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DODAQ is a relatively new company in Belgium that is promoting themselves as ‘the only marketplace to invest in diamonds’.
It’s discussed off and on in this rather long and convoluted thread but I think it’s an important enough topic that it deserves it’s own thread.
Their program has 4 interesting components to me.
Is it a viable place to sell diamonds?
Is it a viable place to buy diamonds?
Is this a viable investment opportunity?
Is it likely to be successful?
Is it a viable place to sell?
In the case of selling, the answer is clearly NO for those who are not members of the trade. Here’s the first requirement they impose on sellers:
All issuers (those able to send diamonds to the DODAQ vault) must be members of the World Federation of Diamond Bourses (WFDB).
Individuals are simply not eligible as sellers unless they don’t take delivery and leave their purchases in the DODAQ vault in Belgium. For all but the participating manufacturers this is a purely financial transaction.
Is it a viable place to buy?
As a consumer interested in taking possession, NO. It’s a blind transaction where you can’t see or inspect the stone, where the terms of sale are cash in advance and where there is no recourse if you are unhappy with the results. The sellers are aware of all of the relevant facts and the buyers are not. This is an enormous and terribly important imbalance. For those living outside of Belgium it’s aggravated by the difficulties associated with engaging international business. Online diamonds is a large and highly competitive business and there are hundreds of dealers that offer far better and safer buying opportunities.
For a dealer wishing to buy diamonds for resale, I would still say no, largely for the same reasons. The buyer is required to rely on incomplete information in a no recourse cash transaction. At a low enough price, of course, I would expect the dealers to be willing to take the risk and I haven’t looked up the prices but I see no reason to expect them to be low enough to entice dealers to be interested in this as a source of merchandise. The risks are simply too high for what I would expect to be the savings in costs.
Is this a viable investment opportunity?
In my opinion, no. Without a pool of buyers willing to take delivery and then come back for more they have nothing to offer potential sellers in exchange for tying up their inventory (goods for sale must be shipped to Belgium and therefore be unavailable for sale through their regular channels) and in exchange for the ‘vaulting’ fees. The only reason I can see why a seller would want to include stones is if they are trying to move goods where they couldn’t do better elsewhere using their existing channels. Again, the ONLY people who can add stones are existing and large diamond dealers and I can’t think of much of anyone who would benefit from buying this way. This is drastically different from any other commodity exchange where the end of the process is some end user who takes delivery and presumably has need or want for the goods.
Is it likely to be successful?
In my opinion, no. Whether this is a problem for 'investors' with stones in their vault if the house of cards collapses would be a matter for Belgian law but, personally, I would be concerned.
Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver
It’s discussed off and on in this rather long and convoluted thread but I think it’s an important enough topic that it deserves it’s own thread.
Their program has 4 interesting components to me.
Is it a viable place to sell diamonds?
Is it a viable place to buy diamonds?
Is this a viable investment opportunity?
Is it likely to be successful?
Is it a viable place to sell?
In the case of selling, the answer is clearly NO for those who are not members of the trade. Here’s the first requirement they impose on sellers:
All issuers (those able to send diamonds to the DODAQ vault) must be members of the World Federation of Diamond Bourses (WFDB).
Individuals are simply not eligible as sellers unless they don’t take delivery and leave their purchases in the DODAQ vault in Belgium. For all but the participating manufacturers this is a purely financial transaction.
Is it a viable place to buy?
As a consumer interested in taking possession, NO. It’s a blind transaction where you can’t see or inspect the stone, where the terms of sale are cash in advance and where there is no recourse if you are unhappy with the results. The sellers are aware of all of the relevant facts and the buyers are not. This is an enormous and terribly important imbalance. For those living outside of Belgium it’s aggravated by the difficulties associated with engaging international business. Online diamonds is a large and highly competitive business and there are hundreds of dealers that offer far better and safer buying opportunities.
For a dealer wishing to buy diamonds for resale, I would still say no, largely for the same reasons. The buyer is required to rely on incomplete information in a no recourse cash transaction. At a low enough price, of course, I would expect the dealers to be willing to take the risk and I haven’t looked up the prices but I see no reason to expect them to be low enough to entice dealers to be interested in this as a source of merchandise. The risks are simply too high for what I would expect to be the savings in costs.
Is this a viable investment opportunity?
In my opinion, no. Without a pool of buyers willing to take delivery and then come back for more they have nothing to offer potential sellers in exchange for tying up their inventory (goods for sale must be shipped to Belgium and therefore be unavailable for sale through their regular channels) and in exchange for the ‘vaulting’ fees. The only reason I can see why a seller would want to include stones is if they are trying to move goods where they couldn’t do better elsewhere using their existing channels. Again, the ONLY people who can add stones are existing and large diamond dealers and I can’t think of much of anyone who would benefit from buying this way. This is drastically different from any other commodity exchange where the end of the process is some end user who takes delivery and presumably has need or want for the goods.
Is it likely to be successful?
In my opinion, no. Whether this is a problem for 'investors' with stones in their vault if the house of cards collapses would be a matter for Belgian law but, personally, I would be concerned.
Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver
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