Here in Venezuela we accidentally began finding diamonds amongst the gold tbat we were producing in certain areas. The diamond market is a small market making up less than 100 billion dollar’s a year. Here in Venezuela you are primarily producing gold and other matals but diamonds are something you come across from time to time.
The diamond business is a business that has been segmented into a few different groups.
Producers are the people or companies that extract raw diamonds from the earth. Upon looking at a raw diamond you wouldn’t even know it was a diamond, at least, I didn’t know what a raw diamond looked like until we found one and one of the miners had to tell me what it was.
Typically, when you mine diamonds you will sell them to a cutter who cuts and polishes the diamond who then sells the diamonds to a manufacturer who creates finished pieces. The first finished pieces we created were horrific, an abomination. But with practice and with Venezuela lacking the normall distribution channels, we had to learn how to do each and ever part of the business from beginning to end.
Manufacturer’s usually sell the diamonds to a retailer who thing carries the inventory until their marketing department is able to sell the diamond based product online. Luckily for us, we had someone that was familiar with online marketing so we have been fortunate enough to streamline the process from beginning to end for our small insignificant operation.
The amount of diamonds that we sell anually is miniscule compared to what is sold by major mining companies like De Beers, Alrosa, BHP Billiton and Rio Tinto which combined account for about 70% of the world market.
Cutters and Polishers:
The producers that sell their rough diamonds to intermediaries who cut and polish the diamonds lose a lot in this costly process: most rough diamonds lose 50 to 60 percent of their weight going to polished form because material is cut or polished away. Aditionally, high labor costs. In the U.S., it costs about $150 a carat to cut a diamond; in Venezuela, it costs $15.
Jewelry manufacturing is a fragmented business: there’s more than 10,000 players in the world, most of whom are anonymous. There are, of course, a few very famous names who act as manufacturers as well as retailers: Tiffany, Cartier, Bulgari, Louis Vitton, Gucci, and Chanel, but more than 80 percent of the players are in India or China and do not brand their work.
Still, branding is where the big money is. Branding is crucial to profitability. A diamond engagement ring by Cartier may enjoy a premium of 40 percent over an unbranded ring with a stone of identical size and quality.
This group is even more fragmented than the manufacturers. There’s roughly 300,000 jewelry retailers worldwide, most of them locally owned and operated.
In the past, diamond sales were done largely through specialized stores. Some were famous: Tiffany, Zale , Kay Jewelers. Most are not. Internet sales have also grown and have been a big help introducing more transparent pricing.