This Blog Has Moved!

We've moved from Blogger and integrated our blog into our existing website.

Our new blog can be found at: http://www.diamondsandopals.com/blog/

How Buying A Diamond Has Changed in The Last 10 Years: Part I

Prior to the mid 90s, the only way to buy a diamond was to go to a jewellery store and buy one from their stock or one they had received on approval from a wholesaler.

There were a couple of problems with this:

a) You had to go to a number of stores just to find the diamond you wanted.
b) It was expensive, and the diamond was probably uncertified.

However, in the mid to late 90s, internet retailers like us burst on to the scene and created shockwaves in the industry.

Instead of offering diamonds in stock or from an Australian wholesaler (or "middleman"), we listed diamonds directly from overseas cutters and wholesalers. And instead of charging a markup of up of to 400%, our average markup was a mere 20%.

In the early days, the market for this method of buying was still small and yet to fully "catch-on", however, there were only a couple of players in the industry, so sales were solid and we remained profitable.

However, as others in the industry caught on to this "new deal" and new websites came and went, it was clear that internet diamond sales were here to stay and that more and more diamond dealers were going to try to compete.

Our Signature Series vs Our International Selection: An Explanation

Traditionally we have offered stones in our inventory, as well as a couple from Australian based wholesalers only to Perth based clients, as well as a few clients we meet interstate. The stones that were listed on our website were all from overseas cutters and wholesalers - something that is done on many diamond websites.

The reasoning behind this method was that:

• The stones from overseas cutters and wholesalers would dwarf the amount of stones in our inventory.


• There was no value being added to stones in our inventory for customers buying online.

In early February we invested in three tools: The OGI Firetrace, a powerful gemmological microscope as well as The Ideal-Scope Sales System. Along with our digital SLR, compact camera and video camera, we can now say (tongue-in-cheek of course!) that we have a diamond lab.

The main benefit of having a diamond lab is that we can now transmit proportion analysis, brilliance reports, microscopic photos, Ideal Scope images as well as videos all through the web or email - something that is popular in America, and now available in Australia.

One US merchant likens this system to the Nintendo Wii - much like playing Wii Sports isn't quite playing the actual sport, but it's very close to it.

So, how does this equipment affect how we can sell diamonds over the internet?

Well firstly, we can analyse all our diamonds in our inventory, as well as a few others and post them on the internet. Because they have downloadable photos, videos and cut analysis for comparison with other stones, we can charge a little more, reflecting the true inventory cost of our diamonds. We've even been super creative an labeled these diamonds our "Signature Series".

Secondly, we're not getting rid of the diamonds from overseas cutters and wholesalers. Instead, we've been even more creative and labeled them our "International Selection".

So, what are the main differences between our International Selection and Signature Series, and which one should you choose?

Firstly, our International Selection have either EGL USA or GIA certificates, they are also on average about 5-10% cheaper than our Signature Series as there are no inventory costs and there may well be other sellers competing to sell the same stone. The main drawback is that buyers can only compare specifications on paper, and not with photos, videos or detailed cut analysis.

In order to get a stone under $10,000 from our International Selection into our lab, we request that you put a $150 deposit down. We will then import the diamond, which usually takes only 3-5 days, analyse it and send you the results for approval. Upon approval, you pay the balance and we will ship to you via our fully insured, overnight courier. Should you disapprove, you can select another diamond from our signature series, using the full $150 deposit toward the purchase, choose to import another diamond, forfeiting $75 of the deposit, or choose not to buy from Jogia Diamonds at all and forfeit the entire deposit.

As you can see, this system has its drawbacks, as you need to fairly committed to buying a diamond from us. However, the alternative system, which we used to use, and others still use is to ask for full upfront pre-payment and simply send the diamond, totally unseen to the customer. The costs of returns was integrated into the total price, meaning everyone paid that little bit extra. We think this system is a lot better as it discourages comparison shopping with our International Selection, and anyway, $150 is such a small commitment, especially if you like the idea of receiving Australia's most detailed cut analysis with your diamond.

Secondly, our Signature Series is more akin to a traditional retail experience. We even think it's a lot better as you can view objective analysis right from the comfort of your home or office, without pushy salespeople or lighting conditions misrepresenting the quality of the stone.

Once you've been through and selected a diamond from our signature series, you can click the "Buy Now" link and order straight there and then. Of course at times we're either busy or just plain slack and we don't update the diamonds that have been sold, which is why we ask you to call us prior to purchasing if you aren't confident in our website updating ability.

So, that's a brief overview of the changes we've made over the past month. We're still busy setting up our new office and showroom (a video is available here) so we hope to start adding our signature series diamonds in the next few days.

The Freeloader Problem

Seth Godin blogs about someone buying from McDonald's, but eating at Starbucks, simply because it is "much nicer" at Starbucks than it is at McDonald's.

So, how does this relate to buying diamonds?

Well, contrary to what most in the industry think or like to think, most consumers know little, if any about diamonds. This means that it is only natural for consumers to want to look and compare diamonds before they purchase, as they want to know what all this "SI1", "VVS2", "Colour H" and "Colour D" actually means. And, being consumers, they also want the lowest price possible.

This creates a paradox, which at times results in the classic "freeloader problem". That is, consumers go to a retail store, look at diamonds and get advice, but then buy from an online merchant at a much cheaper price! It should also be noted that this can work the other way - consumers look up prices online, get advice and then bargain a retail store down to that price.

So how do both online and brick and mortar merchants tackle this problem?

Well, one way that Jogia Diamonds has solved this problem is through maintaining a reasonable level of high quality stock, along with monthly trips to the Eastern States to show diamonds to customers.

Another way, which is popular in America is to provide extra information such as Brilliancescope images and photographs. However, in our opinion, these do little to solve the freeloader problem as consumers will still want to view and compare diamonds with their own eyes.

So, what about brick and mortar diamond merchants?

The key is to find a balance between high markup stores such as Tiffany's and the low cost online merchants, combined with smart marketing.

Speaking from experience, Jogia Diamonds uses online ads to target Perth, and only Perth diamond consumers. When a consumer clicks our ads, they can then click through to see our stock diamonds, as well as our regular website. This kind of targeted advertising creates a strong link between the online and offline experience, whilst controlling the now enormous cost of online advertising.

And our big secret is that most of our Perth customers buy diamonds that we keep in stock. Sure, they are about 10% more expensive than the cheapest diamonds listed on our site, but they provide the customer with the best experience, are all GIA or DCLA certified, much cheaper than retail store prices, and are probably the most profitable.

Happy Daylight Saving

In case you haven't realised, Western Australia introduced daylight saving today.

This brings us inline with the rest of Australia (except Queensland and The Northern Territory), meaning we are only 2 hours behind Tasmania, Victoria and New South Wales, 1.5 hours behind South Australia, 1 hour behind Queensland and 30 minutes behind The Northern Territory.

The benefit is that those calling us from interstate or overseas can now do so earlier in the morning as our phones are automagically released from nightmode at 8am local time.

Of course, some people say the WA doesn't need daylight saving, as the state's sunset is already quite late. In fact, Sydney's longitude is about 151E, whilst Perth's is 115E, a difference of 36 degrees. All other things being equal, if the two cities were 30 degrees apart, then a 2 hour time difference would mean the sun would set at the exact same time. However, the extra six degrees means that Perth already gets late sunsets.

Anyway, below is a picture taken at 8PM today. As you can see, it is still quite light.

Black Hat vs White Hat Diamond Merchants

Nowadays, with so much choices offline and online for buy diamonds, it is difficult to decide who the best is. For a bit of fun, we've attempted to categorise different types of merchants using a colour scale - black hat = bad, white hat = good.

Blacker Than Black Hat

Sells uncertified diamonds that are either fake or have undergone treatments. They tell their customers that they are natural, and possibly give a certificate or valuation they have made themselves.

Black Hat

Engages in a variety of less than ethical sales techniques such as "total carat weight", switching stones or inaccurate in house grading.

Pencil Grey Hat

Sells low quality diamonds, possibly with a grading certificate from an independent laboratory. However, they trick their customers into thinking they are buying a large, high quality diamond at a great price (or they say "you can't buy high quality diamonds in this city/country") and that the grading certificate is "just as good" as one from The GIA.

Overcast Grey Hat

Lists certified diamonds on the internet, but doesn't keep any stock, instead, opting to drop ship diamonds from supplier to customer.

Off-White Hat

Sells a variety of certified diamonds that they keep in stock. However, charge an unreasonable premium, possibly with branding, and deliberately limit the customer to the diamonds they have in stock.

White Hat

Sells certified diamonds online and offline, is well connected within the diamond industry, and possesses a lot of diamond experience. Keeps a good amount of high quality stock and has solid relationships with diamond wholesalers. For online customers, they give extra information such as light performance information, photographs, ideal scope images and diamond scans.

Pearly White

Uses the internet as a medium for advertising, research and discussion. However, unlike white hats, they do not sell diamonds over the internet, instead opting for the more traditional approach. When customers come to their store, they are given accurate, unbiased information and like white hat merchants, are offered a variety of choices from the merchant's own stock and wholesalers.

Blindingly White

They are like pearly white hat merchants, but take time to understand what the customer is after, can afford and generally get to know the customer better. With this they match the customer with the perfect diamond. If they are unable to do this, they admit defeat and refer the customer to a more suitable merchant. They also take steps to avoid attracting the "wrong crowd" such as those seeking a "big and cheap" (and therefore low quality) diamond. They may also travel to rural or remote locations to show customers diamonds.

Recap of the Last Two Months

The last two months have been hectic as usual for us, so below, is a digest of changes that we've made to our company and website:

Integrating the Wiki Into the Main Site

We found that people don't want to visit a seperate wiki site, so to increase usability, we integrated the wiki into our main site.

Six Months Interest Free

One of the main problems faced by diamond buyers today is organising enough funds to pay for their purchase. In addition, due to budgetary constraints, they might settle for a lower quality diamond. With six months interest free, customers can easily obtain finance for their purchase and pay for it over six months without any interest. Of course conditions do apply, and we will continue to waive the application fee over the Christmas and New Year period.

New Video Section

Google buying YouTube for US$1.65b confirmed our suspicions that video is the next big thing on the internet. Whilst only a few old videos are up at the moment, you can expect interviews, product demonstrations and other interesting short videos we've made over the next few months.

New Customer Management System

Before we implemented the new system, we merely used an emails stored on a central server to interact with our clients and suppliers. Now, with the new system implemented, we can easily manage and interact with our customers and suppliers, thus providing better service and freeing up time for things like blogging and making videos.