Diamond Market's E-Commerce Revolution - Competition and Lower Prices

Until diamond vending E-Commerce companies have been established, the role of diamond polishing companies and diamond dealers in the diamond supply chain was very risky economically. With developments in the online diamond market, diamond polishing companies, wholesalers, online dealers and customers enjoy a much more competitive market.

Economic Pressure in the traditional Diamond Supply Chain

In the diamond jewelry supply chain, the De Beers Group is the owner of most diamond mines, especially the prosperous ones in Africa. De Beers sell their rough stones to some sight holders, which are diamond polishing companies that own special rights of dealing directly with De Beers, and to other companies and traders, before cut diamonds are produced. Polished diamonds are later on sold to diamond wholesalers, before reaching local stores.

The De Beers' sight holders pay high expenses for receiving such privilege. Every several weeks the sight holders pay some millions of dolalrs to De Beers. As the latter demand a cash payment, the holders have a line of credit that enables them to execute such payment. From the moment they purchase the rough stones, it takes approximately 90-100 days until polished diamonds are produced, a time duration in which the holders still don't receive any payment to overcome their minus, thus they must pay interest that is added to the initial diamond cost. The time duration which it takes these sight holders to sell the polished diamonds to wholesalers, whether the wholesalers agree to pay in cash and the additional time it takes to have the diamond certified are all parameters which determine what economic risk the sight holders would face.

This situation demonstrates the high pressure put on the De Beers' sight holders, who are obliged to pay for new rough diamonds every 6 weeks, and as a result must produce diamonds and sell them in maximum speed. Jewelers also don't have an easy task, for they must keep a decent supply of diamonds for their customers if they wish to remain relevant, which needless to say costs much. Dealers quite often borrow money in order to pay for maintaining a large variety of diamonds, which throughout the years induced a process of diamond markups.

E-Commerce Revolution

Blue Nile is perhaps the most well known online diamond dealer. Unlike other stores which began as B&M stores and later on expanded towards online shopping (such as Tiffany's), Blue Nile has been established in order to tackle the problem mentioned above, selling diamonds while reducing economic risks. The diamonds which Blue Nile provides aren't its own inventory, but rather stones which belong, and are possessed, by many companies worldwide. These companies constantly inform Blue Nile about their diamond stock and the wholesale price of each diamond. Blue Nile displays these diamonds on its sight and presents itself as the direct diamond dealer. After a purchase is executed on BlueNile.com, the supplier sends the diamond directly to the customer adding a Blue Nile receipt which they printed their itself, without having the item pass through the Blue Nile office (though it would be fair to say that many Blue Nile customers are aware of this situation and still regard Blue Nile as a very reliable company). 

Sight holders find this arrangement very convenient. It doesn't cost them to have their diamonds added to the Blue Nile catalogue both price-wise and effort-wise, as a very simple procedure makes their diamonds available for sale. The sight holders in addition aren't stringed to Blue Nile too tightly, and in case they find another diamond customer, they can sell it diamonds and remove it from the Blue Nile list. Blue Nile also enjoys this symbiosis, as it doesn't face the stressful expenses of carrying inventory costs of providing a high supply for its customers, which B&M stores constantly struggle to maintain.

Current Online Diamond Market

It is estimated that Blue Nile charges its customers 18% for diamonds more that the price it pays diamond suppliers, a very low profit compared to that charged by B&M jewelers (around 90-100%), though a profit that still makes Blue Nile a very profitable company. Diamond suppliers are updated with the price list of many other online diamond dealers, as well, making the market very competitive, much for the common diamond consumers' benefit.

Though much competition has aroused, Blue Nile remains a very successful dealer. It enjoys the reputation of being a pioneer in this online diamond market, though its formula is replicable and adds intense "rival" dealers, which might harm Blue Nile more significantly in the future.

James Allen is one of the prominent diamond online dealers nowadays. It tried to provide the customer an advantage over Blue Nile by providing the online customer the possibility to view the diamonds before selecting a stone. While Blue Nile claims that all the knowledge a diamond customer needs to possess while selecting a stone could be obtained through reading the diamond certificate, James Allen is aware of the customer need the view the items physically. Though this cannot be accomplished virtually, the 3D diamond photographs it provides in the James Allen website make a big progress in the field.

Future development in the online diamond customer market, in important aspects such as diamond pricing and customer service are still expected in years to come. Blue Nile and James Allen will certainly be there in full strength, but many other companies are expected to join the race.