|
'We buy diamonds' the next pitch for retailers?
By Michelle Graff
September 17, 2009
Roswell, Ga.--For more than a year, independent retailers have been reporting that gold buy-backs helped their stores stay afloat--and even Kay Jewelers got a piece of the action with an online jewelry-exchange program launched this summer. So the next chapter is, perhaps, no surprise.
In late July, Sharon, Mass.-based Cash for Gold USA, one of the players in the consumer gold buy-back frenzy, launched Cash for Diamonds USA, claiming the move was a response to growing consumer demand.
Between aging baby boomers' store of stones and the glut of cash-desperate consumers, the opportunity is as good as buying gold these days, experts say. Retailers with the know-how shouldn't shy away from buying diamonds from their customers as a way to supplement slipping sales, says industry analyst Ben Janowski, owner of Janos Consultants.
"Good jewelers have been doing this forever," Janowski says. "Now, it could turn into a big, profitable business."
Wayne Stollman, chief executive officer of Antwerp Diamonds LLC, which is part diamond wholesale business and part retail store, saw the potential in buying diamonds back from the public five years ago.
A Gemological Institute of America graduate gemologist who put in his time selling stones in New York's Diamond District, Stollman first opened up a retail store in suburban Atlanta in the early 1990s.
"I had [one retail store] for five years and it was never really successful," he says. "We never made any money."
After a short stint with another retailer, Stollman rolled the dice again, opting for a model that focused on buying diamonds from the public.
"Before I knew it, we went from nothing to $1 million in sales in the first year," says Stollman, who now has buying offices in Roswell, Ga., and Sarasota, Fla., and sees himself mostly as a wholesaler, although his store, also in Roswell, sells diamond jewelry and brand-name watches.
Stollman would rather see his merchandise move than hand out cash, so he offers store customers a 30 percent higher return if they opt to buy something rather than take cash, a practice he recommends for retailers who buy stones from the public.
"Frankly, I would rather trade," he says.
Recycle, reuse
This is not to say that all retailers should close up shop and follow Stollman's lead. But, as Janowski pointed out during a speech at the Las Vegas jewelry shows, buying diamonds "off the street" has the benefit of better profit margins, and retailers will find a willing pool of consumers.
As the worldwide diamond supply dwindles, and more goods are shifted toward expanding markets in India and China, Janowski suggests that the U.S. supply of diamonds will come, increasingly, from recycled stones.
"I think there's huge potential," Janowski says. "The next diamond mine is the public...A lot of retailers are living on recycled goods already."
Stollman attributes the increase in consumers selling diamonds to the economic downturn.
"It is a luxury item. It is not needed," he says. "People are deciding they would rather have the money than have the item."
While the need for cash is one reason, Janowski also brings up another: the baby boomers. Roughly defined as those born between 1946 and 1964, boomers consumed the majority of diamonds sold in the United States over the last 30 to 40 years, and today, boomers are at an age where they want to cash in on unused jewelry or pass it down to their children.
"There are always people who are sentimental, [but largely] the next generation is not going to have the same feelings about a piece of jewelry that older people do," he says.
Retailers can take advantage of this social shift by advertising that they buy back diamonds, in addition to gold, and then selling the stones they've bought to diamond dealers.
"Nobody throws out diamonds," Janowski says. "They'll buy them."
Potential pitfalls
Retailers looking to get into diamond buy-backs need to make sure they have diamond appraisal know-how and should also consult solid industry sources on prices, such as RapNet, IDEX or Polygon, both Stollman and Janowski advise.
"Buying gold is easy," Stollman says. "Buying diamonds takes skill."
In addition, the Jewelers Vigilance Committee reminds retailers that just as with gold buy-backs, they must be in compliance with local laws regarding second-hand dealer licenses, anti-fencing laws and have an anti-money-laundering program in place to buy diamonds from the public. (See JVCLegal.org for more information.)
For stores without these resources, another option is New York-based Circa, which mostly buys from consumers but also works with more than 100 retailers that regularly send in jewelry bought from clients, says Chief Executive Officer Chris Del Gatto.
For stones that pre-date the baby boomers, Los Angeles-based Single Stone specializes in antique jewelry and works with about 85 retail stores nationwide, buying up vintage diamonds, classified as stones dating from the late 1800s to the 1920s.
"Right now, because of the way things are, stores that are successful are stores that are actually working with consumers in buying back jewelry," says owner Ari Madilian.
Like Stollman, Madilian says that retailers should offer two options to their customers: a flat cash payout or a slightly higher store credit so jewelers cash in on their purchase right away and move a piece of merchandise.
Stores should avoid buying back melee (diamonds of 0.25 carats or less) because it's too hard to amass a usable collection of small stones that are of equal size and quality.
"There isn't enough profit in it because when you go to sell it to the trade, nobody wants to buy it for the same reason," Madilian says.
|
Save
E-mail
Print
Most Popular
RSS
Reprints
