Tiffany, Diamonds and the Internet

[diamondsbylauren]

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On 8/26/2004 11:12:18 PM davidjackson wrote:

D Riley -
Your comment was fascinating; thank you. If I understood it correctly, you're saying that some key aspects of diamonds which cannot currently be measured according to widely accepted metrics will soon be measurable. If that's true, it seems to make a lot of sense that diamonds will become increasingly commoditized.

Garry -
I'm not sure your perfume analogy is accurate. Here's why. Perfumes are not commodities, because each fragrance is unique. That uniqueness then opens the door for branding opportunities. As you allude to, perfume vendors spend more on packaging and advertising than the creation and manufacture of the perfume itself. But a plain platinum wedding band with no decoration, to use another example, is a commodity, because wherever you buy it from it will be identical, and its characteristics are determined by objective metrics (size, weight, shape etc). A company with a powerful brand may be able to sell a commodity at a slightly higher price, but consumers generally will put a cap on that price premium because they know the products are essentially identical. My gut feeling is that this is the case with diamonds, once the issues that you've raised about measuring the quality of the cut are worked out (as D Riley suggested they will be). Sure, you might pay 5% or 10% or even 15% more for the cache of buying a diamond from Tiffany, but 30% more or 40% more? Not if you know that you could buy an identical product from an Internet vendor for much less.

By the way, that is why I clearly distinguished in the piece between engagement rings and Tiffany's other products. Tiffany's other jewelry is not a commodity, because the designs are unique and can't be purchased elsewhere. The same is true of the bulk of the products it sells in the $80-$750 range. But diamond engagement rings are different, because their design is standard (I understand that there are variances in settings, but I don't think that's significant enough of a differentiator) and the stone at some point - if not now - will be measurable against agreed metrics.

This discussion has been really helpful for me. Thank you to everyone who has participated so far.

2 other questions:

1. Does anyone have any anecdotes about people intially thinking they would buy from Tiffany and then purchasing from the Internet instead?

2. Do you think it's possible that a company like Blue Nile could establish enough of a brand name to become the 'Tiffany of the Internet'?----------------

Hi David,
Diamonds will never be a "commidity" per se- they definately retain value well in certain cases.
I'm of the belief that no machine will ever be able to judge what needs to be seen by ones eyes.
Even if we could assume that there was a way to accurately judge a diamond's cut using it's measurements, there are other factors to consider- such as imperfection placement which will afect a stones saleability, and therefore it's value.
Bottom line- even with all the new tools, I know of no dealer who would buy a diamond sight unseen, regardless of the tools currently avialable.
It's not likely to change because 2.00 G/SI1 diamonds are not fungible.


Regarding Tiffany's- they have extrmemly strict standards, and produce a consistently wonderful product.

In my opinion a large percentage of the people looking for what Tiffany's offers would not want to shop anyplace other than a Cartier, Harry Winston, or Van Cleef.
The internet has allowed some very fine companies ( and a bunch less than fine) to sell to more and more people that would never walk into Tiffany's It's possible to buy diamonds and jewelry that are comperable in terms of quality. At prices quite a bit lower.
Blue Nile has done a wonderful job of establishing a great online brand name.

 

[denverappraiser]

GIA is the dominant brand name on the internet and, increasingly on the street. As the cut grading becomes more and more defined, I expect this to increase in power with some competition supplied by AGSL, EGL and IGI. Notice that Tiffany's and Blue Nile's names are not on that list. A majority of customers put more value on what GIA says than they attach to the merits of the stone itself and a GIA branded stone will sell faster and for more money than another 'lesser' brand, even with an identical stone. Consumers know the brand names and they have a relative heirarchy in the marketplace. If what David is suggesting is correct, this will accelerate because he's effectively declaring that the only important attributes of a stone are the ones that GIA chooses to report on. There are quite a few people out there who agree with him. This doesn't make brands less important, it makes them more so. It just changes the important brand from the name of the store/cutter/advertiser to the names of the grading labs (who are also heavy advertisers). Without that brand, everything goes back to the relative chaos of an open market. I can't say I agree with his position but I see where he's trying to lead this discussion. I think in his model, the threat to Tiffany isn't coming from the internet at all, it's coming from Carlsbad California.

Neil Beaty, GG ISA
Independent Appraisals in Denver

 

[fire&ice]

Well, it's Friday so I'm gonna say it. (DJ - if you do a search you will many a Tiffany threads - the heated ones usually occur on Fridays

)

Tiffany & Co. carries no cache for me. I do not consider them to be *the* upscale jeweler. I find them to be very Middle America. To me, they are not in the same league as Harry Winston. Tiffany & Co. is more of a trinket pusher. That's just my take. I can well afford to buy from Tiffany & Co; but, do not find the blue box to be any where near unique for the premium they charge for the diamonds (which are not specific only to Tiffany).

That said, they have nice quality not great quality.

 

[diamondsbylauren]

I would disagree with some of the things in Neil's post.
For one thing, the diamond market has always been an open market- relative chaos is the norm- and I don't see that changing.
When we're talking about "branded" diamonds, which are traded with less "chaos", we're speaking of a tiny percentage of the market.
Even if we eliminate the HUGE percentage of stones sold which are NOT round, then eliminate the majority of round diamonds, which are not "branded" we're left with a tempest in a teaspoon.
GIA does have an impact on the market- but the broader picture still is that each stone needs to be judged on it's own merits. This is NOT going to change.

The second tier labs have already tried cut grades. Other than AGS which serivces this tiny sliver of the market, none of the second tier labs' grade carries substantial weight with dealers- cut grades included.



It seems people love to bash Tiffany's- still, can anyone name another company in the jewelry business with a reputation to match Tiffany's?

I used to sell jewelry for a compnay that did business with Tiffany's- I can tell you that their quality standards are unbelievably tough.

I don't think that many of Tiffany's clients would trust GIA over Tiffany's- not to say a Tiffany's report compares to a GIA report- just that many people in the position of buying the type of jewelry and diamonds Tiffany's offers would probably not even know that a GIA report is more widely accepted form of Gem identification.

It could be argued that Tiffany's is a more widely recognized name than GIA.

 

[denverappraiser]

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On 8/27/2004 4:10:45 PM diamondsbylauren wrote:

I don't think that many of Tiffany's clients would trust GIA over Tiffany's- not to say a Tiffany's report compares to a GIA report- just that many people in the position of buying the type of jewelry and diamonds Tiffany's offers would probably not even know that a GIA report is more widely accepted form of Gem identification.
----------------

David (as in diamondsbylauren)

The only reason that Tiffany would start a policy to give their customers GIA paper in addition to their own is if they feel some market pressure from customers to do so. The fact tht they are apparently doing this as a standard practice would suggest that they *DO* have customers who have requested a GIA issued document as further assurance. The only reason a customer would make such a request is if they have both heard of GIA and think highly enough of them to be interested in their opinions. The only reason that Tiffany would make this a standard practice is if the request were common.

The market being discussed is, indeed the branded diamond market and this is a relatively small portion of the whole jewelry industry. This market is growing while Tiffany's share of it is shrinking. I'm not inclined to buy their stock for this reason. Are you?

Neil Beaty, GG ISA
Independent Appraisals in Denver

 

[fire&ice]

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On 8/27/2004 4:10:45 PM diamondsbylauren wrote:

It seems people love to bash Tiffany's- still, can anyone name another company in the jewelry business with a reputation to match Tiffany's?

--------------

What reputation? I have found significantly better quality items at my local jeweler/craftsman. Caryle & co. carries much better trinkets. Name recognition is not the same as reputation. I can think of several better jewelry stores that aren't a well known designer place. I'm not saying Tiffany is junk. Just that the ain't all that and a bag of chips. I can buy the same lazare Kaplan diamond at a store w/ better products.

Pieces w/ a Tiffany signature *may* command a bit more money on the secondary market; but, not in the same league as Bvgari, Cartier, Harry Winston, etc.

 

[jtoskey]

David Jackson,

When looking at the shopping comparison engines, I really don't think any of them do a very good job. The problem with these sites (BizRate, Shopping.com, NexTag, My Simon, etc.) is that their back end infrastructure isn't built to support products like loose diamonds. Their strength is in common, UPC'd goods, like TVs, DVD players, computers, etc.

To browse or search for diamonds at these sites is excruciating. They don't present information in a manner that is consistent with how people shop for diamonds. And they know that. A couple of them are taking steps to improve their taxonomy, but they have a long way to go. And loose diamonds is worlds better than most other jewelry categories.

 

[diamondsbylauren]

As far as offering GIA reports:
I believe Tiffany's purchases most of their diamonds on the market. Higher quality stones are usually sent to GIA by the cutters. It stands to reason that if the diamond Tiffany is offering was purchased by them with a GIA report, they would offer it as a matter of course. If they were cutting thier own rough, then it may very well be true that market forces are driving them to send stones to the GIA.

Sorry- I did not mean to lead a "Tiffany Cheerleader Squad".
Sure- they are probably overpriced- and there are certainly other sellers offer quality equal, or even superior- at far lower prices.
The perception of quality is something personal. NO question more and more people are finding other places to buy the superior quality that Tiffany is known for.
Blue Nile is a great example of an online company with broad based name recognition. They have a very good reputation. You can be sure that fact makes a big difference to a large percentage of thier customers.

Not that BizRate, or any of the others mentioned don't have a good reputaion. But having a reputation for being cheap, such as the type of place you buy an air conditioner, or computer- that's not where most folks looking for quality diamonds want to buy one.

 

[eyesoftexas]

Tiffany Friday here we go....

Again I think we are going down a rathole with this one. Please realize that people who are on this message board are a special breed with passion for diamonds or newbies who like to do their own research. This by far is not the majority of buyers at Tiffanys. I have had several college buds just get engaged. All of them are upper-class young professionals who could have easily done the reserach on this forum prior to making a purchase. But they did not, rather they went to Tiffanys or Cartier, looked at their diamonds and picked what looked good. They assumed that with those reputations for quality they were not going to go home with a peice of glass. They liked the service, did not have to do any work and did end up with a quality diamond. They know they paid more but so what....

As far as diamond quality, I agree with David, your eyes are the best tool. Not sure about those on thsi board but I have a hard time telling the difference between 34.2 and 34.4 degrees crown angles because to me it does not matter - it is splitting hairs.

 

[fire&ice]

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On 8/28/2004 12:48:16 AM eyesoftexas wrote:

Tiffany Friday here we go....

But they did not, rather they went to Tiffanys or Cartier, looked at their diamonds and picked what looked good. They assumed that with those reputations for quality they were not going to go home with a peice of glass. They liked the service, did not have to do any work and did end up with a quality diamond. They know they paid more but so what....

As far as diamond quality, I agree with David, your eyes are the best tool. Not sure about those on thsi board but I have a hard time telling the difference between 34.2 and 34.4 degrees crown angles because to me it does not matter - it is splitting hairs.----------------

They are not going to get junk at those stores - granted. And, I've never been a numbers junkie. I solely buy by my eye for my profession. I honestly don't think Tiffany nor most of Cartier offers a quality product at a *fair* price. In my opinion your buddies were lazy (if indeed there only reason was because of quaranteed relative quality). We aren't talking about buying convenience store milk at $2.00 more. We are talking thousands for the same diamond (if not better) offered else where.

I still shake my head.

 

[eyesoftexas]

Was it that my buddies are lazy or is it that they choose to spend their time doing other things - which is the case.

As far as getting junk - get real. Your Tiffany envy is coming through. As David said, I do not want to be a Tiffany cheerleader (or cartier) but there is a difference between being expensive and categorically calling their stuff junk which is absolutely not the case. I have run several RBC from Tiffany through the HCA and they always come out less than 2 and usually excellent across the board.

 

[valeria101]

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On 8/28/2004 12:15:02 PM eyesoftexas wrote:



[...] that they choose to spend their time doing other things [than tracking diamond subtelties]

----------------

Thanks for saying it in two words (as opposed to the 100 I need

).
Much less wisedom voids the claims of short-lived brands, than professional buying takes.

Unless one enjoys the ride on in it's own right, it may not be worth going the extra hundred miles.


Getting just one piece of expensive jewelry (= engagement ring) out of the blue seems tricky. If one already has as a decent amount of experience with this sort of purchases beforehand (or at least among the immediate social circle) there would be no need for Pricescope, I suppose.


Well established brands are the obvious choice whenever the object you want is confortably within your budget - whatever that may be.

 

[fire&ice]

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On 8/28/2004 11:53:13 AM fire&ice wrote:

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On 8/28/2004 12:48:16 AM eyesoftexas wrote:

They are not going to get junk at those stores - granted. I honestly don't think Tiffany nor most of Cartier offers a quality product at a *fair* price.
I still shake my head.

----------------

I suggest you re-read my statement above. I did not say that Tiffany is junk - but that the price is high for what one receives. Sorry, don't have Tiffany envy. I own several Tiffany & Cartier items. All, save one, I bought on the secondary market for pennies on the dollar. I will pay for decent quality at a fair price. In my industry, Tiffany holds a mild premium - but only because the mass market one sells to believes this - not because anyone thinks their quality is exceptional. Tiffany is resting on their laurels. If they continue the route of poping up stores all over, they will lose the "public" cache.

I have an opinion. The "supposed" cache & certain moniker of quality is *not* worth the premium to me. For this article, it wasn't about the money. I just don't think that Tiffany offers anything special to command the inflated premium.

And, yes, IMHO, Lazy. I would be a little miffed if my fiance didn't want to take the time to know what they were buying. If he choose to go buy at Tiffany's *after* putting some effort into choices, then so be it. This isn't some dopey piece of jewelry. Quite a bit of thought goes into taking the step to marriage. The ring is a symbol of that. But, maybe these women are thrilled w/ something from either store. I wouldn't be. And, my husband knew me well enough to know that the name isn't my end goal.

We are going to have to agree to disagree. Why is it when someone doesn't think Tiffany is the end all of be all that it must be envy? It's not. It's an educated belief. If that blue box means something to someone then fine. But, just know that that box costs quite the premium. It means nothing to me. I like some of their designs. I do believe their "Tiffany" setting is a standard. But, I'm not willing to pay a premium to own it on the retail level. I would only pay what I would pay for a nice item. Tiffany is a retailer - pure & simple. I just don't buy the hype. And, I maintain that my local craftsman/jeweler has things that far more inspire me - created & design *by* him.

And, it's not even Friday!

 

[fire&ice]

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On 8/28/2004 1:49:16 PM valeria101 wrote:

----------------
On 8/28/2004 12:15:02
Well established brands are the obvious choice whenever the object you want is confortably within your budget - whatever that may be.
----------------

I completely disagree with this statement.

I see so many people make the mistake of buying something simply because it was branded "X". And, they pay a premium for it. The problem arises when they start to educate themselves & realize that the signiture is just one thing to consider. But, then, some are none the wiser.

Case in point. Last year I bought a quilted Pendleton jacket. Pendleton isn't the highest of end; but, shares a reputation. It's nice quality. I liked it. I bought it. Yesterday I was in Walmart for sundries. I spotted a quilted jacket. The styling exceptional, good construction & lined w/ polar fleece. I bought it. Yep, happy with it at 1/8th the price of my Pendelton jacket. BTW, both are made in China & possibly at the same factory.

Maybe my point of view is skewed as I buy for a living. The concept of shopping comes naturally for me. And, because it's my livelihood, maybe I am more confident in my choices. I've bought things from Christies, etc. I've bought things from damp basements in not so nice houses. The venue/brand doesn't determine value. Unless the cache of buying from such venue/brand is added in one's own mind, to the perceived "value".

 

[Dancing Fire]

i really doubt if anybody can tell the difference between a diamond from Tiff and a top ideal cut,of the same grade.

 

[davidjackson]

Thought you'd be interested to see this:

Zales (ZLC, $26.54, NR) just reported its July quarter results.  In its conference call, management announced that it plans to launch its online retailing efforts for its premium Bailey Banks & Biddle store in November. Management also indicated that it plans to be more aggressive in the online retail segment – management listed the online launch as one of its top three IT priorities.  Finally, management indicated that it will support the launch with direct mail and magazine advertising.

Looks like the online jewelry market will grow faster than many people think. Garry - there's clearly a big opportunity for pricescope.

Best Regards

 

[alexah]

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On 8/31/2004 10:47:39 AM davidjackson wrote:



Looks like the online jewelry market will grow faster than many people think. Garry - there's clearly a big opportunity for pricescope.

I read the tutorial and looked at the other postings, and just wanted to complement Garry on this site. It's outstanding. I'll make sure I link to it from the piece.----------------

Regarding the above, Leonid is the one to compliment on this terrific site

 

[Garry H (Cut Nut)]

Thanks for the tip David.

But i doubt they will be brave enough to be listed here on Pricescope among the super heavy weight competitors.

Yes Leonid is the BossMan

 

[davidjackson]

Just wanted to thank everyone who replied to my original posting. I've added a link to pricescope in the article, which will be sent to thousands of subscribers in the financial and technology industries today. Your comments gave me a much better understanding of the issues.

Thank you to all of you!

Best Regards,
David

 

[davidjackson]

Just wanted to thank everyone again who posted comments in response to my question. The article has now gone up on a new web site specifically targetted at hedge fund managers. You can find it at:

Will Tiffany be Hit by the Internet?

Please feel free to let the readers know if you disagree with the thesis of the article there, by posting a comment. I'm also happy for you to post the name of your firm, if that helps you advertise your service (incling this terrific web site). But please be subtle about the advertising; don't go overboard.

Best Wishes to you all,
David

 

[Garry H (Cut Nut)]

Good stuff David.

BTW there will be a live interview about the Lab & pricing survey on WBIX-AM in Boston, Mass. with CBS Marketwatch and the host/interviewer Chuck Jaffe at 11.20am on Tuesday morning.

 

[Ascher]

I think that Tiffany's is being undercut in price, but the kind of customer they attract are not only going to Tiffany's for the price/value, they are going for something else- the cache of a Tiffany diamond. The girl, and for that fact, the guy, can brag that they bought a Tiffany diamond. Ohh La La! Even though it may be smaller or not as nice as a non-Tiffany ring, it still carries the name of Tiffany. I believe the kind of customer who would buy via internet is not the core market of Tiffany's or the market they are trying to capture. Tiffany may have issues with their silver pieces or other jewelery but not diamonds. Just my thoughts.

 

[JohnQuixote]

Regardless of the impact Tiffany could feel, this is an illuminating article about the growing viability (and trustworthiness) consumers see in this marketplace.

Consumer Education + Laboratory Certification + Credit Card Protection = Comfort.