The Transformation of Diamonds

Until the early nineties, the global diamond business was a closely knit, hierarchical pipeline, where all participants knew their place as the precious pebbles moved from the mine to the market. Everyone understood that the industry’s oxygen was controlled by a single, all mighty entity, which used its undisputed power with meticulous care and determination. A kind of La Familia.

But those days when De Beers was known as “The Syndicate” controlling more than 85 percent of the world rough diamond supply are gone. Now relegated to a still important 30 percent share, a dozen or so additional miners now supply rough diamonds to manufacturers worldwide, through a suite of sales methods and platforms.

This change from the tight, monopolistic supply to a competitive, more democratic and transparent one, caused significant instability and forced changes in the historically opaque but well organized pipeline. One dramatic change was the reduction to “razor thin” profit margins as genuine competition entered the system. Many manufacturers were forced to sell their polished production at significant losses into a softening market that was unwilling to pay the high prices and lofty margins they had enjoyed for so long.

However just as the mining dynamics resolved for De Beers, the dynamics are resolving for the manufacturing and distribution participants. Better production technology, more accurate market information and reduced inventory with better management helped the industry navigate a more competitive and complex pipeline that resulted from changing market supply and demand. Today, successful participants continue their adjustment to the ever-maturing new normal.

Companies unable to adapt closed, while others were absorbed by larger, more capable and better capitalized firms. Banks learned expensive lessons, suffering big loan losses during the evolution as fatter margins, dysfunction and fraud were wrung out of the system.

Ultimately, consolidation, efficiency and transparency throughout the pipeline led to better predictability, improved supply and demand responsiveness with better price development and discovery.  In short, the mining, manufacturing, and trading processes consolidated, becoming more transparent, democratic and efficient.

The internet added to the democratization and productivity. Manufacturers and traders increasingly used tools like RapNet, IdexOnline and PriceScope to buy, sell and trade with seamless global access and newfound efficiencies.

A reasonable conclusion from this evolution is that diamonds would become commoditized and benefit the end consumer and investor, just as it did in other industries where monopolies ended and competition resulted in new efficiencies. Unfortunately, this has simply not happened in the diamond industry. The improvements have just not translated into a more efficient and transparent opportunity for those outside.

The reasonable question is: Why have the improved efficiencies not created improved value for the consumer and investor?

And further, with access to online etailers like Blue Nile, Ritani, James Allen, Lumera and Helzberg offering diamonds with grading reports from various laboratories, why does the public remain disadvantaged?

The answer is that all efficiency stops the moment diamonds enter retail where industry participants are able to take advantage of the consumer’s limited information as they have always done. At that moment value becomes a matter of perception as most consumers and investors know little about traded diamond values. Other than what they are told by the salesperson or dealer, the naïve public remains at the mercy of the diamond industry that still uses trust, brand, fashion, luxury and love to extract those big margins.

Etailers, who claim to deliver better value, capture as much margin as possible, by adjusting their prices based on algorithms that include the time of year, gift giving holidays and other social factors. Not surprisingly, etail customers end up with laboratory graded diamonds at the bottom of the grading range. Etail vendors always list the lowest standard stones on sites, seeking greater profits than they could achieve through other channels.

Both etailers and retailers selectively use laboratories with lower standards to achieve better margins. Because diamonds cannot be graded like precious metals, laboratory reports vary up to 15 percent, always to the detriment of the consumer.

Once diamonds have been purchased through a dealer or retailer at the usual high margins, it is impossible for the consumer or investor to recover their costs regardless of the time that passes. The margins at retail are simply too big. A sad example was recently uncovered by an experienced diamond dealer on a beautiful pair of rare, collection grade yellow diamonds. The investor had paid a jeweler over $80,000 for the stones, which were worth about $30,000 in the wholesale trade.

Adding insult to injury, when a consumer or investor wants to sell diamonds, there are few buyer options and none for price discovery. No global platform exists where consumers and investors can meet. When brought to diamond dealers, private owners often hear about exaggerated defects in their diamond, laboratory grading reports are ignored and a highly-discounted price is always offered.

So can diamonds ever be transformed into an asset that provides consumers and investors diversification, long-term growth and other benefits?

The answer is yes with VULT.  VULT diamonds are not part of the dealer or retail environment. VULT sources Gemological Institute of America (GIA) graded diamonds from primary diamond manufacturers, visually inspects every stone to insure it meets all collection grade standards, not just a few that a dealer or retailer wants to talk about. VULT prices are determined by market forces, not by retailers who must pay high rents, high salaries, high insurance and bonuses to successful salespeople.

VULT provides consumers and investors access to a transparent and global trading platform where sellers and buyers meet on their own terms. In addition, both Secured Worldwide and Money Metals, buy back VULT at a 1.5 – 3 percent discount from the last traded price. Providing value, price transparency and liquidity never before seen by the consumer and investor.

VULT delivers a globally liquid, portable diamond asset. The high security that protects the enclosed diamonds is enabled with advanced, metal-free ceramics and single crystal sapphire, as well as patented and state-of-the-art optical technologies. Since VULT technologies allow it to be authenticated globally using a smartphone application the diamond instrument is unique in that it may be sold or exchanged completely privately without brokers or other intermediaries. The last traded price of any model is discoverable on the website 24/365.

Secured Worldwide stands behind VULT products with the added benefits of both a return and buyback policy. In addition to GIA laboratory grading, Secured Worldwide is the only company to warranty that the diamonds in VULT are exactly as listed.

VULT is available in an understandable range of denominations from US$10,000 to US$250,000 and built with higher diamond standards than any other financialized product. It is a truly unique product that combines the best qualities of gold and diamonds with transparency, simplicity and portability. Contact us below to learn more about why VULT leads the financial revolution underway in diamonds.

 

[contact-form-7 id=”128″ title=”Contact form 1″]