Thu, 01 Dec 2005

Why do we need diamond grading reports?

Do diamond grading reports add value?
With
the implementation of new technologies current diamond polishing costs
are about $35 per carat. Diamond grading reports run to $127 per carat.
Does this seem a little strange to you?

Today consumers enjoy
a host of free rating services for wine, hotel, restaurants, B&B’s,
cars, camera’s and individual retailers etc. All are easily compared
for quality and cost.

In India many diamond polishing
companies, such as Venus Jewel, have their own grading systems. Why,
they ask, would they sell a client an E colored VVS diamond as D
Flawless? That it is simply bad business. Consolidation of diamond
manufacturers has led to bigger businesses that see the benefit in
establishing good supply partnerships with their clients. Some of these
partnerships are with consumer recognized brands where there is less
need for GIA or HRD ‘branded diamonds’.

Decades ago trade in
‘investment diamonds’ required independent authentication for large
high color and clarity diamonds. This reduced squabbles and
disagreements between buyers and sellers; each grade of difference is
worth around 30%. Later B2B web listings and the Internet led to
trading between people who often never meet, trading diamonds they
never saw. Trust and hand shakes became less important.

Grading
reports also added value in faceless bourse markets where agents
completed deals; neither buyers nor sellers knew each others identity.
But Rio Tinto (CRA) helped its Indian Argyle sight-holders deal
directly with their customers by taking them to jewellery trade fairs.
The cutters also gained valuable feed back. After its strategic review
in the late 1990’s, De Beers forced its sight-holders to follow a
similar business model. Today only a fraction of diamonds are traded
via agents; the pipeline is shorter, and relationships between buyers
and sellers is the norm.

The cost of the grading report, the
longer stock turn cycle (1 week to 2 months) and shipping and handling
costs add a lot to the final consumer price of the stone. Add to this
the confusion and complexity shoppers face in choosing between labs,
and we could ask:

Do diamond grading reports add value?

Normally markets become more efficient over time; will diamond grading reports become dinosaurs?

by Garry Holloway
HCA and Ideal-scope developer

www.ideal-scope.com – www.hollowaydiamonds.com.au

Holloway Diamonds