A price list for wholesale and retail buyers of diamonds aims to provide the boundaries for how much a diamond should cost.
How does a consumer know how much to pay for a diamond? Without prior knowledge of the diamond business, he is unlikely to have any reference points for deciding how much a diamond should cost, www.antwerpfacetsonline.be says.
It is true that with the advent of the Internet and the easy availability of information, members of the public can find out about the 4Cs, and compare prices in the comfort of their homes. Nonetheless, few buyers are likely to understand how much they should or could be paying for any particular diamond.
For the seller or retailer this may be thought by some to be an ideal situation. The less information the buyer has, the larger the chances the retailer will be able to sell for a higher price. But it also is undoubtedly a major reason for the known phenomenon of consumer anxiety that is associated with buying diamond jewellery.
The diamond jewellery category is one of the few retail sectors that does not have a reliable source for Suggested Retail Price (SRP) or Maximum Retail Price for consumers. But now, with the endorsement of the World Federation of Diamond Bourses (WFDB), an initiative has been launched that, for the first time ever, aims to give diamond jewellery consumers a simple-to-understand price list that will enable them to understand how much they should be paying for jewellery.
In encouraging the development of the diamond SRP, the WFDB claims to have followed the approach that the consumer's lack of knowledge is bad for the diamond trade as a whole, because it reduces confidence. Potential jewellery buyers who are uncomfortable in their lack of knowledge are likely to simply walk away from a potential purchase, the organisation states. Meanwhile, those who later feel that they overpaid are less likely to become second-time diamond buyers.
The WFDB says the Suggested Retail Price List will serve the needs of the trade as well as consumers. According to the organisation, it is meant to serve as a benchmark for an enormous range of diamonds, which will inform dealers, as well as consumers, about how much they should pay for any particular gem.
The WFDB said the system is supportive of the trade because all retailers will see that prices are set at a level that enables them to be included in the system. High-end asking prices at the wholesale level and high-end multiples will ensure ample room for all business models.
The SRP was launched at the WFDB's Presidents' Meeting in Antwerp in mid-November. WFDB President Avi Paz said the WFDB was putting its weight behind the SRP list because it is transparent and subject to third-party auditing. He also said the list came about because hundreds of diamond traders had requested a price list based on complete transparency.
The WFDB-endorsed SRP list is based on up-to-date market data derived using methodology developed by IDEX Online which has a live database of polished diamonds worth more than $4 billion. The company has committed to having its system being audited by a third party, likely to be one of the world's top accounting companies. The price list will be governed by a board featuring representatives from all stakeholders - manufacturers, wholesalers, retailers and consumer advocate groups.
IDEX Online says that the system's objectivity is guaranteed by the raw data being based on actual sales, which is then subject to a"pre-determined mathematical algorithm with no human intervention."
According to IDEX Online, prominent diamond companies, including Eurostar and Rosy Blue, have already pledged to use the list, and Cartier in Paris has expressed interest as well. Furthermore, a new venture by eBay that allows consumers to build their own diamond jewellery incorporates the SRP list, showing the relevant SRP price next to diamonds in its search results.
As with the B2B lists used by professional diamantaires, the SRP will give a retail price recommendation for a stone based on each of the 4Cs– Cut, Carat, Colour and Clarity. The list will be based on the high-end of retail prices common in the market place, therefore allowing enough room for all business models in the industry.
Consumers will receive information on the SRP for a specific category and also on the reasons for the level of discount from the SRP. For example, they will find out why they should be able to receive a bigger discount on a lower-quality diamond. Similarly, there will be explanations that while an online retailer offers deeper discounts, there is a trade-off in terms of the services you might receive, such as the inability to see the stone in-store and compare it to other stones. On the other hand, if you are shopping at Tiffany & Co, then the discount a shopper might expect will inevitably be much lower.
The price list will be published monthly as a PDF file that can be downloaded, while its cost will be set at a symbolic annual fee. The price list will be accessible to consumers worldwide.
Not everyone is impressed, however, with the newly launched WFDB price list. Charles Wyndham, founder of Antwerp-headquartered PolishedPrices.com and of WWW International Diamond Consultants Ltd, does not believe the diamond industry should be deciding for consumers how much they should pay for a diamond. Far from making the purchase of diamonds more transparent, Wyndham believes the diamond trade is "embracing deliberate obfuscation.”
He said the list is based on asking prices, therefore making it of little use. “Who buys anything based on asking prices?” he asked. “Who is recommending the prices? The list has been created by the trade for the trade because it wants to control prices. And if that is the case, then how will it boost consumer confidence, as claimed?”
"The list is anti-competitive and not transparent. The industry has long been obsessed with price lists, but you cannot be precise about prices as they very quickly become out of date. They are only a snapshot of a situation at a particular moment in time. The trade is searching for, or purporting to be able to provide, degrees of certainty that simply do not exist in an attempt to ring-fence their margins.
"I do not believe that the industry has confidence in itself or its product. Take a handbag made by one of the famous fashion houses. Everyone knows that the cost of material and manufacture are relatively low, but those firms have the confidence to charge hundreds or thousands of dollars for something that is going to be out of date in months, or a year at most. Even with such a handbag, the costs go way beyond the simple raw materials and especially in the cost of creating and maintaining the brand which cannot be reflected in a recommended price list for the raw materials.”
"How can the diamond industry decide what a price should be for the consumer? What a list can legitimately do is to reflect in a transparent way the prices at which diamonds are being traded within the trade. This new list providing recommended prices is being supported by the same people who argue that diamonds are not a commodity, with which I would agree at retail but not for loose polished or rough diamonds. And then they are providing some benchmark, or commoditising, diamonds at the retail level, removing differentials in price for additional value that a particular retailer may provide."
Abraham Stern, CEO of IDEX Online, rejected the claims saying that the SRP is not a price list for the industry, but rather a tool created for consumers to allow them to make an informed decision in buying jewellery. "We are providing a high benchmark which provides a ceiling for how much the buyer should be paying," Stern explained.
“That is the starting point for the consumer's discussion with the retailer. If a diamond does not have a certificate, or has a lower-quality cut grade, or has high fluorescence then clearly a consumer should pay less and we are seeking to educate him in these issues. In similar vein, if the customer wants to see and feel the diamond before deciding on the purchase, then they are going to have to pay more than they would do for a similar stone bought from an online retailer.”
"This is a data-driven tool that aims to empower consumers and, in doing so, will make customers feel more secure and therefore drive business. The methodology has been accepted by the WFDB. It is open and transparent and cannot be tampered with. The SRP is subject to third-party auditing and has been adopted by a wide range of stakeholders. This is all about the consumer and not about the trade."
