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 Post subject: Sales of the mine
PostPosted: Tue Nov 29, 2005 11:37 am 
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Perhaps this is a little offspring of the World Wide Web - the sale of precious stones from deep down the supply chain (be it by someone who mines them or a bit up from there).

Does it ever work?

Is it something new at all?

Does it make sense to talk about this?


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PostPosted: Tue Nov 29, 2005 11:58 am 
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PostPosted: Tue Nov 29, 2005 1:02 pm 
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Let me see if I understand...

You're asking if the phenomenon of people selling rough from the far "left" of the supply chain direct to cutters/consumers is related to the internet?

I'd guess so. The global marketplace that has arisen with deep penetration of the net (especially now into 3rd world countries) and the ease of global shipping makes it a "no-brainer" that this sort of thing would happen eventually.

The old format of mine -> long chain of middlemen -> consumer served a purpose in a world where there was no way for the end buyer to connect with the people pulling the stones out of the ground.

Now, the buyer gets a cheaper price and the miner gets a higher price than either would if the middlemen were involved. This is a win-win situation for (in my opinion) the "crucial" people in the chain. The people who control the supply and the people who control the demand are the people without whom the gem trade does not exist. If no one mines them, no more gems. If no one wants them... no reason to mine them.

The middlemen, who certainly served a purpose in the past, and continue to serve a purpose in the present (albeit, a less unique role) are "dispensible" in that commerce can be conducted in their absence. Now, this is not to say that it is always in the best interest of the industry (or even the consumer) to follow this practice.

There is no substitute for seeing a gem in person, as we all well know. One of the primary advantages in the chain of middlemen is that there is someone at all steps to take custody of the gems and know what it is that is being purchased. They aren't relying on low-quality photos before asking stones to be shipped thousands of miles sight-unseen.

Yes, I know that there are buyers who buy sight-unseen... and that the quantity of stones that are bought this way is immense. Nevertheless, there is still a place for people who will GO to the mines and SEE and FEEL the stones and know what to take and what to leave.

Following along that line, I would offer a caveat. While it is by no means CERTAIN, knowing that there still are people who buy in person from the mines or the mines' distribution chain... where are these gems "direct from the mines" coming from? Well, it may well be the "leftovers". What are mines to do with stones that the dealers won't take... or, rather, that they won't take at a price the mine wants?

I'm not saying that this ALWAYS happens, but surely it's worth considering.

That's just my 2¢.


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 Post subject: Sales of the mine
PostPosted: Tue Nov 29, 2005 2:01 pm 
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This is definitely an area that Andrew could comment on. I know that Andrew and others in the Australian sapphire industry are trying this approach - in part, because the traditional buyers (Thai) are looking elsewhere for sapphire rough. As a buyer, I definitely enjoy dealing with the miner directly - they generally know their material better than the rough dealers and the prices are (often) much better. Knowing exactly WHERE my gems came from also offers opportunities to read and get excited about the specific deposits. Of course, the possibility of deception still exists, but at least the chain of deceit is much shorter...


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PostPosted: Tue Nov 29, 2005 3:54 pm 
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Hi all,
Great question, I guess we can tell you if it works if we are still doing it this time next year. The comments so far are true from where we stand. Without the internet giving us the ability to reach customers direct, it would never have been worth considering. About 15 years ago a very large local miner spent a lot of money and time setting up a cutting factory in Australia to cut and sell direct. When the traditional buyers learnt of this they got together and dropped the bulk price of sapphire here by 40% as punishment for trying to cut them out of their profit.

Times have changed and the Thai buyers seem to be bypassing Australia altogether for greater profit opportunities in China and Africa. We sell direct because we have to - we are in a position where there is no choice except to stop mining completely. In the short while (12 months) we have done this, the response has been great. It has been very satisfying to get great feedback from the end buyer but our small scale and low advertising budget means it is slow progress. It has been an interesting and encouraging year and we mean to keep at it as long as we can.

We face many hurdles - there is a lot of very cheap stone being sold in Bangkok at the moment, bulk diffusion and other treatments seem common and many of these gems are sold very cheaply online. We have to compete with these sellers which is difficult on price but we have everything to lose and nothing to gain if we sold inferior or mislabelled gems. For us selling direct, we must always provide great product at a good price. If we get one customer unhappy, word would spread like wildfire. When we started we were worried that we would have a lot of returned stones but so far only two have returned after inspection and these were replaced with higher value stones to suit the buyers needs.

The internet is definitiely the key to all this - the "Ebay generation" is much more comfortable about buying online. I think even 5 years ago, we would not have had any success at all but the world is a much different place now.

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PostPosted: Tue Nov 29, 2005 4:03 pm 
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gem-n00b wrote:
Let me see if I understand...

snipped...
Following along that line, I would offer a caveat. While it is by no means CERTAIN, knowing that there still are people who buy in person from the mines or the mines' distribution chain... where are these gems "direct from the mines" coming from? Well, it may well be the "leftovers". What are mines to do with stones that the dealers won't take... or, rather, that they won't take at a price the mine wants?

I'm not saying that this ALWAYS happens, but surely it's worth considering.

That's just my 2¢.


I have replied to this thread in another message but wanted to comment on this separately. Certainly, you should keep in mind this issue and it is good to remind us of it. However, in the case of Australian sapphire miners (and we are not the only ones selling direct - many opal miners also) - the middleman have cut us out of the picture almost completely. So by buying direct from us - you have the choice of our full range from the budget priced mine run parcel to the best of our production in specialty stones. Another comment: by selling direct, we are always left with lower quality stone that once we would have been able to sell to a dealer - we cannot sell this stone at all direct to end customers so if anything you are getting the best and none of the worst. The kind of customers that buy from us will not accept our lower grade sapphire and we do not attempt to sell it in this way as a reputation for quality is absolutely critical for success. In other countries where dealers are actively buying, then it is certainly possible that the miners are selling direct what they could not sell to the dealers - this may or may not be a problem depending on the price they are asking. As always, buyers should educate themselves about the product so they can make wise buying decisions.

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PostPosted: Tue Nov 29, 2005 4:47 pm 
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Aussie Sapphire wrote:
I have replied to this thread in another message but wanted to comment on this separately. Certainly, you should keep in mind this issue and it is good to remind us of it. However, in the case of Australian sapphire miners (and we are not the only ones selling direct - many opal miners also) - the middleman have cut us out of the picture almost completely. So by buying direct from us - you have the choice of our full range from the budget priced mine run parcel to the best of our production in specialty stones. Another comment: by selling direct, we are always left with lower quality stone that once we would have been able to sell to a dealer - we cannot sell this stone at all direct to end customers so if anything you are getting the best and none of the worst. The kind of customers that buy from us will not accept our lower grade sapphire and we do not attempt to sell it in this way as a reputation for quality is absolutely critical for success. In other countries where dealers are actively buying, then it is certainly possible that the miners are selling direct what they could not sell to the dealers - this may or may not be a problem depending on the price they are asking. As always, buyers should educate themselves about the product so they can make wise buying decisions.


Let me be clear, I certainly didn't mean to imply at all that ALL "direct from the mine" deals were of that nature. I have seen Andrew's rough and it's quite lovely, certainly first quality. I wasn't even thinking of Australia, I admit, when I was writing my response to the query (hence my references to third world countries... which Australia is certainly not ;) ).

I agree wholeheartedly that in places (like Australia) where the miners have been abandoned by the middlemen (does anyone know if the US sapphires have the same problem?) that this direct-from-mine approach is going to result in AAA grade stones going out direct to cutters/consumers. My concern was more for the places where the middlemen "take the best and leave the rest". As always, caveat emptor of course... but Australia's a great bet in my book. :)


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PostPosted: Tue Nov 29, 2005 6:30 pm 
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Gem-noob

I certainly wasnt taking issue with your statement - it is good to be aware of the possibility and there is absolutely no problem with raising this issue - it is helpful I think.

It would be interesting to hear what USA sapphire miners think about all this - I would imagine they have similar problems to us. I think most larger ones have closed leaving mainly small operators, many rely on tourism.

Your point of the best stone being taken to leave the rest is a good one. Many probably dont appreciate the very small percentage of almost all miners production that is in the "best " catagory - often only a few percent. In some ways this makes it harder for likes of us compared to a buyer who can pick and choose from many sources to put a collection together for sale - but of course, this way, you have to pay extra for the middleman.

cheers

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PostPosted: Tue Nov 29, 2005 6:37 pm 
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gem-n00b wrote:
Let me see if I understand...

You're asking if the phenomenon of people selling rough from the far "left" of the supply chain direct to cutters/consumers is related to the internet?



Something along those lines, yes.

I am an amateur all the way, and the Net made such a huge difference on what exactly I could do with a strange hobby. It begs the question - how does it work for the trade anyway.

It is hard to miss the US based virtual diamond shops and be amazed at the love-hate relation the folk involved have with colored stones. As if there was no relation whatsoever.


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PostPosted: Tue Nov 29, 2005 7:39 pm 
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valeria102 wrote:
gem-n00b wrote:
Let me see if I understand...

You're asking if the phenomenon of people selling rough from the far "left" of the supply chain direct to cutters/consumers is related to the internet?



Something along those lines, yes.

I am an amateur all the way, and the Net made such a huge difference on what exactly I could do with a strange hobby. It begs the question - how does it work for the trade anyway.

It is hard to miss the US based virtual diamond shops and be amazed at the love-hate relation the folk involved have with colored stones. As if there was no relation whatsoever.


Your right Ana,

I too found the only way I could do this strange bobby was via internet. I haven't the time to scour the world looking for stones. I fine connections via the internet that send them to me on memo for me to look at.

Regards,
Maurice


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PostPosted: Wed Nov 30, 2005 10:39 am 
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MJO,

By your example I would not call it 'hobby', but 'second life'. It would take that much, I guess...


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PostPosted: Wed Nov 30, 2005 4:21 pm 
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valeria102 wrote:
MJO,

By your example I would not call it 'hobby', but 'second life'. It would take that much, I guess...


I guess I'm obsessed.

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PostPosted: Fri Dec 02, 2005 9:37 am 
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The traditional multi-level market is colapsing. In the diamond market it has already done so except that the source producers seem to holding the line so the loosers are retail jewelers. Everyone is always seeking to cut out the middleman and the net has made this possible.

Some people bemoan this and speak angrily of those who are making it happen. First retailers cried about American wholesalers, now American wholesalers are crying about the Thais. Soon the Thais will be bo hooing about the Madagasgans. The fact is that it is inevitable.

The higher you go in quality the less this is happening and comparison is a problem since there is no universally accepted gem grading system. Its difficult to compare apples to tangerines.

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PostPosted: Sat Dec 03, 2005 4:00 am 
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Hi all,

When are we going to get together as an industry and get a standard coloured gemstone system? I know we have all had our thoughts on the subject before but it is just so important. Hard to believe in todays progressive world we cant get the entire trade to see the benefits.

Richard, your comments on middlemen are timely for us. A good friend and fellow miner has just got back from Bangkok yesterday. Before going we both arranged to send some bulk mine run over to have for him to show around as samples and try and create some new sales. We decided that we would send them to the address of our best buyer as he has proven to be good to us over the years and although he wasnt interested at all in buying he would keep it safe for us. When our mate arrived he found that the samples had been already sold leaving us without material to show to any other potential customers. He did not want to buy (and they were small samples) but it seemed certain he didnt want our sapphire offered to anyone else. This type of thing has happened in the past and just makes the job harder. Finding new markets is hard in any case without this kind of thing going on - makes selling directly to the end customer a lot more satisfying. Dealers will never be cut out completely - we just all need to adjust how we do things in reaction to changed circumstances.

Cheers

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PostPosted: Sat Dec 03, 2005 10:54 am 
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Andrew,

Boy, that was underhanded on the part of your regular customer! :twisted: These tactics seem to be regular part of the arsenal of some gem dealers...


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