Jacques Voorhees, CEO of Verichannel, and one of the pioneers in online diamond trading, tells Rough&Polished about the search engine for the jewelry industry, their new partnership in China and the China market, and explains what their diamond database has to offer to both the trade and the consumers worldwide.
Can you tell us what the concept of online diamond trading that you invented at Polygon is?
In the early 1980s, when we got started with Polygon, nobody could imagine that anyone would ever buy a diamond from a computer screen. It was quite a revolutionary idea back then. Polygon was the first of these online trading networks, and the diamonds were not for consumers, they were for the trade. RapNet, one of the many competitors that came along, started only a couple of years later. The concept is that these dealers find each other by computer network. The dealers that have diamonds show their product by computer, and those people who are searching for them find them by computer. That’s how we do everything today but back in the 1980’s it was quite new.
What is the main business idea behind Verichannel?
The main business idea of Verichannel is what we call a "niche search engine". When we're looking for something online, we usually go to Google, Yahoo, Bing or one of those general search engines. When we're ready to do something that's more specific, often we will use a specialty search engine. For example, you don't go to Google to buy a plane ticket, you go to Expedia, Travelocity and so forth. The reason why you use Expedia is because it specializes in a particular niche and focuses on the unique characteristics of the travel industry. They have filters and features that help you easily find, plan and book travel.
That's what Verichannel is: a specialty search engine for the jewelry industry. We started providing services for B2B about a year and half ago, and a few months ago we launched in beta mode, a consumer-facing version under Gemfling.com, that has services for individual consumers.
What are these new services?
When you think how consumers approach the issue of finding a source for buying diamonds or jewelry, typically they will go to Google or one of the other big search engines where they might type "diamond ring" or "wedding band" and just get all kinds of chaos because a consumer doesn't really know what to ask for or how to put in search keywords to find what they want. Our specialty search engine for consumers, that we're just getting started with, will serve up filters that help them better find products that fit their needs.
We'll start by serving up to a consumer an organized way of choosing a vendor. We divide up the vendors into four classifications: retail stores, e-tailers (like Blue Nile), brands, and B2C/ multi-vendor platforms (like eBay). So first a consumer chooses whether he wants to buy from a local store, e-tailer, brand or B2C platform and then we provide them filters associated with both a vendor and a product that also explain to a consumer different characteristics of the jewelry purchase. We're not just helping them find vendors, we're educating them in terms of different kinds of things that are useful for them to know.
Last month you announced a strategic partnership with a China-based online trading platform Worldmart*E to provide global diamond suppliers with an online gateway to the Chinese market. Does it mean that Chinese jewelers can now go online, choose and order diamonds from all over the world and have them delivered at their Chinese address? Can you explain how this works?
What you just said is true, but it requires a little explanation. No matter what you put together in terms of a computer system, it doesn't mean that you're avoiding the issues of shipping, customs, taxes, duty and even trust between seller and buyer. Those things still exist. What we're really doing is we're helping, let's say a retailer in China, find suppliers, find merchandise from all over the world as you said, but that doesn't mean that they don't have to pay the China import duty, it just means they are able to more easily find the stones they need, the suppliers they need, and the contact information. Another issue is language. In China many people do not speak English well, and in terms of trying to connect China with the rest of the world, language is an important part of it. Handling all of these issues is where Worldmart comes in.
Worldmart is basically an industrial park in the Panyu* area. It provides physical manufacturing space and all of the surrounding services that are needed, including translation services, customs, shipping, insurance and so forth. In other words, anything you need to do business in China, Worldmart provides the services that make your life easier. Worldmart*E is the online version. It is a business to business online trading platform. It's very much like the concept of Polygon or RapNet and so forth. But it's 100% dedicated to the Chinese market, and appears in both Chinese and English.
What Verichannel provides in our partnership is established relationships with the major diamond manufacturers and largest traders in all the big diamond centers all over the world. We're getting close to 200,000 diamonds uploaded into our system every day from these trading centers. We're handing those off to Worldmart*E so they have inventory of stones to show inside of China where they're available for sale.
As far as I know, until this year, the only authorized channel for polished diamonds to be imported in Mainland China with favorable tax policy has been through the Shanghai Diamond Exchange. Will your customers in China be still able to receive favorable tax rates?
All diamonds have to go through Shanghai before they can come in to the China market permanently. Worldmart is a member of the Shanghai Diamond Exchange and has a special status that was granted by the government. A diamond can come in via Worldmart, in their industrial park in Panyu, in a bonded warehouse environment, and be physically inspected by a potential buyer. If the diamond sale doesn't happen, the diamond will be able to leave Panyu, go back to where it came from and there's no duty involved. If the purchase transaction is going to continue, then yes - the diamond has to physically make a trip to Shanghai. And again, Worldmart makes that very easy.
In March 2010, the Shanghai division of Rapaport started to provide diamond import services to Mainland China. Foreign companies wishing to sell diamonds to Chinese companies may ship their diamonds directly to Rapaport Shanghai which will then import the diamonds into China. Are you going to compete with Rapaport in this area?
Absolutely. We’ve been competing with Rapaport for over 20 years and will continue to do so. I'm not surprised RapNet is focused on China, as it underscores the importance of the China market to everybody. Worldmart believes it has a strong competitive advantage versus what Rapaport is doing in China. In fact Worldmart*E is the only B2B online diamond trading platform that is 100% dedicated to the China market.
These days, there are concerns about an economic slowdown in China, some experts predict that diamond demand growth in China may also decrease. Do you feel confident moving your focus to China these days?
The demand for diamonds in different countries goes up and goes down; it's constantly changing. That's why companies like yours are in business because you're constantly reporting whether it's going up or down or sideways. I was just reading your website this morning, for example, on what’s happening in Israel. But does anyone really believe that long term China is not going to be a large consumer of diamonds? You could say whether the trend line right this moment is up or down, what the forecast is and so forth, but long term China is going to be a major consumer of diamonds. I don't know how anyone could disagree with that.
Will the data in your Daily Diamond Report feature prices for freshly graded diamonds?
No and it probably never will. If you go to Verichannel’s website, you can see the list of diamonds that are uploaded by suppliers and they all have prices. On the other hand Daily Diamond Report isn't a price list of diamonds, it's a report of the diamonds coming out of the major labs in the last 24 hours. Diamonds on DDR are posted just a few hours after being graded. In most cases those diamonds are still at the lab, they have not been shipped back to the owner of the stones yet. Because of that prices are not shown because the diamonds haven’t yet been priced. The owners of the stones don't price them until the diamonds come back from the grading lab.
What are your main goals and plans for this year?
We succeeded in the last twelve months in bringing a large supply of diamonds into Verichannel. Now it is one of the biggest databases of diamonds in the world. Now we're trying to communicate in the next year the existence of our services to many people in the trade. We have a communication job to let businesses know that they now have access, at no cost, to these services. There are no membership fees or subscription fees, anymore than there are with other search engines like Google or Expedia. Anyone in the trade, anywhere in the world can now access one of the largest databases of diamonds and be put in touch directly with the seller. This is something that the world has never had before. Our goal is communicate it. We want to see consistent growth in users for Verichannel both in the trade and on the consumer side.
Olga Patseva, Editor in Chief of the American Bureau, Rough&Polished
*Panyu is an area to the south of Guangzhou, a major Chinese city, which is China's key center manufacturing diamonds and jewelry and trading in these goods.
