HCA question

[John P]

I have very little optimism that they will release cut grading on any other shapes in the foreseeable future simply because there will not be enough pressure on them to break from the status quo. They certainly have the knowledge and ability, but not the will to do so.

There are some within the organization who would like to move this forward. They have been working on the Princess shape for some time. In fact certain producers in Antwerp were consulted on this again, as recently as last week.

 

[John P]

Two thoughts regarding the GIA and AGL discussion.

First: On the largest B2B trading platform, nearly 70% of >1m diamonds are accompanied by GIA reports. AGSL is somewhere inside the 3% of other.


There are some reasons why AGSL's percentage may be somewhat larger than reflected above: A number of upstream AGS Ideal productions are polished, graded and shipped directly to retailers. These dedicated outputs are never seen in the wholesale supply-stream. Also, AGS grades far less fancy shapes than other labs, so the number would be higher if limited to MRB.

Nevertheless, it's a pretty overwhelming graphic in terms of GIA dominance and the shadow cast over other labs.

This is what follows:

In the USA 10 out of 10 jewelers will tell consumers GIA is the world's most reputable report. It's a unanimous message.
7 in 10 carry a softer lab as well as GIA and will admit up-front that the softer lab is "somewhat" (sic) behind GIA standards.
2 in 10 will try to position the softer lab as GIA-equivalent.

None of them will mention AGS, or if they do the information can be less than complete or fault-finding - since it doesn't serve their purpose to promote what they don't sell.

Only 1 in 10 will discuss AGS favorably - typically if they have access to AGS-graded diamonds. Of those, few salespeople know the technical differences between the respective cut grades... To them Any EX is equivalent to any Ideal. Even the world's most popular internet seller maintains this in their educational material.

Summary: 10 of 10 jewelers send the message that GIA EX is king. 9 of 10 won't bring up AGS and live safe in the knowledge that the guys across the street and down the block will be sending the same non-message.

Partial excerpt from this thread with relevant discussion overlap, some cut-quality/submission tactic overlap as well.
https://www.pricescope.com/communit...g-in-the-future.145819/#post-2632133#p2632133

 

[John P]

Given that AGS stones command a 5% premium over GIA then could/would the market stand erosion of this premium?

While this is definitely relevant, and of critical importance in cut-focused communities like this one, it's a statistic that the global market takes little notice-of.

In fact, at last month's Certification Conference staged by Rapaport at JCK** the information in this slide was given with the admission that they really don't know if it should be included. Of course it's relevant here, and quite frankly it becomes relevant whenever a consumer learns enough to recognize the value of cut-quality and requests more information in a showroom.


** Tip of the hat to Cecilia Gardner, who was on the panel, for insisting the name "Certification Conference" should be changed to "Grading Report Conference" (sic).

 

[Texas Leaguer]

JP,
I did not have the opportunity to attend the grading report conference. Would love to hear from you the main takeaways from this year's meeting and if there was anything new relative to the past ones.

 

[Texas Leaguer]

I have very little optimism that they will release cut grading on any other shapes in the foreseeable future simply because there will not be enough pressure on them to break from the status quo. They certainly have the knowledge and ability, but not the will to do so.

There are some within the organization who would like to move this forward. They have been working on the Princess shape for some time. In fact certain producers in Antwerp were consulted on this again, as recently as last week.

This is uplifting news John. To see some actual outreach happening is cause for cautious optimism. But forgive me for being skeptical since there have been signals given since the RB grading system was launched. What was that, almost a decade ago? Should it really take that long to roll out a broad cut grade for princess (we know that's what it will be, and that is fine by me- actually preferred). They have all the resources in the world to make this happen, if and when they decide to do so.

 

[Texas Leaguer]

I take you points on the drivers for GIA preserving the status quo.

As far as introducing cut grades for princess etc, couldn't your point concerning the effect on existing inventory be mitigated by :-

1) Releasing a statement of intent to introduce a cut grade, in say 3 years
2) At the same time releasing a draft of the grading standards for 'comment' and guidance for new production.

Isn't GIA in a monopolistic position, in terms of grading and setting standards? This is causing problems for the industry as a whole (above is an example). It is also apparently causing problems for GIA itself (linking to the thread by Neil Beatty you referred) and the problems of scalability that it appears to be facing.

Neil suggests raising prices as one way of controlling these issues. How about moving to a performance based system akin to AGS.

Wouldn't this drive some custom away from GIA, as, I presume, a client could not be certain of the grade their individual stones would achieve (or at least those that were cut predominantly to preserve weight). The question is where would these stones then go for grading?

Alternatively it would force a further improvement in cut standards. This presumably would be at the expense of yield, which would have a tendency to drive prices up.

Neil suggested a few ways that GIA could overcome it's operational issues, whilst at the same time delivering better on it's mission.
But for me they still leave the same issue ( I won't call it a problem, I'm too much of a novice for that) - the GIA Brand is too big?

Geezer,
I'm all for your idea of GIA rolling out a cut grade for fancies with plenty of advance and information to enable the manufacturers to be able to hit the marks they need to hit in cut quality and prepare their businesses for the change. That would be the least "turbulent" way to make the transition.

Regarding GIA as a monopoly, technically they are not quite, but they are certainly dominant. I do not view them as the source of any problems. However, because of their strength they could, in my opinion, do more to improve market conditions. But I have a hard time finding too much fault with them for serving the interests of their main constituencies. It is inevitable that economic considerations would be prioritized in decisions regarding the direction of the lab, in view of the fact that the lab generates the bulk of the revenue for the institute. I do think they have a duty to do more to educate and develop standards for cut quality on fancy shapes. After all, GIA themselves state that cut quality has the greatest impact on diamond beauty. And they have indicated that they would. Eventually.

Personally I would like to see GIA provide more support to their sister organization AGS and to the AGSL as a way to promote greater education to the public about cut quality and light performance. Although that would amount to the endorsement of very strict standards, I believe that can be reconciled and it would be an important step in educating the public, which is core to the GIA mission.

What form would the support for AGS(L) take? I agree that educating the public is a very important step in promoting cut excellence, but if GIA were to endorse (or be perceived as endorsing) the AGS(round) cut standards, whilst still applying their own standards for grading, I think this would create at best confusion in the consumers mind and it would be a difficult position to justify.

Geezer, as someone once said it's above my payscale to determine exactly what form the support would take . But I feel that simply elevating awareness of AGSL and their specialized services (LP cut grading) would be highly beneficial. I believe it would also be doable within the framework of the relationship GIA and AGS share.

With regard to possible confusion between the two cut grading systems, I think GIA could actually clarify the distinction. And it might actually help GIA to go forward. They could elect to release princess and other fancy shape grading standards similar to the broad system they launched for rounds. It seems to have worked nicely for them, and as we have discussed it has resulted in better cutting being done by the industry. To me, this type system and the LP system of AGS can coexist very nicely. For consumers that just want some indication of the cut quality, the GIA report will have that. For consumers that are really keen to understand detailed aspects of light performance, the AGSL report does that. Consumer's choice, depending on their need.

 

[diamondgezer]

Two thoughts regarding the GIA and AGL discussion.

First: On the largest B2B trading platform, nearly 70% of >1m diamonds are accompanied by GIA reports. AGSL is somewhere inside the 3% of other.


There are some reasons why AGSL's percentage may be somewhat larger than reflected above: A number of upstream AGS Ideal productions are polished, graded and shipped directly to retailers. These dedicated outputs are never seen in the wholesale supply-stream. Also, AGS grades far less fancy shapes than other labs, so the number would be higher if limited to MRB.

Nevertheless, it's a pretty overwhelming graphic in terms of GIA dominance and the shadow cast over other labs.

This is what follows:

In the USA 10 out of 10 jewelers will tell consumers GIA is the world's most reputable report. It's a unanimous message.
7 in 10 carry a softer lab as well as GIA and will admit up-front that the softer lab is "somewhat" (sic) behind GIA standards.
2 in 10 will try to position the softer lab as GIA-equivalent.

None of them will mention AGS, or if they do the information can be less than complete or fault-finding - since it doesn't serve their purpose to promote what they don't sell.

Only 1 in 10 will discuss AGS favorably - typically if they have access to AGS-graded diamonds. Of those, few salespeople know the technical differences between the respective cut grades... To them Any EX is equivalent to any Ideal. Even the world's most popular internet seller maintains this in their educational material.

Summary: 10 of 10 jewelers send the message that GIA EX is king. 9 of 10 won't bring up AGS and live safe in the knowledge that the guys across the street and down the block will be sending the same non-message.

Partial excerpt from this thread with relevant discussion overlap, some cut-quality/submission tactic overlap as well.
https://www.pricescope.com/communit...g-in-the-future.145819/#post-2632133#p2632133

John

Thanks for this info, whilst the percentages are somewhat different from the crude analysis of PS online stones, they still underline the dominance of GIA.

The stats on retail positioning, for me, are very enlightening ( I wonder how they were obtained?). but it shows how the GIA dominance is promulgated at the consumer end of the market.

The highlighted point about access to AGS diamonds is interesting - perhaps it says a lot about how the existing AGS market works - the average added value cost of an AGS(0) must be higher than that of a GIA xxx stone because rough yield is lower, but supply/demand preserves the 5% premium on AGS. This is a (probably too) simple view??

TL

In the context of the relationship between GIA/AGS that you have spoken about. Can you expand on that please? From my distant view I see 2 organisations that were founded by the same people with similar and complimentary missions. They presumably are both accountable to their members - who I presume are drawn from the same constituencies. Given this relationship how do/could/should these organisations interact?

Thanks for pointing out that the cut grading systems can co-exist as they serve different sub-markets.

 

[Texas Leaguer]

In the context of the relationship between GIA/AGS that you have spoken about. Can you expand on that please? From my distant view I see 2 organisations that were founded by the same people with similar and complimentary missions. They presumably are both accountable to their members - who I presume are drawn from the same constituencies. Given this relationship how do/could/should these organisations interact?

Thanks for pointing out that the cut grading systems can co-exist as they serve different sub-markets.

Yes, the two organizations were founded by the same folks with slightly different but highly related missions. AGS as an organization promoting the highest standards and best practices for the retail jewelry business. GIA as an institute for gemological education and testing. Both devoted consumer protection. The two organizations cooperate in important ways, particularly in education.

The main thing that changed is that AGS formed their own lab in 1996, primarily to fill the need in the market for cut quality analysis.

Under current circumstances I think it would be entirely appropriate for GIA to share some juice with AGSL to advance the public understanding and appreciation of top level cut quality and light performance analysis.

 

[John P]

The stats on retail positioning, for me, are very enlightening ( I wonder how they were obtained?). but it shows how the GIA dominance is promulgated at the consumer end of the market.

Agreed. The "enlightening" stats are my own generalization, based on experience. I train and consult for a diverse cross-section of sellers, so I'm pretty confident in their accuracy as an overview. I sample shop retail markets regularly, in the interest of context and education for those I'm training. The sales pros I work-with are asked to explore their area, walk into local operations and become familiar with the consumer climate; as it relates to lab reports sold and discussed, cut-quality education (in-general) and mentions of AGSL (specifically). I posted that overview four years ago. Based on further experience, a statistical study might be even more exaggerated.

The highlighted point about access to AGS diamonds is interesting - perhaps it says a lot about how the existing AGS market works - the average added value cost of an AGS(0) must be higher than that of a GIA xxx stone because rough yield is lower, but supply/demand preserves the 5% premium on AGS. This is a (probably too) simple view??

Yes and no. It's about perception.

You likely saw, above, where the stats for 4gr and 8gr (2 and 4cts.-) don't command a premium. I wager it's because so many diamonds finish at those weights that any AGSL premium is lost in the noise. At 0.7 the average AGSL premium is given as 16% and at 6gr (1.50) it's 5%. The fuzzy result is a 4% "average" premium. But that may or may not apply to a given diamond, in a given category, on a given day - which is typically what a consumer is seeking.

More data from other slides: Over a wide spread of color/clarity (D-M/IF-SI3) AGSL commands premiums in all sizes except 6-8gr (1.50-2.00cts). But when you restrict color/clarity to H+/VS+ GIA then commands the premium over AGSL by 8% on-average, and when weight goes over 2cts that GIA premium jumps into double-digits.

Again, this is about perception: Sellers placing (example) a 3ct D IF diamond on a wholesale trading platform know a GIA report will sell the diamond globally, and will be the most-requested report for such a diamond-of-value. This has become a self-fulfilling prophecy. Nevertheless, there are cases where the end-client has a rare level of cut-education. This is currently an outlying situation, but when that is the end-client's perception a seller knows that GIA diamond can be re-submitted to AGSL (if it will quality for the cut-grade required...which is the sticky wicket of course) or they can have a diamond custom-cut for such as client, with AGSL in-mind.

So, in terms of perception, GIA is currently the undisputed report-of-choice for larger diamonds in collection categories (DEF VVS+). Meanwhile AGSL continues to be the report-of-choice - at a premium - when cut-quality is the primary value-add, but that's a much much smaller driver of demand in the global S&D sense.

 

[Karl_K]

In my area among the independents and even some of the chains I have seen more and more AGSL graded diamonds show up as a house premium line as well as for specialty branded cuts.
I even saw AGSL Aset posters at 2 stores in the mall a while back.
One independent has carried and advertised them for 8-10 years now.
So while John's numbers for AGS aware and supporters is a little low for my area overall I would say they are very close.

I think in a lot of ways GIA is between a rock and a hard place and often finds itself walking a tight rope trying to please all of its masters.
That I think is the biggest thing wrong with GIA it has too many irons in the fire and has too many groups with different needs it is trying to serve.

 

[WinkHPD]

In my area among the independents and even some of the chains I have seen more and more AGSL graded diamonds show up as a house premium line as well as for specialty branded cuts.
I even saw AGSL Aset posters at 2 stores in the mall a while back.
One independent has carried and advertised them for 8-10 years now.
So while John's numbers for AGS aware and supporters is a little low for my area overall I would say they are very close.

I think in a lot of ways GIA is between a rock and a hard place and often finds itself walking a tight rope trying to please all of its masters.
That I think is the biggest thing wrong with GIA it has too many irons in the fire and has too many groups with different needs it is trying to serve.

And sadly, in my opinion, the public is the least of those groups.

Wink

 

[John P]

In my area among the independents and even some of the chains I have seen more and more AGSL graded diamonds show up as a house premium line as well as for specialty branded cuts.
I even saw AGSL Aset posters at 2 stores in the mall a while back.
One independent has carried and advertised them for 8-10 years now.
So while John's numbers for AGS aware and supporters is a little low for my area overall I would say they are very close.

Karl,

That tracks, and good to hear. Cities where cut-focused brands are sold, even in chain-stores, do generate more awareness of AGSL and things like "H&A." For logical reasons it's easier to 'crack that nut' in small to mid-sized markets, as opposed to LA, Chicago or NYC where even strong messaging seems like hurling a note in a bottle out into the Pacific.

I think in a lot of ways GIA is between a rock and a hard place and often finds itself walking a tight rope trying to please all of its masters. That I think is the biggest thing wrong with GIA it has too many irons in the fire and has too many groups with different needs it is trying to serve.

Definitely, and they are in a hard position. As it relates to the critics, I've always celebrated GIA for introducing the 2006 cut grade, as it has undoubtedly improved global cut quality output. The other side of that sword puts far too many steep-deeps on the market, of course.

 

[diamondgezer]

In my area among the independents and even some of the chains I have seen more and more AGSL graded diamonds show up as a house premium line as well as for specialty branded cuts.
I even saw AGSL Aset posters at 2 stores in the mall a while back.
One independent has carried and advertised them for 8-10 years now.
So while John's numbers for AGS aware and supporters is a little low for my area overall I would say they are very close.

I think in a lot of ways GIA is between a rock and a hard place and often finds itself walking a tight rope trying to please all of its masters.
That I think is the biggest thing wrong with GIA it has too many irons in the fire and has too many groups with different needs it is trying to serve.

And sadly, in my opinion, the public is the least of those groups
Wink

Wink , I'd be interested in your thoughts as to how the consumer is suffering relative to the other GIA constituencies?


Almost by definition if the consumer is not a recognized and represented constituency of GIA then it's interests, if considered, are being defined by parties who likely have a conflict of interest.


This discussion seems to be developing a degree of overlap with the 'Why is GIA so slow' thread that is also running at the moment.
Not sure how to link the two?


A quote from the other thread -

The answer to "why is GIA so slow" is pretty simple.....

Because they can be - and without consequence.

They are the overwhelming incumbent, and it would be an enormous lift for any other organization to pose any kind of serious threat to them.



It seems GIA's very size allows them to behave as a monopoly


If GIA and AGS are 'sister organisations' how about considering a full merger under the GIA banner? Could both grading businesses (AGS rebranded as below) be franchised out (as Neil hypothesized) to conventional 'for profit' organisations? This would allow for 2 things-

1) The bottlenecks that seem to exist as per Neil's comments would be resolved.

2) The AGS LP system could be rebranded as a GIA system which might overcome some of the penetration issues that the AGS brand apparently has. This might allow some organic growth for the LP system which should in turn further improve cut standards.
There would probably be some pricing issues around the existing AGS premium / cost to market, but it seems that prices on stones vary for many reasons currently, so this would be just another price differentiator?


With one organization responsible for research, education , maintaining standards etc there would be a reduced cost in the chain from production to consumer.

 

[Texas Leaguer]

Geezer,
Even if GIA was of a mind to, acquiring AGSL would not solve the bottleneck. It is only a single lab at this point. And they are pretty much running at capacity.

GIA has all the resources in the world to develop a light performance based cut grade system on their own if that is what they choose to do.
I suspect that they they will not, as I think the cut grading system for rounds has worked well for them and their constituency. I expect that when they eventually roll out cut grades for other shapes it will be a similar broad system.

And I think that will be good for AGSL. They will continue to serve a smaller (but growing) audience that are keenly interested in diamonds with top performance.

Rather than GIA gobbling them up, I think it would be wonderful if they would simply help elevate AGSL to help grow that select audience and make more consumers aware of the choice. I think it would be very healthy for the market and altogether in keeping with mission of GIA.

This is all just wishful thinking on my part. I have no information that this is even under discussion anywhere, nor do I have any real optimism that it will come to pass. It's more a product of my naiive tendency toward idealism .

 

[John P]

This is all just wishful thinking on my part.

May all your wishes come true.

 

[Regular Guy]

Given that AGS stones command a 5% premium over GIA then could/would the market stand erosion of this premium?

While this is definitely relevant, and of critical importance in cut-focused communities like this one, it's a statistic that the global market takes little notice-of.

In fact, at last month's Certification Conference staged by Rapaport at JCK** the information in this slide was given with the admission that they really don't know if it should be included. Of course it's relevant here, and quite frankly it becomes relevant whenever a consumer learns enough to recognize the value of cut-quality and requests more information in a showroom.


** Tip of the hat to Cecilia Gardner, who was on the panel, for insisting the name "Certification Conference" should be changed to "Grading Report Conference" (sic).

Thanks guys...sorry to be gone awhile. Interesting also how...so many as things change, they also stay the same.

Re this graphic, John, I was interested to see a new (to me) reference point for lab to beat...but in a bad way...being EGL Hong Kong.

Also, the idea that "any" is better than EGL USA must frustrate them. (Is that sort of like the phone companies that actually named themselves: "I don't care" so that they can pick up that business when consumers say that when given a choice for a long distance provider?

All best,

Ira Z.

 

[diamondgezer]

Geezer,
Even if GIA was of a mind to, acquiring AGSL would not solve the bottleneck. It is only a single lab at this point. And they are pretty much running at capacity.

Hi Bryan, I agree that there may not be a fast solution to the bottleneck. But from the other thread this bottleneck is hurting (to quote Neil: 'This has been a giant industry problem for years'), and if it will continue to hurt the industry then surely something must change. The franchise model would allow for expansion (although it would not happen overnight and would have multiple risks and obstacles to overcome). If I understand things right the economic growth in China, India etc is likely to increase demand that will put further pressure on grading resource.(assuming sufficient rough can be mined).


GIA has all the resources in the world to develop a light performance based cut grade system on their own if that is what they choose to do.

I suspect that they they will not, as I think the cut grading system for rounds has worked well for them and their constituency. I expect that when they eventually roll out cut grades for other shapes it will be a similar broad system.

And I think that will be good for AGSL. They will continue to serve a smaller (but growing) audience that are keenly interested in diamonds with top performance.

Rather than GIA gobbling them up, I think it would be wonderful if they would simply help elevate AGSL to help grow that select audience and make more consumers aware of the choice. I think it would be very healthy for the market and altogether in keeping with mission of GIA.

This is all just wishful thinking on my part. I have no information that this is even under discussion anywhere, nor do I have any real optimism that it will come to pass. It's more a product of my naiive tendency toward idealism .

That's the beauty of a forum like this. Wishful thinking, naivety, idealism can all be bound together in 'out of the box'/blue sky thinking and nobody can get fired!!!! Plus, we guys, whose primary interaction with the industry is as consumers, get the chance to learn from the experience and knowledge of the great pro's here!!!