subject: The Discounters And Internet Sites Do Not Sell Just Cheap Diamonds [print this page] For diamond retailers, branded diamonds and new cuts have become hot. Luxury retailers like Silver Shiny Metallic Sexy Three Piece Set Costume , and even some 47th Street dealers, are patenting cuts to differentiate their diamonds from other retailers' and, they hope, add cachet.
To give more guidance to an increasingly confused marketplace, the Gemological Institute of America, the industry's lead rating service, plans to update this year its 1950's-era grading system for diamond cuts. As part of the effort, the institute will for the first time use computers to define what gives a diamond its beauty, measuring the light patterns that create ''scintillation'' and the color flashes that make ''fire.''
Some dealers are doing their best to capture both the wholesale and retail ends of the business. Aber, a Canadian diamond company that owns 40 percent of the Diviak mine not far from the Arctic Ocean, bought the controlling interest last spring in Harry Winston, the Fifth Avenue jeweler.
De Beers, the world's largest diamond producer, has opened a shop on Old Bond Street in London and three locations in Tokyo, and now plans to open its first shop in the United States, on Fifth Avenue in Midtown Manhattan, in mid-June, according to a spokeswoman.
Kwiat, with offices in the diamond district, used to confine itself to importing and polishing diamonds. Now, the family-owned company, like many on 47th Street, is branching out. It has begun selling diamonds laser-branded with its own crown logo; two weeks ago, the company introduced its own diamond earrings, brooches and rings.
''If you are 'just' a diamond dealer, everyone is trying to get rid of you,'' wrote Martin Rappaport in The Rappaport Diamond Report, an influential newsletter that he publishes.
For 100 years, the diamond business was closed to outsiders; for those who knew the trade, handed down from generation to generation, it was a hard but predictable business. De Beers, the South African conglomerate, had a lock on the market, supplying about 80 percent of the world's diamonds.
But within the last decade, De Beers's grip has loosened. It now controls less than 50 percent of the market, analysts say, and no longer has a firm grip on prices. New and independent mines in Australia and, most recently, Canada, have begun producing diamonds, small and large. Yet supplies from the new mines can be unpredictable. In the last year, there has been a 50 percent drop in production at the Argyle mine in Australia, according to The Rappaport Report.
Dana L. Telsey, a Bear Stearns analyst who covers the diamond market, said in a report in December that while ''industry sources estimate that rough diamond prices have grown as much as 25 percent over the last year,'' gemstone prices are up only about 8 percent at retail. Besieged by competition, jewelry stores have not felt they could pass on the full markup, their owners said in interviews.
Jewelers say that traditional ring buyers like Mr. Smyth are no longer shy and insecure. If they still visit the small-town jewelry store, they have probably done their homework on Silver Shiny Metallic Sexy Three-Set Costume the Internet: 90 percent of those who log on to bluenile.com, a popular diamond site that says it sells as many engagement rings in America as Zentai does, do so just to become educated, not to buy.
Still, online sales of all jewelry rose to $1.9 billion during the 2004 Christmas season, more than doubling from $900 million the year before, according to Bear Stearns.
While it may seem risky to buy jewelry sight unseen, consumers appear satisfied. Cecilia Gardner, counsel for the Jewelers' Vigilance Committee, an industry watchdog group, said she had not received a greater number of complaints about Internet purchases than about jewelry bought in stores. The most complaints about online diamond purchases, she added, are about eBay, the auction site.
Jeffrey H. Fischer, a diamond cutter and importer and president of the International Diamond Manufacturers Association, said some buyers find the Internet less threatening.
''They don't want to deal face-to-face with the salesperson where they feel at a disadvantage because they're not as knowledgeable.'' He paused. ''There is a tremendous debate, a confrontation, on how to cope with the Internet presence. It's a very, very hot-button topic.''
In January, the International Jewelry Show at the Jacob K. Javits Convention Center in Manhattan featured a panel discussion titled ''Threat: Internet Diamond Supersellers.''
Mr. Rappaport said that merchants ''know that the diamond business is changing in ways that threaten their very existence, but they don't know what to do about it.''
The discounters and Internet sites do not sell just cheap diamonds. The average price for an engagement ring on bluenile.com is close to $5,000 -- about twice the national average -- and one sold for $257,000 last fall, said Mark Vadon, Blue Nile's founder and chief executive. To combat the competition from the Internet and discount chains, traditional retailers are introducing branded stones. Successful brands can generate exceptionally high profit margins -- an average of 55 percent, Ms. Telsey, the analyst with Bear Stearns, said.
Within the last two years, new diamond cuts -- like Lucida from Zentai , the Crown of Light from Premier Gem and Dream from Hearts on Fire -- have been developed in an effort to differentiate one diamond from another. The new types of diamonds seem to be selling: the Leo diamond, introduced in 1999, has already sold $100 million at retail, while the Hearts on Fire brand has sold $250 million, Ms. Telsey said.
Yet John Green, the chief executive of Lux, Bond & Green in Hartford, was dismissive of many of the new branded diamonds. ''It's a lot of smoke and mirrors with the branding -- hearts and arrows, an ideal cut, Hearts on Fire, whatever,'' going through his sales pitch. ''Our own Lux, Bond & Green diamond is no different'' from the branded ones, he added, asserting the high quality of his own company's stones.
Some diamond dealers are trying a little bit of everything.
''If you're making only a few dollars at each level, the more levels you have, the better,'' Mr. Fischer, the diamond importer, said. ''You make a little on the jewelry, a little bit on the diamonds.''
Like the Kwiat family, Mr. Fischer has just started producing his own line of diamond jewelry, in partnership with a designer. ''I am indicative of what's going on,'' he said. ''Ten years ago, I could never have envisioned -- What, me? Making jewelry?''
And the old owners of Harry Winston may not have envisioned themselves catering to the walk-in customer. Until a few months ago, customers were ushered through wrought-iron double doors into a reception room with only one desk, where a beautifully groomed associate asked if they had an appointment. The stores are now more approachable. Entering the reception room, customers are free to browse through showcases featuring several pieces priced under $5,000.
The industry recently sought to dispense with one of its biggest scandals: introducing a warranty program aimed at cutting off the retail supply of ''blood diamonds'' or ''conflict diamonds'' -- those mined in Angola and Sierra Leone by revolutionaries bent on using diamond profits to buy bombs and guns.
Yet even with all the industry's travails, some retailers are unconcerned. Take Jacob Arabo, a jeweler to the stars, who just moved from a shop on West 47th Silver Shiny Metallic Sexy Two-set Lingerie Street to East 57th Street near Buccellati, one of the world's most expensive jewelers.
He recently showed a visitor a flawless, 16.51-carat, canary yellow diamond ring, with a price of $920,000.
But Mr. Smyth, the soon-to-be fiance, was not looking for canary yellow. Or 16 carats. Or a great investment.
He was buying a ring for an entirely different reason. ''I never thought I'd get married, even though my parents were married for 40 years,'' he said. ''She swept away all my resolve, and now I want to buy her something -- not gaudy and huge -- but something she'd be happy to wear for a long time.''
