It is time to move matters forward. For many months I have been discussing issues in the diamond pipeline, with an emphasis on transparency, disclosure and knowledge. In those articles I attempted to flush out sore points, examine them and provide an alternative approach.
Most recently, those issues included recycled diamonds, lab-made goods and natural diamonds, and keeping diamonds relevant to consumers. Other key issues included the rarity of diamonds and wealth preservation.
Now it’s time to explain how I came up with that approach. Allow me to introduce: Mercury Crystal Clear™.
Mercury Crystal Clear™
Mercury Crystal Clear™ is an innovative methodology for valuing rough and polished diamonds, which I have been developing as chairman of Mercury– R&D, and through diamond pricing consultancy.
Mercury Crystal Clear™ is about making diamonds' value known and transparent, based on the conviction that diamond buyers today lack sufficient clarity about what they are paying for.
Diamonds are associated with emotions and giving, while at the same time are considered an expense. Mercury Crystal Clear™ adds a strong rational approach to the emotional expression of love, thus transforming the concept of an “expense" into a valuable object. It carries a promising, long-lasting resale value, passed down to the next generation, which embodies both love and valuable possession.
Determining a Diamond’s Value
The missing link to the question of how to determine the accurate price of a diamond is the realization that beyond the 4C's – which to date are the sum knowledge of an ordinary buyer – various other characteristics called “irregularities” should be included in evaluating the price of a diamond. These can create differences in value between two similarly graded diamonds with the same 4C characteristics.
The importance of a transparent and easily understood pricing system for diamonds cannot be stressed enough. For many years, the general press and many consumers have been stating that the misunderstood differences in diamond prices are a turn-off.
In a world that is characterized by an explosion of information, a market will find it difficult to operate without transparency all along the value chain. In a non-transparent market, one of two things may happen: Either consumers will protect themselves by offering the lower average price for a diamond because they don’t understand the differentiation that causes the price differences. Alternatively, consumers will avoid the product altogether.
Once this knowledge is obtained, diamond buyers will be able to make rational and educated purchases that combine emotions with a potential tool for wealth preservation planning.
Why Mercury Crystal Clear™
Mercury developed the tools behind Mercury Crystal Clear™ out of an understanding that promoting full transparency in the diamond market will advance the diamond industry and improve the attractiveness of diamonds among consumers, bringing more of them to choose a diamond.
Another place where Mercury Crystal Clear™ can play a role in the value chain is to improve the accuracy of translating prices of polished diamonds into rough diamond prices. This is an important function that is likely to happen, as the diamond pipeline should be in a well-functioning market.
Recently, a diamond industry member underscored the issue of pricing when discussing prices of recycled diamonds. He lamented the difficulties of presenting fair and reasonable prices.
The introduction of gem quality lab-made goods alongside natural diamonds into the consumer market further emphasizes the importance of highlighting the value of natural diamonds.
The true value of natural polished diamonds must be drilled into the consumer’s mind to the point that when consumers purchase natural diamonds, they know what they are holding in their hands. Further, they should understand its value when considering selling that diamond.
The Art Example
The economics of rare art show us the power of openness and continued discussion with the “final user.” The art world did a great job at communicating and educating the public on the importance of art, and understanding art. That brought more and more people to take an interest in art and buy art, which enhanced art objects’ value of exchange. As a demonstration of this, coupled with the role of rarity, when an artist dies, the value of the artists’ works – their value of exchange – rises. By educating millions of people about the history and importance of art, a huge art market was developed.
Mercury Crystal Clear™ emphasizes the exchange value and rarity of natural diamonds. Their market will only grow as their story, understanding of the value of exchange and pricing via real transactions becomes more accessible to the public.
Imagine what would have happened if the value and characteristics of polished diamonds were communicated so well to the general public.
Inheritance and Appreciation
The new consumer generation is hungry for information more than it is hungry for highlighting its wealth with diamonds. Their wealth is being in knowledgeable. The lack of transparency causes this generation to have less appreciation for diamonds. Even if today’s consumers inherit diamonds from their parents and grandparents, they will treat them differently if they have an exact understanding of what they are holding in hand.
Otherwise, they may sell their inherited natural diamonds for the lowest average price in the category, as happens in any under-developed market. If they haven’t inherited any diamonds, why should they care about a 150-year-old story and go out and buy diamonds?
The conservative approach of the diamond industry today, an approach that often prefers opacity to transparency, is not in the industry’s best interest. Acting conservatively when marketing to a generation that is not conservative is running the risk of being out of the "game".
I believe that for the generation that is entering the consumer market, especially the luxury market, making a purchase in a transparent market while knowing and understanding the background story is a brand in itself: “I bought a piece of history at the right price with a known exchange value, and when I want to sell it, I’ll have an exact understanding of its characteristics.”
That is a brand upon itself!
Mercury Crystal Clear™ has been developed with this deep economic understanding. As part of its methodology, it created a comprehensive table of irregularities with references to discounts and premiums, enabling buyers to have as much information as possible on the products offered.
Equipped with this information, diamond buyers will have access to the most accurate and transparent prices available. This approach will help on two levels. First, at the consumer level, wherever the consumer seeks to purchase a polished diamond. Second, when determining the price of rough diamonds, as derived from polished diamond transactions between retailers and consumers.
The views expressed here are solely those of the author in his private capacity. None of the information made available here shall constitute in any manner an offer or invitation or promotion to buy or to sell diamonds. No one should act upon any opinion or information in this website (including with respect to diamonds values) without consulting a professional qualified adviser.