"Elements come together to perfectly unite the atomic structure that develops the perfect colored gemstone, through movement of lava, mountains, and plates" (D. Hiss). The creation of colored gemstones is both fascinating and rare. With this in mind, one would assume that consumers are aware of the existence of colored gemstones and would like to possess such a treasure. But in reality, majority of the consumers are not aware of colored gemstones and would like to own diamonds instead. The focus of this report is to describe the misconceptions consumers have regarding the gemstone industry and what it will take to overcome these perceptions in order to increase awareness and demand for colored gemstones.

The gemstone industry has been dominated and hampered by a particular stone diamond, from the world renowned conglomerate De Beers. This company is internationally known for its slogan "A Diamond is Forever" and markets on the behalf of the whole diamond industry. The advertising and marketing efforts of De Beers project an exclusive and prestigious image which has adversely affected the colored gemstone market. The colored gemstone industry is very fragmented and the industry is very private. More than half of all companies who sell gemstones are family owned and operated businesses. Currently, there is no monopoly like the diamond cartel now operated by De Beers for the colored gemstone market. However, there is nothing stopping De Beers from dominating the colored gemstone market as well. The colored gemstone market has positioned itself by emphasizing the rich colors of the gemstones when compared to the singular color of diamonds. The slogan "Light Up Your Life With Color" is currently being used by the American Gem Trade Association (AGTA) to help eliminate barriers in customer’s minds. AGTA also wants to convey that diamonds are quite alike, but colored gemstones are rare and each stone is one of a kind. According to gem expert, Barry Whittle at Gemstone International, gems have several advantages over diamonds. First, gems are genuinely rare to find, in comparison to diamonds which are not unique and whose rarity is mainly due to the limitation of supply by De Beers. Second, gems are offered in a variety of shades where as diamond are exclusively one shade. Finally, the durability of gems is similar to that of diamonds and they generally do not break or crack. The ultimate problem in the gemstone industry is that consumers are not well educated about the benefits of gems and consumers have barriers that are preventing them from buying gems for their jewelry needs.

III. BACKGROUND MARKET INFORMATION

The actual size of the world market has not yet been determined accurately. However, there is data suggesting the estimated size. Nevertheless, this data is exclusive to loose stones only and does not include gemstones which are exported or imported already set in jewelry. According to Cheryl Kremkow, the Director at the International Colored Gemstone Association, the total United States polished gemstone imports were valued at $455 million in 1991, a 1 % decrease from 1990. However, United States imports of unusual gemstones have doubled in the past five years and it looks as if imports may double again in the next five years. The United States is clearly the largest consuming market for gemstone jewelry. Expert gemstone wholesaler, Barry Whittle, stated that select colored gemstone sales are estimated as a half billion dollar industry: sapphires account for $95,000,000; rubies $85,000,000; and emeralds $203,000,000 (see Chart 1).

Source: Barry Whittle, expert gemstone wholesaler, 9 July 1997.

The United States is the largest market for gemstone jewelry. Despite the lack of direct statistics regarding the actual size of the gemstone market, there are signs that the gemstone market is undergoing immense growth. One strong indication that the gemstone market is growing is directly linked to the rapid growth of the jewelry industry in Thailand. Since Thailand is one of the leading countries that mines precious gemstones, (specifically ruby and sapphire) any fluctuation in Thailand’s gemstone production process is a valid leading indicator of what the market is doing. The estimated value of the total Thai gemstone and jewelry industry exported in 1990 was $1.5 billion, concluding that Thai jewelry was increasing the overall market for colored gemstones jewelry.

Another indicator demonstrating the growing market of gemstones is found through the increasing number of women today who are wearing engagement rings featuring colored gemstones instead of diamonds. According to Cheryl Kremkow, Director of International Colored Gemstone Association, sapphire is the most popular choice for a colored gemstone followed by ruby and emerald.

Unpolished Fashion Stones Stones

Stones Cut

There are many organizations and associations which try to help inform the consumer of the colored gemstones market and strive to reduce the barriers that consumers face when purchasing a precious stone. Organizations such as, the American Gem Trader Association (AGTA), National Jeweler, and Polygon are a few facilities which offer assistance with marketing gemstones. The AGTA competes with other associations to sign up new members in the gemstone industry.

AGTA is an national association of over 700 wholesale and retail gemstone and jewelry providers within the Unites States. AGTA provides information about how to locate a wholesaler or retailer that is affiliated with this association. Basically, it allows the traders to easily find resources who are interested in buying or selling colored gemstones.

National Jeweler is the world’s most important resource for current publications on the jewelry industry. According to Trade Magazine Promotion Corporation 1995 Study, Sixty-three percent of all readers surveyed considered National Jeweler to be the best news publication. National Jeweler is devoted to the most recent breaking news, market trends and the latest happenings in the marketplace.

Polygon has provided a service on the Internet through combining numerous resources of the jewelry industry to generate more exposure for everyone involved. According to the President and CEO of Manufacturing Jewelers and Silversmiths of America, Inc. (MJSA), " the synergy of bringing the important jewelry industry web sites together in one place ensures improved access and visibility for all of them involved." According to Polygon’s home-page on the Internet, Polygon already hosts over 7000 jewelry industry web sites, including sites for major associations and trade publication such as AGS, MJSA, IJO, JCK, National Jewelers, Jewelry Search and others.

"Ancient emeralds were from mines in Egypt and perhaps what is now Afghanistan. But Spaniards arriving on the continent of South America were stunned to see emeralds finer and larger than any ever seen before. The Spaniards spent years searching for the source of the fantastic green stones favored by the Incas. They found it finally in what is today Columbia: Chivor, also known as Somondoco or "God of the green gems," then later Muzo and Cosquez, the richest emerald mines in the planet and still the source of the finest stones today.

Hernando Cortes, the conqueror of Mexico, was carrying carved emeralds taken from the Aztecs in the shapes of fish and flowers and a carved emerald bell, and an emerald the size of a man’s palm when he was shipwrecked. Many of the finest stones were lost forever. The Incas had an emerald goddess, a fabulous emerald the size of an ostrich egg. In tribute they sacrificed her children: smaller emeralds which were presented to the goddess. Treasure hunters seeking wrecks of Spanish galleons are occasionally rewarded with the ultimate treasure: emeralds lost by the conquistadores long ago"

The colored gemstone market consists of any gemstone excluding Diamonds. The market is broken down into two main categories; precious and semi-precious. Precious stones consist of Rubies, Emeralds, Sapphires and natural Pearls. All other stones are considered to be semi-precious. For example Amethyst, Citrine, and Tanzanite are semi-precious stones. The reason for this classification scheme, according to Debbie Hiss from the Gemological Institute Association, was that precious stones had higher taxes and tariffs when importing and exporting to different countries, in comparison to semi-precious stones.

The major difference between precious and semi-precious stones is the durability and hardness of the gemstone. Hardness is measured by the Mohs Scale of Hardness. This scale ranges from one that is Talc to a ten that is a Diamond. Precious stones range from eight to nine on the Mohs scale of hardness. Semi-precious stones fall below an eight on the Mohs scale. Precious stones are more durable than semi-precious stones. The reason is that it is much harder to scratch or damage a precious stone than a semi-precious stone.

Gemstones are classified as a species. The two components that make up a species are composition and transcendent construction. For example, ruby and sapphire are sister stones and are categorized in the Corundum family. Sapphires are available in every color except red, which is the color of rubies. Additionally, aluminum-oxide is the basic substance in rubies and sapphires. Aquamarine and emeralds are sister stones found in the Beryl family. The main elements found in the Beryl family are beryllium, aluminum, and silica.

After talking with Debbie Hiss, we learned that colored gemstones are found all over the world. Some common places for colored stones are Thailand, Sri Lanka, Africa, and South America. After the gemstones are found in the rough, they go through an elaborate process before they are put on the market. According to Debbie Hiss, the first step after to stone is extracted involves determining what type of stone it is. This is done by using instruments to measure optical and physical properties of the stones. The next process involves cutting. Cutting needs to be done in a way that allows as much light in as possible, as well as keeping the stone as large as possible. The cutting allows the stone to sparkle and act like a prism to reflect light. The final step is to heat-treat the stone to improve its beauty. There are two ways to heat treat a stone. The traditional method for heat treating colored gemstones is to improve the clarity and color of the gemstone. The non-traditional treatment is a diffusion treatment. This type of treatment has to be disclosed to the buyers since they are altering the natural stone. After these steps are taken, the gemstone will then be sold to jewelers and put on displays in showcases.

The quality of gemstones are based on three aspects, color, rarity, and clarity. These three factors are what really separates the stones and gives distinction between colored stones. The color and shades are used to help determine the quality of a colored gemstone. For instance, a colored stone that has one color, has much higher quality than a stone that has many different colors mixed. Another factor that determines the quality of a colored gemstone is the rarity of the stone. The rarer the colored gemstone is the higher priced and higher quality associated with the stone. "Colored gemstones are rarer than diamonds especially rubies and emerald’s." (Debbie Hiss, 1997) The third factor in determining the quality of a colored gemstone is cut. There are different ways to cut a stone to capture the most amount of light. The trend for cutting colored gemstone is moving towards "proportional cutting." More cuts means more light which cause vibrant colors and a more lively stone. Some of the common cuts according to Debbie Hiss are Emerald, Oval, Cushion, Pear, Trilliant, and Brilliant cut. Each of these cuts allows more light to enter the stone that causes it to shine and sparkle more (see Appendix A).

Synthetic stones contain the same basic materials and do not possess inclusions. They are transparent and glass-like. Experienced jewelers look for inclusions, girdle lines, and the atomic structure of the gemstone to tell if the stone is synthetic or natural. Currently, jewelers can use a magnet to detect synthetic stones. A magnet is able to pick a synthetic stone out of a pile of natural stones since synthetic stones have metal particles intertwined in the component nature of the stone Due to constant developments with technology, metals that are found in synthetic gemstones will eventually become non-existent. Therefore, identifying synthetic gemstones will be more difficult in the future.

After interviewing two jewelers in the Northwest market we noticed that emeralds, rubies, sapphires, and some selected birthstones were most popular. The precious stones are what the consumer purchases most of the time because they are more durable than semi-precious stones. The two jewelers that we visited were the Shane Company which are direct diamond importers and the retail store Gordon’s Jewelers. The Shane Company will only carry gemstones that they can guarantee for life. These are emeralds, rubies, sapphires and selected birthstones. The gemstones that you see on display are already mounted in settings and are not loose in the showcase. Colored gemstones are found in many different types of settings; such as rings, bracelets, and necklaces. Generally, gemstones are not used for engagement rings unless the consumer requests colored gemstones in their bridal sets. Additionally, the styles of rings, bracelets, and necklaces you find at select department stores are more for fashion jewelry and are usually set with diamonds. At the Shane Company the colored gemstone display was towards the back of the store instead of being in front.

The next jeweler we visited was Gordon’s Jewelers. At this store we found a wide range of precious stones and semi-precious stones. Like the Shane Company, the colored gemstones were already mounted in rings, bracelets, and necklaces. Here, the precious stones, emeralds, sapphires, and rubies, were up at the front of the store and the semi-precious stones were at the back of the store. Talking with Cori Rickard, a sale associate at Gordon’s Jewelers, we found that most consumers purchase colored gemstones for fashion jewelry and for special occasions, such as birthdays or anniversaries. Both, the Shane Company and Gordon’s Jewelers could not give us any brochures or charts on colored gemstones.

The value of colored gemstones have been consistent over the years. But colored gemstones have an intrinsic value because they are naturally rare. In contrast, De Beers gauges the diamond industry by holding diamonds artificially and controlling prices, which in turn, controls demand. Supply and demand also dictates the prices of colored gemstones. For example, as demand increases and supply stabilizes, prices will also increase. Colored gemstones hold more value much better and for a longer period of time than diamonds. Color, rarity, and quality determines and dominates the perception of colored gemstones. In contrast, diamonds use the four "C’s," which are cut, clarity, color, and carat weight, to create perception in consumer’s mind. "Even though the ‘purest’ colored stones which cost the most money are not always the color of choice from the customer" (D. Hiss). Most retail, franchises, and chain jewelry stores will carry the same styles due to the high probability that colored stones are bought from the same vendors, sellers, and wholesalers. The wholesale value is the true value of the colored gemstone to the jeweler and appraiser, which is also the appraised value. The retail value is the true value to the consumer because this is the level that is most available and convenient for the consumer to purchase the gemstone.

According to Barry Whittle, expert wholesaler for colored gemstones, the reasons colored gemstones are not marketed are because importing and distribution is operated through small companies that are usually family owned. Promotions have been difficult because consumers have had potential barriers that have resulted in consumers not being as informed of the colored gemstone industry. The potential barriers that prevent consumers from purchasing gems for their jewelry needs are: (1) perception of low quality, (2) lack of information available on evaluating stones, (3) colored stones are hard to coordinate with clothing, (4) jewelers do not recommend colored stones, (5) diamonds are the only appropriate stone for special occasions, and (6) no information regarding the variety of colors and species of stones.

Currently, there is very little promotional activity to market colored gemstones. Promotional venues used in the past to increase sales and awareness of colored gemstones have been word-of-mouth, history, and tradition. For example, if the mother owns a sapphire, then the daughter may also buy a sapphire.

Sales and promotion of colored gemstones are not collaborated. Basically, each business owner must promote on their own, unlike the diamond industry. For example, De Beers advertises for the entire diamond industry. According to Robert Frost, AGTA member, colored stones should be perceived as products, similar to that of clothes, furniture, and automobiles. When shopping for colored stones consumers are looking for something of "beauty" versus practicality. "Colored gemstones hold their value better than any commodity" (R. Frost).

AGTA is slowly working toward creating a promotional campaign to increase awareness among consumers and change the misconceptions of the colored gem industry. AGTA needs to inform jewelers about the complexity and dynamics are the colored gemstone industry. One way AGTA is informing jewelers is through creating a comprehensive book for jewelers in the United States, to better assist customers at the retail level.

AGTA needs to create demand for colored gemstones through promotional activities. AGTA should incorporate a one-word focus to market and attract consumers. For example, words like durability, individualistic, and rarity. Additionally, AGTA needs to promote colored gemstones as "wedding stones" and steer away from the traditional notion that colored stones should only be bought for special occasions such as birthdays and anniversaries.

Interview, Debbie Hiss, Gemological Institute Association, July 2, 1997

Kremkow, Cheryl, "Estimating the size of the world gemstone market", 12 June 1996.

PRISM: Newsletter of the American Gem Trade Association, Issue 97.2, May 1997, p.5

Web site: http://www.adiamondisforever.com/sindex.htm

This web site provide information about De Beers.

Web site: http://www.national-jeweler.com/

Helpful insight about the publisher National Jeweler.

Web site: http://polygon.net/index.html

Web site: http://www.gemstone.org

Web site: http://www.gemstone.org:80/size.html

This web site gave a detailed article about the estimated size of the gem industry.

Web site: http://www.gemstone.org/engagement.html