On its homepage, Rare carat boasts that you’ve found the site that diamond dealers don’t want you to see. As a diamond dealer myself, I’d say that’s fair — I know a lot of retailers, especially jewelers in NYC’s Diamond District, who dislike the site and have complaints about it. But their complaints aren’t for the reasons that Rare Carat takes pride in.
Over the last few years, I’ve heard multiple people mention how they think there is bound to be a “Priceline for diamonds.” Rare Carat is the first to tackle this, and more power to them for being the first to actually take it from concept to reality.
Rare Carat touts itself as the “Kayak for diamonds.” This phrase shows they know their concept isn’t inherently new. In fact, the concept is as old as the internet itself, with numerous price aggregators out there for every industry. One could argue that Amazon’s entire website is just one big price aggregator, gathering prices from hundreds of individual sellers and serving up, in real-time, the lowest price for the item you’re looking for.
Price aggregation by itself is harmless, and frankly inevitable due to the hundreds of individual diamond e-tailers out there. It’s extremely daunting for a consumer to check the same diamond specs across major sites like Blue Nile and James Allen, along with numerous smaller retailers. So in practice, Rare Carat is a sound service that houses prices from a variety of sellers in one place, making the search for diamonds simpler.
That said, there are two main issues I see with Rare Carat:
1) Its diamond recommendation engine is inherently flawed.
When searching for a diamond on Rare Carat, the user is prompted to enter a GIA certificate number, which the site then grades to tell you whether or not it is a good price. It then grades the diamond itself based on multiple parameters and tells you whether their in-house gemologist would recommend the diamond or not.
This is great in theory, but anyone in the diamond industry will tell you that though the GIA report is a good starting point, it is far from the complete picture on a diamond. GIA has done a fantastic job branding itself, and is arguably the most consistent large independent laboratory in the world, but even a GIA board member I spoke with recently admitted that they are not perfect.
While color grading is being increasingly handled by grading machines, diamond clarity is still evaluated by humans and different graders have different ways of grading. Especially for VS2 to SI2 grades, the ranges are quite wide. Two SI1 or SI2 diamonds can be vastly different, with one diamond vastly superior to the other. Given their system, Rare Carat doesn’t have any way to know from the certificate itself whether one SI1 graded diamond is inherently better than another.
Their cut recommendation engine is also dicey, particularly when looking for any shape other than round as they don’t have cut grades. Here’s an example. For oval, pear and marquise diamonds, it’s important to look out for a bowtie effect. A bowtie effect is seen when the center of the diamond appears dark, in the shape of a bowtie, and indicates a poorly cut diamond. Rare Carat buries mention of this phenomenon deep on its website in an article about selecting diamonds. However, when asking for a recommendation on an oval diamond, their cut grade doesn’t factor in the bowtie effect, or mention it at all. As a test, I submitted a diamond that, to me, had a very obvious bowtie effect, but even their trusted gemologists, who had access to a video of the diamond failed to mention this effect at all. When I brought it up, the gemologist on their site replied, “I don’t think this one is as sever[e] as the image shows.” Another said, “It doesn’t look so severe to me. I’ve seen much worse and of course much better.” When I told the gemologist that the bowtie seems noticeable and her advice contradicts what many others have said, she replied, “My job is to not to tell you what to do, it’s to tell you what I would do.”
Pictured above: A strong bowtie shrugged off by Rare Carat’s gemologists
I think the issue here is that RareCarat’s gemologists are former GIA graders who know how to grade diamonds from a grading report perspective, but are not as well accustomed to what customer should really look for and value from a buying standpoint. As a diamond wholesaler, I know that when buying a diamond, the customer always has to make compromises based on their budget. But rather than learn from what customer is looking for and where they are more willing to compromise, RareCarat’s engine and gemologists push their own opinions. For example, if I were recommending a car to someone, I would want to learn about whether they are more interested in fuel economy or speed, or if they have kids and need additional space and want to go bigger with a minivan or SUV. It would not serve the customer well if I were, say, to tell a treehugger that I don’t mind lower fuel economy and love driving big cars (FYI – not the case!). Similarly, it doesn’t serve the diamond buyer well if the gemologists disagrees with them by pushing their opinion that the bowtie isn’t noticeable to them, without first knowing how important this factor is to the individual user. This is only something a truly invested diamond consultant could do – the Rare Carat gemologists don’t have the time to learn about the user and their personal preferences, and instead simply push out their personal opinions on the masses. They want to give you just enough information for you to make you confident enough to buy a diamond (preferably through their trusted retailers), even though it may not the complete picture. They are not incentivized to go too in depth since they make more money with a large volume of traffic rather than trying to make sure individual customers truly get the best diamond experience, like only a one on one personal interaction can provide.
I’ve also noticed that Rare Carat grades every type of cushion modified brilliant diamond just as any other, even though most people in the industry know that there are many different types of cushion modified diamonds — and some are better than others. For those who are less familiar, there’s a regular cushion modified brilliant, which has additional facets at the bottom of the diamond. These extra facets make it a bit heavier at the base and give the diamond a crushed ice effect, similar to a radiant cut diamond ( which are generally 5-10% cheaper than a hybrid or regular cushion brilliant). That said, Rare Carat’s price engine and cut grade system fail to mention this and indicate that a hybrid cushion modified diamond is not as good of a buy compared to a regular cushion modified. I know from a wholesale standpoint that the hybrid/regular has much better light performance and a much higher value. This is yet another area where Rare Carat’s experience falls short of the real thing – working one-on-one with a diamond expert.
2) Biased partnerships with only select retailers limit inventory.
While there are hundreds of online sellers of GIA diamonds and customized rings out there, Rare Carat only shows and compares listings from a few select e-commerce sites that they partner with. This severely handicaps its ability to live up to its claim of being the “Kayak for Diamonds,” since Kayak includes a much higher percentage of the total market than Rare Carat. Kayak shows airline and hotel fares from every major online merchant, saving the user from having to browse each individual site to compare fares.
I personally find it annoying that Kayak and Expedia don’t include fares from Southwest in their engine, but imagine if they didn’t include prices from Delta, American Airlines and United, and just showed fares from others like Jetblue, Alaska/Virgin Airlines, Spirit and Frontier. That’s essentially where Rare Carat is right now.
Rare Carat currently only shows results from less than ten online retailers – that are arguably very niche and small – and doesn’t include the top three largest and well known online sellers (Blue Nile, James Allen and Brilliant Earth). So while the concept is great, it’s offers access to a very limited inventory and requires the customer to browse Blue Nile, James Allen and Brilliant Earth for a more complete picture.
It’s likely that their list of retailers it includes will grow, but Rare Carat might face pushback since online retailers who already face stiff competition and slim margins are likely to loathe paying commissions to the aggregator for every click, especially if those clicks don’t convert into meaningful sales numbers. On the FAQ section of its website, Rare Carat states, “Instead of getting paid a commission when you buy, the online retailers pay us when you click on diamonds (this is how Google and Trivago work). This means we don’t have incentives to push you to buy anywhere, and can still pay our bills.” This really isn’t as clear cut as they make it seem. Even though Rare Carat gets paid based on clicks, and subsequently may not care specifically which diamond a customer ends up buying, they are still incentivized in the long run to have their users buy from their partner retailers’ websites. It’s pretty easy for these retailers to track how many visitors referred by Rare Carat actually buy a diamond. If the retailers see that Rare Carat users aren’t converting at a profitable rate (given their already razor thin margins), they may drop their partnership and spend their marketing money elsewhere. So while it is technically true that they don’t have a (short term) incentive to convert users, they have every incentive in the long run to push users to buy from a partner that offers click-based revenue.
Room to grow
Rare Carat has a visually appealing website, and although there’s admittedly isn’t a very unique concept, it has great potential to make its mark on what is an antiquated industry. This case is especially strong among millennials who are now more comfortable than ever making big purchases online. Though, because it’s still a very new website, there are several kinks that will need to be refined in order for it to really live up its promises. The website would be well-served to work closely with diamond industry experts (who actively work with consumers) to tune its recommendation engine so that it delivers more accurate price comparisons, recommendations and diamond rankings. And while I think it’s inevitable that it will eventually open itself up to more diamond e-tailers, the platform as it stands is very narrow in terms of suppliers, which limits the user experience and increases the likelihood of recommendation bias.
The internet has disrupted almost every industry and forever changed them, and the diamond and jewelry industry is no exception to this. One of the biggest disruptors in recent history has been Blue Nile. While it has struggled to make a profit, Blue Nile has drawn a lot of ill will from traditional brick-and-mortar jewelry stores and wholesalers alike. Many complained it shrank retail margins down to unsustainable levels, but at the end of the day, it is just a middleman that lists diamonds for sale by other middlemen who list diamonds from large diamond manufacturers and wholesalers around the world. Neither Rare Carat, nor the retailers they work with, carry their listed diamonds in their own inventory. Diamond wholesalers and manufacturers set the prices for their diamonds and these e-commerce sites list them for a tiny margin to gain market share. And because they are not undertaking any inventory risk, they can work on tiny margins, unlike traditional jewelry sellers. According to Joshua Niamehr of Enchanted Diamonds, his margins are often less than what typical retailers charge as sales tax.
The internet brings greater transparency, which is bad news for traditional sellers who have much higher fixed costs and overhead, but great for consumers who can get pretty much the same thing for cheaper. Uber gave users access to taxi rides with a better user experience at a cheaper price, and Amazon does the same with consumer products. The problem in this case is that while websites like Blue Nile, and now Rare Carat, help consumers get access to diamonds at a cheaper price than they could have with traditional retail, they don’t necessarily provide a better user experience. Blue Nile arguably made diamond buying even more confusing by laying out thousands of options for every budget. Rare Carat spreads a lot of misinformation by guiding users towards certain types of diamonds without proper justification, and just provides a limited picture of the diamonds, with nothing but a tiny disclaimer at the bottom of the page to warn users of this potential hazard. Yes, Rare Carat hopes to simplify diamond buying, but so far it’s pretty fair to say they still have a long way to go.