already have relationships with other sellers and simply aren't interested in talking with new people.. We get enough cold calls as it is and generally let them play the 'on hold game' or say not thanks and hang up..

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I'm curious why you think buying in Europe means you aren't buying conflict diamonds..

 

Anyway, yes, loose diamonds is a very tough business and I know that at the store level many buyers won't even talk to new sellers.. We already have relationships with other sellers and simply aren't interested in talking with new people.. We get enough cold calls as it is and generally let them play the 'on hold game' or say not thanks and hang up..

 

The one thing I have learned about diamonds, buying from Europe and Middle East means higher cost. I have gone to major diamond centers like Antwerp, Tel Aviv, and even Mumbai, with a little homework and alot of inquiring, I have been able to find other suppliers in areas most people look over. But most of the European and Israeli dealers are high. I will not go to Africa because I have no desire to go and also security issues. But I do not know the diamonds I buy are conflitct diamonds or not.

 

Again, if most jewelry stores do not want to buy, I can hold these diamonds, knowing it will not loose it's value and sell them later or I can start my own online retail store and still beat most competitors pricing. Truthfully, the handful buyers I have, have been happy with the price I give them, and like any business owner, I am looking to expand, but if it doesn't happen, so be it. I am still making a living and able to provide to the family. But the one thing I do see in the industry, although competitive, most of the jewelry retail store owners aren't getting the best prices. Maybe because of favorable credit terms from exisiting vendors or maybe because of relationships, but when it is a highly competitive market, it is better to have good prices with high quality.

 

Just my 2 cents.... but thanks for the advice from everyone. :rolleyes::lol:

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US jewelry stores will often pay a premium price in exchange for having a 3rd party carry part or all of their inventory risk. This gives them the opportunity to offer a far bigger selection to their customers than their own finances would generally justify. In the trade this is known as memorandum. In effect, yes it’s favorable payment terms although there are implications with regard to accepting returns that can be very important as well. It more accurately would be described as a consignment.

 

Buying diamonds and holding them in inventory until the right customer comes along is a VERY different activity from the one you’ve described thusfar, as is the task of operating an Internet retailer. I repeat my first piece of advice that you need to figure out who your customers are and what you will be doing to add value to the deal that justifies your paycheck. It will be very different in the 3 diffent business models you've suggested here. Even if this is only ‘plan B’, it deserves some serious thought before you invest major amounts of money in your expansion. More often than not, plan B (or C or D) turns out to be the one that counts.

 

Best of luck, keep us posted on how it goes.

 

Neil

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The one thing I have learned about diamonds, buying from Europe and Middle East means higher cost.

 

I beg to differ. One of the things that I know about the diamond business is that location has very little to do with it. FedEx and similar service from India, Belgium, Columbia et.al. is incredibly inexpensive. Other than taxes, the difference in value as a result of the location is only a few dollars per stone. Certain places, like Singapore, have rather high import taxes on diamonds that will increase this a bit but for importers into the United States this is not a factor. Diamonds are mined wherever the mines are, cut wherever the cutters are and sold wherever the customers are. These are almost never the same place and stones mined in Africa can and do get both cut and sold in every diamond market in the world.

 

That’s not to say that certain sellers don’t charge more for their service or that it doesn’t make any difference where you buy. The important difference is the character of the people behind the counter/keyboard, not the location of the store. This is equally true at both the wholesale and retail levels.

 

Bargains overseas are almost always an illusion. How? Check the grading. All VS2's are not the same. Some H's are really J's. Not everyone uses the term 'ideal' in the same way. Certificates certify nothing. Pay no attention to the man behind the curtain.

 

Neil

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Or perhaps do pay very close attention to the Man Behind The Curtain as that will tell you much about the bonafides of the diamond being sold.

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