Ther's Something About Paper - Why aren't you MAD???

[WinkHPD]

One of the more interesting educational sessions of the JCK Jewelry Show for me was the presentation by Richard Drucker of GemWorld.

It was about ten issues facing the industry today and one of them was the issue of over grading by some of the labs. I wish he had done a more inclusive comparison, but he included only GIA, EGL USA and EGL Israel. His comparisons are pretty damning as they are, but I think inclusion of AGS (which is normally higher priced than GIA) and IGI would also have been informative.

Here is the information that was shared. The stone being compared is a 1ct G-VS2 with none to slight fluorescence.. In his comparison Mr. Drucker listed the high, low (range) and then the average, mean and mode of the stones looked at. For simplicity I am only going to list the Mode.

Using GIA as the benchmark, and thus 100% EGL papered stones sell for -27% of what GIA sells for, ie if you paid $100 for the GIA stone you would pay $73 for the EGL USA.

For the same stone papered by EGL Israel the cost would be -40% ie $60 for the same grade of stone that would cost you $100 from GIA.

Worse is the FACT that this same comparison two years ago had the same stone selling for -25% rather than today's -27% from EGL USA. From EGL Israel the spread from two years ago has changed from -33% to today's -40% meaning that in the opinion of retailers the grade disparity is getting worse. Grade creep is here and it is going to keep creeping for those second and third tier labs.

One wholesaler asked by Mr. Drucker why he carried stones he knew to be over graded said it was because his retailer clients demanded it of him.

Why do they do this?

BECAUSE THE RETAIL CLIENT BELIEVES THESE BOGUS PAPERS AND BUY THEM FOR THE "BARGAINS" THEY OFFER. Thus many retailers demand a steady supply of these insidious "certificates" to feed to their unsuspecting victims.

Sad. Very sad.

Does this make you mad?

Wink

 

[Circe]

Wink, just to clarify, the problem is that it is NOT the same stone, yes? Just the same grade. Just to avoid confusion ....

And, yes, I do think it's a problem for the industry, one that contributes to the image of jewelers as cheats (spoken as a dealer's daughter and an enthusiastic amateur.) I'd love to see some self-policing going on here.

 

[WinkHPD]

You are correct, the same description of stones, in the latest study by Mr. Drucker there were 112 GIA papered stones, 15 EGL USA papered stones and 43 EGL Israel papered stones.

Sadly, with much lip service to self policing in the past few years, including sessions with industry leaders in attendance at JCK, the problem has become worse, not better.

Wink

 

[GemFever]

Just to clarify if I'm understanding this correctly...

Labs like EGL-USA and EGL-Israel give better grades to stones than GIA would (i.e. they inflate the grades) and then stones with these certificates sell for less than GIA-certed stones? The consumer thinks he/she is getting a bargain, but in reality the difference between the inflated grades and the lowered price still cheats the customer?

If I'm understanding correctly, it does sound pretty upsetting.

 

[WinkHPD]

Just to clarify if I'm understanding this correctly...

Labs like EGL-USA and EGL-Israel give better grades to stones than GIA would (i.e. they inflate the grades) and then stones with these certificates sell for less than GIA-certed stones? The consumer thinks he/she is getting a bargain, but in reality the difference between the inflated grades and the lowered price still cheats the customer?

If I'm understanding correctly, it does sound pretty upsetting.

Bingo! You got it exactly right and if you take a stone like an VS2 and move it to an SI1 there is a big price difference, move it down another grade to SI2 and there is another big price difference. Drop a color grade or two and the price difference can be HUGE.

Many retailers do not have the ability to know when the paper is good or bad. (See, the ironic thing is, occasionally the EGL USA paper is correct.) So those retailers either assume the paper is good, or do not care, since they can not tell for themselves. Other retailers know darn good and well that the paper is bad, and that is how they compete with the stores selling quality gems that have not only good paper but that paper has been confirmed by the retailer selling the quality gems with the quality paper, as the true professional knows that occasionally there can be a "lucky" (bad) paper by AGS or GIA.

It is a huge problem in the industry and someday it is going to raise up and bite us in the bottom!

Wink

 

[WinkHPD]

edited to delete a double post. Not very good at working on my laptop. Back into the show I go...

Talk with you all later.

Wink

 

[dreamer_dachsie]

Yes, it makes me mad. Sad. Annoyed.

GemFever -- the idea is that if a G VS2 stone being sold by EGL-USE is offered at -27%, then it means the industry *knows* it is more softly graded. The change of -2% from two years ago means that the industry *knows* that grading is getting even softer in EGL-USA compared to GIA.

This is an example of what many on PS have been saying for a while: With an EGL stone you can determine its GIA grade (roughly) by its price. There are no real deals out there.

 

[makemepretty]

It doesn't make me mad because if you're buying a piece of paper rather than the diamond you are seeing with your eyes, then pay whatever the heck you want 'cause I won't stop you. It's like paying more for a name brand than off brand, whatever floats your boat...but love what you buy NOT the piece of paper.

I saw a beautiful IGI I1 at Kay's a few years back. Those are few and far between, I know. I've seen a Nice Ice diamond 1 ct that cost $10,000, a 1.5 princess from Whiteflash for $7900, a 2Ct no brand for $8,000, a 1 ct $3500 from Helzberg.....all those diamonds were just as equally beautiful. Graded by IGI, EGL USA, GIA. I can tell you, the average lay person CAN'T TELL THEM APART except that they're different shapes and sizes.


Irony? I see a lot of people buying vintage stones, not GIA graded, not high up color or clarity, not using the holloway cut advisor and they are over the moon for the diamond they own. That's how it's supposed to be. I've never ever ever heard anyone ask "Oh, is that your engagement ring? Is it GIA graded?" You know who really cares about that piece of paper and the cost differences? SELLERS. That's why they get mad.

 

[GemFever]

I've never ever ever heard anyone ask "Oh, is that your engagement ring? Is it GIA graded?"

You know, I might not ask it, but I may think it...

I think you have a point makemepretty, but I can't agree with it fully. While people should enjoy whatever pleases their eye, I think good paperwork is helpful to an educated consumer because it's so damn hard to judge diamonds properly in a store setting. I went into Jareds once and the sales representative showed me several diamonds, but she kept dipping them in some kind of alcohol solution and they would really sparkle until the alc dried up. She called them drunken diamonds. It was real fun. But what would those stones look like on my finger in a regular environment? I could carry around a bottle of vodka to liven up my diamond, of course, but... I'd rather just get a really good stone to start with. Not being a diamond expert, I don't trust myself to pick one out in a store setting. That's where all the paperwork comes in very, very useful.

Dreamer... sure, there are no real deals out there, except the ones you find on ebay Let me sneak in another congrats on that beautiful 3 stone of yours! And thanks for that explanation... esp the point about what the additional 2% means. It makes sense.

 

[dreamer_dachsie]

Makemepretty, I think you are missing the economic point of this issue. It is not about beauty, or cut quality. It is about consumers getting screwed financially.

 

[Laila619]

Makemepretty, I think you are missing the economic point of this issue. It is not about beauty, or cut quality. It is about consumers getting screwed financially.

But a lot of consumers don't care. They perceive the EGL stone to be a deal, much cheaper than GIA or AGS. And no amount of trying to convince them will make them pay more $$.

 

[dreamer_dachsie]

Makemepretty, I think you are missing the economic point of this issue. It is not about beauty, or cut quality. It is about consumers getting screwed financially.

But a lot of consumers don't care. They perceive the EGL stone to be a deal, much cheaper than GIA or AGS. And no amount of trying to convince them will make them pay more $$.

Well the real point is they could pay LESS money and get the same thing An EGL G VS2 will cost more than its *true equivalent* GIA graded stone.

Ignorance won't stop me personally from trying to enlighten people I cannot imagine someone in their right mind blindly buying any other high price item the way people blindly buy diamonds. Do people walk onto car dealerships and take everything their dealer tells them for granted? Maybe some people do. The diamond and jewelry industry as a whole has done a really good job convincing people that they should not care about ANY of the markers that determine value on the market -- ooooh all you should care about is love and sentiment! On something worth thousands? No thanks. It is marketing pure and simple, and people fall prey to it all the time.

 

[AnneinGA]

I think there are two main issues with the average (non PS consumer).

1. They either know enough to know that they should have a piece of paper stating the grade of the diamond they are buying OR the B&M store they're using has "certified" diamonds that they upsell as better than their non-certed stones so the consumer deduces that a papered diamond is better than a non-papered one

and

2. They don't know the difference between the logos on the top of the paper, and since many B&M's don't have AGS, and the ones that have GIA's are priced higher than the other "papered" diamonds, the consumer goes with a (any) papered diamond as a feel-good of increased quality of the stone.

I think it is much the same way as puppies. There is AKC, CKC, and UKC. Then there are the "puppy shop" lineages, that are "Puppy Shop Family Tree" papers. All show the lineage of the dog. Some consumers (dog people like me) know that puppy shop family trees may be real, but that they usually are puppy mill breeders, and what it doesn't say is how many litters, etc. I also know to check for health, OFA screenings, ratings, eye health, etc, and to see the parents and grandparents (if possible) to determine if I like the line.

But some people who want a chocolate lab will go to the puppy store and buy one with "Puppy Shop Family Tree" paperwork. To them, their dog is great.

Wink, as much as I agree with your position, you can't expect consumers who just want a diamond to want to be educated about the diamond. They buy things backwards. They want a 1 carat. The other stuff doesn't matter. It's like buying a car by telling the dealer what you want the payment to be, and the finance man "works his magic" and ther person who bought the car is over the moon (nevermind the 10.2% interest rate over 72 months and the rollover of the old car still owed).

Most people flat don't know any better, really have no desire to know any better and go on about their business.

And for the rest of us, there's PriceScope!

 

[Karl_K]

Yea it makes me mad.
A local jeweler for years has sold diamonds like this:
Has one GIA graded stone and a ton of igi and egl-isreal graded stones in the popular sizes/grades.
He offers the GIA graded stone at a high margin then offers them a deal on the igi/egl at about 10% off the GIA stone.
He then makes a killing because he is not passing the real price difference on to the customer.
Every once in while someone will insist on GIA and he doesn't care, sells it and gets another in on memo.
Wash rinse and repeat year after year after year.

 

[oldminer]

I just made a direct request to Rob Bates, Chief Editor of JCK Magazzine, to research and develop an article in consultation with GIA about the mis-use of the grading system that GIA is known for all over the world. The fact that GIA did not trademerk their system leaves it open for others to use the same letters and numbers in a mis-leading way when the only similarity between these various labs if often just the letters and numbers, but not the quality of the diamond.

No individual or small group of professionals can stop what has been a practice for a very long time, but the largests jewelry industry magazine in concert with GIA could do something about it. Pressure from every level of the industry to get a widely published industry magazine to produce the article and for GIA to finally stand up and require that all grading they produce at the GIA lab have ", GIA" directly after any grade is printed on all their reports. The worst labs could not risk putting ",GIA" afterthe kind of grading they use.

You won't find many other labs willing to say their grades are equal to GIA grades by using that sort of terminology. Every lab should put their own initials following their own color grades unless they are prepared to prove and defend that they use exactly GIA lab standards. Few could claim such a policy and in fact, most would deny they do that now. The abuse of GIA terminolgy is mis-leading to consumers and is a widespread fraud causing harm to honest merchants, consumers, and other parties which rely on these reports not fully understanding the nature of purposeful diamond grading error from lab to lab.

While the fraud continues there are some very large and small retailers and dealers who are beneficiaries of loose grading. Those forces have a vested interest in keeping things just as they have been. The sooner we see change, the better, IMO...

 

[Gypsy]

Made me mad for a while. You see it all the time on this board.

What's the solution though? I don't think there is one other than what we do: help people become more knowledgeable so they can make informed decisions instead of ignorant ones.

 

[Haven]

As an educated consumer it makes me mad. But honestly, I think the market is just meeting the very low demands of the customers. In this day and age, people *can* become educated about diamonds. I mean--we're all here on PS, aren't we? But do MOST diamond buyers find PS? Nope. They don't find us because they're just not looking.

I think most people who buy diamonds don't really care enough to investigate the various grading labs. AND, I think most people like to feel like they got a steal, and they care more about this feeling than they do about the actual quality of the stone itself. At least, this is something I've noticed amongst people I know IRL. They rarely talk about the quality of the stone, it's always about the amazing deal they got.

I suppose the question is how much responsibility should diamond sellers have when it comes to fairly representing stones, versus the individual consumer's responsibility to educate herself before making a large purchase.

 

[kenny]

Does this make you mad?

No.
I'm LIVID!

I want to see the heads of these "labs" do jail time.
They are criminals!

Imagine if a 1.00 ct from GIA weighed 1.27 ct at EGL USA and 1.4 ct at EGL Israel.
Same Fracking Thing!

 

[Haven]

Does this make you mad?

No it makes me LIVID.
I want to see the heads of these "labs" do jail time.

Imagine if a 1.00 ct from GIA weighed 1.27 ct at EGL and 1.4 ct at EGL Israel.

Same Fracking Thing!

That's a really interesting point, Kenny.

I wonder if they get away with soft-grading of color and clarity because, unlike weight, they can set their own standard for measuring these two things. I mean to say, if EGL was brought to task for grading a GIA F/SI1 as D/VS1, could EGL just claim that they have their own standards, and according to them, this stone is an EGL D/VS1. This seems to be the case, based on all of the softly graded stones we've seen.

This whole thing kind of reminds me of college in a way. Students can choose which professor to take for a class, and different students have different priorities. Students who want to work hard and learn a lot will take Professor A, because the feedback on her RateMyProfessor profile says she's tough but you will learn a lot and be prepared to move on. Students who want an easy A without much effort will take Professor B because her ratings say she doesn't really read anything you submit and as long as you show up to class you'll get an A. Is it right? NO. But different students/consumers have different priorities, and they make purchasing choices based on those priorities. Everyone finishes the semester feeling they got their money's worth because their varying priorities were met. I don't agree with the students who choose Professor B, or with Prof B's approach, and I think it's wrong that she is allowed to hand out As that mean a very different thing than the As that Professor A assigns, but they both exist because there is a market for both of them.

 

[Laila619]

Does this make you mad?

No.
I'm LIVID!

I want to see the heads of these "labs" do jail time.
They are criminals!

Imagine if a 1.00 ct from GIA weighed 1.27 ct at EGL USA and 1.4 ct at EGL Israel.
Same Fracking Thing!

Kenny,

Carat weight is not subjective though, it has to be precise. Color and clarity are subjective.

 

[kenny]

Does this make you mad?

No.
I'm LIVID!

I want to see the heads of these "labs" do jail time.
They are criminals!

Imagine if a 1.00 ct from GIA weighed 1.27 ct at EGL USA and 1.4 ct at EGL Israel.
Same Fracking Thing!

Kenny,

Carat weight is not subjective though, it has to be precise. Color and clarity are subjective.

Not THAT subjective.

I'm going to open up a lab.
EVERY diamond submitted will be graded D IF.
We will have the fastest service and lowest price since we don't have to bother employing anyone to look at the stones.
I, and all the vendors, will get rich as the public gets screwed.

After all, it's all subjective.
It's all just opinion.
Right?

 

[WinkHPD]

Does this make you mad?

No.
I'm LIVID!

I want to see the heads of these "labs" do jail time.
They are criminals!

Imagine if a 1.00 ct from GIA weighed 1.27 ct at EGL USA and 1.4 ct at EGL Israel.
Same Fracking Thing!

Kenny,

Carat weight is not subjective though, it has to be precise. Color and clarity are subjective.

Interesting comment Kenny. Here is something that makes me even madder.

Mr. Rapaport reported that some houses are recutting stones to exactly match the grading report of a nicer stone and then selling the stone as the nicer stone. He said that he had caught one of his biggest users doing this and threw them off of Rapaport. (Sigh, my hero...)

Then Peter Yantzer got up during the session on the labs and said who in the audience did not consider that out right fraud? (Got an ovation, well deserved.)

Paul Slegers said to John Pollard and I in a private conversation, "So, he threw them off of Rapaport? Did he name them so we know who they are? Did he call the police and report them? That is like going to a car thief and telling him, 'Hey, stop stealing cars on my street, you must go steal them on someone else's street.' If you do not call the police, you really have not helped anything except your street."

There are some serious issues in my chosen industry, and like our government, every one acknowledges them, but figures we will let our children solve them.

I Say BS! We need to work on them now before they destroy our wonderful industry!

Wink

 

[elliemay]

Wink, as much as I agree with your position, you can't expect consumers who just want a diamond to want to be educated about the diamond. They buy things backwards. They want a 1 carat. The other stuff doesn't matter. It's like buying a car by telling the dealer what you want the payment to be, and the finance man "works his magic" and ther person who bought the car is over the moon (nevermind the 10.2% interest rate over 72 months and the rollover of the old car still owed).

Most people flat don't know any better, really have no desire to know any better and go on about their business.

This. Before PS, I knew I wanted at least a carat, eye clean, and not noticeably yellow. Those were my main criteria for shopping! I also steered away from certificated diamonds because I thought they were just a marketing ploy. I was very, very lucky to end up with a great stone for a great price, but I took a huge, uneducated risk and could've ended up with an I2 poorly cut honker of a monstrosity. And that would've been my own stupid fault.

The vast majority of retail diamond purchases are made by people with little to no diamond knowledge. No loupes. No research. No confidence. They see something big enough and sparkly enough and hand over their money. Salespeople know this and use it to their advantage and really, we can't blame them because they aren't there to educate or help the consumer -- they're there to earn their commission.

It's the same as someone shopping for a car wanting a red one -- colour as the only criteria. The salesperson is, of course, going to try to sell them the red car with the highest profit margin.

In my mind, it's the saleperson's job to make money and it's the consumer's job to educate themselves. It's very much an us v. them scenario. PS is such a wealth of knowledge, but it's really unfortunate that the people who really need PS knowledge and guidance are the very people who never think to seek it out.

 

[Christina...]

I worry about possible future implications. If the vast majority of consumers are uninterested in educating themselves about their diamond purchases and different lab gradings, and are happy to buy the stones that appear to be a bargain, then how long before reputable labs like GIA and AGS start softening their grading as well to ensure that dealers looking for 'top grading' continue to submit stones to them. Are fewer stones today being sent to GIA and AGS than in the past? If that begins to be the trend, what will the implications be? They will have to respond somehow to survive.

 

[distracts]

As an educated consumer it makes me mad. But honestly, I think the market is just meeting the very low demands of the customers. In this day and age, people *can* become educated about diamonds. I mean--we're all here on PS, aren't we? But do MOST diamond buyers find PS? Nope. They don't find us because they're just not looking.

I think most people who buy diamonds don't really care enough to investigate the various grading labs. AND, I think most people like to feel like they got a steal, and they care more about this feeling than they do about the actual quality of the stone itself. At least, this is something I've noticed amongst people I know IRL. They rarely talk about the quality of the stone, it's always about the amazing deal they got.

Yep yep. My fiance is like this - we bought my ring for a fair price. It wasn't a "deal" in that it wasn't below what it was worth, but it was a completely fair price, a little bit above what you see at PS vendors but it was a B&M so that seemed fine to me. As seems to be customary, the "appraisal value" was inflated. Fiance likes to believe that is the "real value" of the ring, and that we got a ring for roughly half of what it's worth. To make this even worse, we saw a similar ring at another store for a little more than the price of our "appraisal value," which further confirms my fiance's thoughts, despite the fact that, as I have explained to him, it's actually exactly opposite - if we had bought the more expensive ring at the sticker price, we would have been paying almost twice what it was worth (and in all likelihood, the store would have negotiated down like 30+%). I've explained it to him like a million times but he doesn't get it or doesn't care. However we do have a rule that I do all the jewelry shopping, and if he wants to shop for things for me on his own he can only do it from a pre-approved-by-me list of vendors, so even if he persists in crazy thinking, he isn't actually getting ripped off.

 

[kenny]

GIA and AGS going belly up because the public is increasingly dumbed down and lazy is a frightening but plausible prospect.

I gotta get Kenny Gem Lab going.
Same day turn around.
$10 per carat.
D IF guaranteed on every diamond.

We'll have an FCD department.
Every colored diamond submitted is guaranteed to be graded Flawless Fancy pure Red.

The public will be so happy with the bargains they'll get.

 

[Rockdiamond]

HI All,
Wink, Paul's comments were spot on!
Mentioning there was a problem and not "outing" the perpetrator is plain wrong.

The answer is education.
Really that's all we can do.
The bottom line is that consumers who don't do their homework can easily fall prey to con men( women) ....and this is true in ANY endevour.

I'm well in tune with the old saying- you get what you pay for.
But there are always going to be people who think they can "beat the system" - and therefore there will always be prey for con men.

 

[yssie]

GIA and AGS going belly up because the public is increasingly dumbed down and lazy is a frightening but plausible prospect.

I gotta get Kenny Gem Lab going.
Same day turn around.
$10 per carat.
D IF guaranteed on every diamond.

We'll have an FCD department.
Every colored diamond submitted is guaranteed to be graded Flawless Fancy pure Red.

The public will be so happy with the bargains they'll get.

Throw in gem photography services and you'll be the most popular enterprise on PS

 

[WinkHPD]

GIA and AGS going belly up because the public is increasingly dumbed down and lazy is a frightening but plausible prospect.

I gotta get Kenny Gem Lab going.
Same day turn around.
$10 per carat.
D IF guaranteed on every diamond.

We'll have an FCD department.
Every colored diamond submitted is guaranteed to be graded Flawless Fancy pure Red.

The public will be so happy with the bargains they'll get.

Throw in gem photography services and you'll be the most popular enterprise on PS

LOL, will that include the cost of photoshopping the yellow's to make them look red???

Wink

 

[WinkHPD]

Oh wait, no humor, I am still cranky about this!

Sigh. It is hard to be mad and have fun at the same time.

I am seriously laughing at Kenny's new gem lab and really cranky about the state of the "paper wars".

Wink