Industry Insights With RapNet
Monday, April 29, 2019
Spectra Update had the opportunity to speak with Saville Stern, COO of RapNet, who gave us some insight on what’s happening in our industry, answered a few questions about RapNet, and what it means to be a member of the American Gem Society (AGS).
RapNet is at the center of pretty much everything that happens in our industry. What trends are you seeing that you think will have the greatest impact on the bottom line for retailers and suppliers?
We are seeing that the pressure on midstream players continues, and we expect further consolidation of diamond suppliers. These suppliers will also continue the downstream move that we are seeing and open more online and physical stores. It will be more important than ever for U.S. retailers to ensure they have solid sources of supply from multiple suppliers, and to maximize the advantages of being a local jeweler.
Another trend we see is the rise of a more educated customer who is not only knowledgeable about diamonds, but also demanding to know the source of the diamonds and jewelry. In essence, we must be ready to answer the question, “Where did this come from, and did it make the world a better place?” It is not at all clear yet whether we will be able to demand a premium for source-certified jewelry and diamonds, but it is clear that we will have to provide this information. While this may be a challenge on the supply side, it provides us with a wonderful opportunity to tell a story and develop relationships with our clients.
The topic regarding laboratory-grown diamonds is important. Whether they become a substitute for natural diamonds or remain a different category remains to be seen, but they cannot be ignored. You must have a strategy in place for how you deal with laboratory-grown diamonds.
And finally, we cannot ignore the global trends that will impact us. Chinese demand for better-quality diamonds a half-carat and lower is dropping. This is leading to oversupply in the market. Consider upgrading your SI needs to VS, as you can get good deals. In addition, there is a crisis in manufacturing, with an ongoing disconnect between rough and polished prices. We expect rough prices to drop even further as this intensifies, and this will impact polished prices going forward.
What do you think is the greatest challenge our industry faces for the next three to five years?
There are many challenges, but I would like to focus on the challenge laboratory-grown diamonds present.
Decisions we make now regarding how we price and sell laboratory-grown will impact our industry and either harm or increase consumer confidence in our products.
Laboratory-grown diamonds will not be a long-term store of value like natural diamonds. As manufacturing processes improve and mass production begins, the price of these diamonds will fall to the cost of producing them plus a small profit.
If we price these diamonds based on natural diamonds—or if we sell them as a store of value—we risk alienating our customers if (when) prices decline. Anyone purchasing expensive laboratory-grown diamonds will feel cheated by the industry if the value falls precipitously, and won’t buy anything—natural or laboratory-grown—again. It is not the laboratory-grown diamonds that are an issue, but how we market and sell them. It’s about transparency and education.
What global impact will most affect U.S. retailers in the next five years?
In our view, without question, Chinese domestic demand will impact us the most.
Politically we see the U.S.-China trade war and other reciprocal policies of the U.S. government having a short-term unsettling effect on the jewelry and diamond markets. However, long-term, we see global demand increasing. This will mean more goods being directed to China, a rise in polished prices, and competition for supply on an increasingly international scale.
RapNet is a great source of data. What’s one industry stat that you’ve come across that intrigues you?
Right now, it’s the 6% to 8% increase in the overall supply of diamonds since the beginning of the year, with some categories increasing by almost 30%.
Manufacturing is declining, and rough prices are under pressure. Low Chinese demand has led to an overhang of supply, especially in 30-pointers and below. RapNet is the primary global diamond marketplace, and we see activity from all over the world. As demand in China decreases, sellers turn to RapNet to reach new buyers. We see a general increase in price discovery as RapNet members optimize their prices and buyers look for good deals.
Are there any products and services that you have that you are particularly excited about? What can you tell us about it?
RapNet is working on a range of added features and services to help our members trade more efficiently and profitably.
Most recently, we launched an online auction feature, which gives our members access to great deals on diamonds from motivated sellers without the need to leave their stores.
We are also dedicating resources to enhancing a powerful online sales tool called Instant Inventory, which lets retail stores expand their stock by showcasing RapNet’s diamonds on their own websites, and they can customize it with their own look and feel and markups.
However, the most exciting development for us has been the recent addition of jewelry to RapNet’s platform. This is really a fabulous opportunity for jewelry manufacturers, designers and resellers to access thousands more customers. It will also allow retail jewelers to source from a much larger pool of both diamonds and jewelry in a more competitive environment. We see a lot of advantages in trading jewelry online the same way diamonds are traded, and foresee the market leveraging the immense benefits of sourcing both diamonds and jewelry in one secure marketplace.
What do you see for the future of grading laboratories? Do you see trends in diamond grading shift with the market supply & demand?
Laboratories are becoming more important as consumers become more educated and the demand for transparency increases. Laboratories will extend their role beyond the 4Cs to ethical-source certification, and will become important in melee identification.
In your view, how does being a member of the AGS help its members?
Being an AGS member means you are committed to maintaining a high level of education and the highest ethical behavior. This sends a message to your customers that you operate on a high level and can be trusted. Trust, transparency and ethics, which were the reasons for founding the AGS 85 years ago, are becoming increasingly important as we move to the future.
What do you love most (and least) about our industry?
That’s easy. It’s the people. The individuals that make up our industry are passionate. They are not only passionate about the beautiful products they sell, but they are passionate about their customers. Our industry cares about people, and we transcend selling products to developing relationships with each other and with our customers.