Jewelers Planning Lots Of Travel

November 18, 2003
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HUDSONVILLE — Two months ago Dan Jensen folded his large frame into a coach seat for a long, long flight from Chicago to Brussels — and then from there to Antwerp to buy diamonds.

Jensen and his wife, Cindy, own and operate a jewelry store in the Hudsonville Plaza.— one of the country’s rapidly diminishing number of independents.

In fact, because about 800 jewelers exit the business annually, Dan often flies himself and Cindy in their six-seat Cherokee to other communities where they buy inventory items for their outlet.

The Jensens also regularly fly to jewelry trade shows in this country.

But September’s jaunt was the first in a series of three annual flights that either Dan or Dan and Cindy together will make to Antwerp, the Belgian seaport that also is the capital of the international diamond trade.

And why would they subject themselves to the hassle of overseas travel when it’s possible to buy diamonds through distributors here in this country?

“Well, I’m not flying coach again,” Jensen laughed.

“But I didn’t have to take off my shoes once,” he added, concerning security checks. “And in security checks over there, everybody was very friendly.”

What one does on a diamond-buying trip, he said, is wire the money first, then go to Antwerp to pick out the diamonds, then fly home and wait roughly a week for the diamonds to arrive in an insured shipment via U.S. Customs.

“You need to ship the diamonds both for security reasons and customs,” he said. “It certainly wouldn’t be prudent to carry them on your person.”

During the September trip, Jensen Jewelers spent about $100,000 for 30 carats of diamonds, which, he said, would comfortably fit in the cupped palm of his hand. 

If that sounds a bit deflating to the layman, he explained that for the firm’s business model, the trip makes sense from the standpoint of marketing, product quality and price.

“I wanted to buy direct,” he said. “The margins over there are very competitive.”

The problem with ordering diamonds in the United States, Jensen indicated, is that the selection isn’t all it might be and the prices reflect the mark-up from somebody else’s trips to Antwerp, plus handling and processing through yet other middlemen in New York City.

“I decided to cut out all of that,” he said.

He explained that because 80 percent of the rough diamonds in the world market move through and are cut in Antwerp, one can custom shop there much more easily for special orders from local customers.

He stressed that he didn’t go shopping on his own among the 1,500 diamond outlets.

Available in Antwerp, he said, are retail agents who know the market intimately and represent, on a commission basis, 40 or 50 buyers — one of whom was him.

Buying diamonds in Antwerp certainly presents its own challenges, he added.

As noted this summer in a lengthy Forbes article, the biggest diamond cartel — DeBeers — customarily sold the bulk of the world’s diamonds through 150 favored purchasers known as its site-holders.

And in its market dominance, Jensen said, “De Beers sold to those buyers on the basis that you accept what we supply or we’ll give somebody else your site. Take it or leave it.

“And what they supplied,” Jensen added, “ranged from high quality diamonds to trash.”

But as that same Forbes story reported, some Russian and Israeli suppliers this year managed to do an end run on De Beers and began selling diamonds directly to agents.

“And from what I heard while I was there,” Jensen said, “that was really quite a big ruckus.”

First, he said he learned that DeBeers had dropped its 150 site-holders and now releases diamonds into the market only through 100 so-called suppliers of choice.

Meanwhile, he added, the diamonds supplied by Russian and Israeli sellers has caused a drop of 25 percent to 30 percent in some prices.

“So when you consider that prices have dropped, and I’m cutting out the middle man, I’ve been able to acquire some very nice diamonds for some good prices.

“That first time,” he added, “was strictly a working trip. But the next time the two of us will go and we’ll see some of the sights. Paris, maybe. And we’ll fly first-class.”

He said that independent operations such as the Jensens’ depends on their ability to offer distinct products that he contends just are not available at jewelry chain stores.

Jensen says that he understands from the Jewelers Board of Trade that though the number of independents is declining precipitously, the number of jewelry chain stores is expending.

The board reported that jewelry sales in the United States increased by just over 4 percent last year, and are expected to grow 6 percent to 7 percent this year and next.

It was Cindy who brought her husband into the jewelry business.

He explained that he earned his bachelor’s in chemistry and enrolled in the master’s program at the University of Michigan.

“And suddenly, I decided I really wasn’t all that excited about doing research in chemistry,” he said.

“Meanwhile, Cindy had built up a jewelry business out of the home. In fact, she was doing quite a business. Well, I always wanted to run my own business, so I decided to take the GIA (Gemological Institute of America) courses and join her in it.”

Among other things, he said, such training is what enables him to examine diamonds critically with the 60-power binocular microscope in his office.

“Diamonds normally are graded with 10-power scopes,” he said.

“But with this,” he said, “you can spot where someone drilled out an area of discoloration and filled it with a clear fluid.

“It results in a nice-looking stone,” he said. “But it certainly should not command a high-quality price.”

He said the firm has grown to the point that it is generating about $1 million worth of business this year, a typical number for such stores. The firm has a goldsmith on premises and thus can do custom work with the stones that the Jensens purchase overseas.

Jensen told the Business Journal he sensed no fear about terrorism among fellow passengers.

“The flight was full,” he said. “There just didn’t seem to be any worry.

“I tell you,” he added, “I was really ashamed about American travelers after 9-11. I think they should have been willing to show those guys (terrorists) they were willing to fly.”

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