Diamond Business Value Added Chain
Diamonds become marketable, and are sold, as a result of a value added chain created to satisfy end users’ needs. This is how it works.
There are four main participants in a diamond transaction. Learn more.
- End User
- Jewelry Retailer
- Diamond Dealer
- Diamond Wholesale Dealer
The value added chain is the results of the actions of the participants in the diamond sales process. Each participant contributes an important share in what it takes to bring a diamond into the market. Contributing to a business process such that an item, or service, becomes possible, or more desirable, is known as “adding value”. Thus, diamonds enter the market as a result of a “value added chain”.
To best explain how the diamond business value added chain works, I will use a simplified example. Illustrating through an example all that that it takes to make possible a diamond sale is the easiest way to explain the diamond business value added process.
Example Diamond Sale Transaction
A couple decides to get married. This is the seminal event of most diamond sale transactions
The husband decides that, to seal the deal, he will buy the best possible engagement ring that he can afford. Traditionally, engagement rings feature a prominent diamond.
He goes to a few jewelry stores (retail jewelers), and locates quite a few diamond rings that would better than do the job for him. At this point, the retail jewelers that engage with him are creating value buy helping the customer select a ring, or possibly getting custom ring designed and built.
The retail jeweler and the customer, decide that none of the existing engagement rings would be unique enough for lady. She wants something fancy and unique, with a large awesome diamond. So the retail jeweler and the customer, conclude that it would be best to create a custom engagement ring with a big, nice, certified diamond. The ring will be created from scratch. The diamond will be sourced.
Because large certified diamonds are so expensive, the retail jeweler can’t hold too many of them. In fact, he retail jeweler has no very large certified diamonds on stock. To source the diamond, he will work with a wholesale diamond dealer.
The wholesale diamond dealer is the business of keeping in inventory a great selection of certified diamonds. He happens to have a certified diamond that closely matches the specifications of the retail jeweler. Since diamonds are a natural product, this is as good as it will get. No two diamonds are the same.
The way the wholesale diamond dealer got the needed diamond is by steadily working with a diamond dealer. He has several similar business relationships throughout the country, and even some abroad. That is how he gets his diamond inventory for the most part.
The diamond dealer, in turn got the needed diamond from a lady that no longer needed it. So she sold it to the diamond dealer for cash. She had the diamond, mounted on a engagement ring, for a long time. The ring was used enough that it was not possible to refurbish. So the gold got recycled, and the diamond was removed for the it to be re-purposed.
The diamond dealer is in the business of buying and selling diamonds and diamond jewelry, mostly by dealing with the public. For him, the best way to deal with a large certified diamond, is to sell it to a wholesale diamond dealer.
The Value Added Chain
As you can see, each participant in the value added chain contributed time, expertise and capital in order to make it possible for the groom to present a diamond to the bride, “seal the deal”, and get married. In exchange for their effort, each participant earns a profit commensurate with their contribution to the diamond sale transaction.