Honesty and a pragmatic approach can net retailers a new over-the-counter revenue stream
If you are in the business of selling diamonds, it only makes logical sense that you are also in the business of buying diamonds, much like a car dealer or realtor assists clients with both sides of a transaction.
The best way to acquire a client’s diamonds favorably is by being completely open while calmly explaining how and why you are able to pay the price you are offering.
For this example, I will cite a recent purchase of a 0.97-carat round brilliant cut J/VS1 with GIA lab report #6173853257, which I acquired over the counter for $1,300. The client mentioned that they originally bought the diamond for $5,500. Comparable diamonds have an average wholesale price of $3,400. Here’s how to capitalize on similar opportunities.
1 Embrace the opportunity — Treat every selling customer with the same kindness and enthusiasm as you would a client wishing to make a purchase. Welcome the client into the store and offer them a beverage. See if they have any other jewelry they would like you to clean. As selling jewelry can be emotional, it is generally best to work with the client in a private area off your sales floor.
2 Be transparent — Working from a position of fact is always best. First, print out wholesale comp examples (RapNet, Polygon, Blue Nile, etc.) similar to the item they wish to sell. If the diamond is of bread-and-butter size and quality, I generally do not factor in nuances such as fluorescence and make unless these factors play to my advantage. I always use the lowest priced comp available.
3 Arrive at a purchase offer — It is generally good practice to pay 50-65 percent of the lowest wholesale comp. In the case of my example above, this range would be $1,400 to $1,825. One must also factor in re-cutting and certification costs when applicable. Obtaining a cost basis of this type will allow you to sell the diamond back to the trade or match online pricing while achieving a healthy margin over the counter.
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4 Present the facts — I first show the customer that I can purchase virtually their same diamond for the lowest wholesale comp. I then explain that often this price can be negotiated down with the supplier. If I do purchase the diamond from the supplier, I can arrange 30-60-90 day payment terms. I explain how I typically only buy diamonds when I have a specific call or a hole in inventory. Furthermore, when buying from the public, the purchase price must be attractive enough that it allows me to sell it back to a diamond dealer or the cash savings must be significant enough to duplicate inventory.
5 Explain the offer — I explain that being an expert in my field allows me to pay approximately 50-65 percent of the wholesale value. I simultaneously present them with the wholesale comp, which also details the math behind my cash offer. At this point, the client usually realizes the reality of the market and their diamond’s true liquid value. Often I mention that other less-qualified diamond buyers who do not specialize in our industry pay between 10-30 percent of the wholesale value. Although many jewelers are quick to tell a customer what their diamond’s “fair market value” is, few are willing to back it up with an immediate cash offer.
Mills Menser is a third-generation retailer and founder of Diamond Banc, which provides capital and partnership opportunities for jewelry-secured loan services, as well as buying jewelry from the public. He can be reached at mills@diamondbanc.com or (573) 875-2265.
This article originally appeared in the February 2017 edition of INSTORE.
