Why do we need diamond grading reports?

In India many diamond polishing companies, such as Venus Jewel, have their own grading systems. Why, they ask, would they sell a client an E colored VVS diamond as D Flawless? That it is simply bad business. Consolidation of diamond manufacturers has led to bigger businesses that see the benefit in establishing good supply partnerships with their clients. Some of these partnerships are with consumer recognized brands where there is less need for GIA or HRD ‘branded diamonds’.

Decades ago trade in ‘investment diamonds’ required independent authentication for large high color and clarity diamonds. This reduced squabbles and disagreements between buyers and sellers; each grade of difference is worth around 30%. Later B2B web listings and the Internet led to trading between people who often never meet, trading diamonds they never saw. Trust and hand shakes became less important.

Grading reports also added value in faceless bourse markets where agents completed deals; neither buyers nor sellers knew each others identity. But Rio Tinto (CRA) helped its Indian Argyle sight-holders deal directly with their customers by taking them to jewellery trade fairs. The cutters also gained valuable feed back. After its strategic review in the late 1990’s, De Beers forced its sight-holders to follow a similar business model. Today only a fraction of diamonds are traded via agents; the pipeline is shorter, and relationships between buyers and sellers is the norm.

The cost of the grading report, the longer stock turn cycle (1 week to 2 months) and shipping and handling costs add a lot to the final consumer price of the stone. Add to this the confusion and complexity shoppers face in choosing between labs, and we could ask:

Do diamond grading reports add value?

Normally markets become more efficient over time; will diamond grading reports become dinosaurs?

by Garry Holloway
HCA and Ideal-scope developer

www.ideal-scope.com – www.hollowaydiamonds.com.au