Friday, 16 March 2012

Buying diamonds off the street – Part III

If you choose to develop a system for buying diamonds off the street, what do you do with them?  Have you ever heard of a Certified Pre-owned Mercedes Benz or BMW?  They take trade-ins, spend the money to bring servicing up to date, make them look like new, add an extended warranty and declare them “Certified”.  These cars sell for more than a non-certified one, and are eligible for new-car-like finance options.

You can and should do the same.  My advice would be to sell them as loose diamonds, so that it won’t put superstitious buyers off from their favored design.  Since you’ve now decided to enter the used-diamond business, you should offer a trade-up policy and/or warranty and a fancy grading certificate.  Make sure you buy the diamonds well enough that after removing, grading, repolishing (if necessary), and printing (or sending away for) a certificate they can be priced below a new diamond.  Refer to them as “trade-in” diamonds.  They may have been traded for bigger diamonds, but they may also have been traded for cash.

I’ve spent a lot of time researching and composing this 3-part series.  I believe Martin Rappaport when he says that due to the developing economies of China and India we will have to compete harder to find the selection of diamonds we want.  If Chinese, Indian and Middle-Eastern buyers keep snapping-up the majority of popular diamond qualities, we may have to harvest as many as possible from the secondary market. 

My daughter is in line to inherit several sets of china.  There’s a big population bubble who over the next 20 years will be distributing diamonds to a smaller next generation.  If we don’t step in and service this need, we leave it up to the pawnshops and the “we buy gold” guys who are popping-up like weeds.

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