It could just be the beginning of the end of a 40-year old monopoly. Over the week, RapNet, the industry’s leading diamond trading platform, which also releases weekly price list, accepted as standard diamond pricing for several decades, saw thousands of diamond companies delist their stocks. Today, their inventory is almost down by 70 per cent, thanks to the collective anger of thousands of stakeholders. “I think it is the right move. It is a natural reaction to unrealistic, immature move. On what basis was the new pricelist produced? There is very less buying happening due to coronavirus, and the entire world has been affected by the pandemic, so if there is no market, then no trading is happening,” said Vipul Sutariya of Dharmanandan Diamonds. The 5-9 percent drop in Rapaport’s price list came as a huge blow to the industry, which is already going through a hard time since the time COVID-19 emerged in China. Many believe that the move is unethical and thoughtless and has no rationale behind it. “At present many people have severed their ties with RapNet. This has happened before as well, for 2-3 months people avoid RapNet, later they come back and rejoin.  Everybody has to come together and resolve this matter.  This severe downfall in demand is because of COVID-19, this isn’t a business problem, or has nothing to do with the economic cycle,” says Sanjay Shah of JB And Brothers.

 Following this incident, many companies sent letters to Martin Rapaport asking him to reconsider his decision. However, he responded to the members saying that the price published reflects the reality of the market, which is not great at the moment and that the buyers require and expect Rapaport to reflect the lower price realities of the market. Overnight, an instagram handle and telegram account @stock_off_rapnet was created, where discussions and strategy to deal with new price list for companies who removed their stocks from RapNet were being discussed.

 RapNet’s Algorithm – Unreliable

Big diamond companies like Venus Jewel, Dharmanandan Diamonds, JB And Brothers, Finestar, Hari Krishna, Ankit Gems, SRK and many more have also taken the unanimous call to stick with the price list published on 6/3/2020. Top 15 manufacturers of India constitute a sizeable chunk of inventory on RapNet. 

The algorithm based on which RapNet decides the prices of goods is driven by demand. If a particular category moves fast, then the price increases, however, if there is no demand, then the price drops – this seems like a fair process. However, many a time, when goods have moved fast, the prices have still been dropped.

Industry sources also say that the market between Oct-Nov-Dec was fantastic. People were making money and margins were high. “I have suggested to Martin to create a transparent dashboard of inventory coming in and going out and then further show the prices reducing and increasing in conjunction with it. This is how a stock market functions. It is live and dynamic based on the consumption that is happening. When this is not happening in RapNet, then how can we believe that what he is saying is right? He doesn’t want to do that because he wants to control the diamond pricing,” says Nilesh.

Though the companies have embraced 6/3/2020 price list, will the retailers globally accept this price? “Every one has sizeable inventory, retail (downstream) might have more in the form of finished and loose. The point here is not only reversals of price but to get rid of weekly pricing system. The proposal is to hold the same price list for a longer time, which eventually makes market more stable,” adds Vipul.

 An Alternative Trading Platform or a Price List Only?

As many companies decided to remove their stocks from RapNet, the idea of creating an all-new trading platform has also been brewing. World Federation of Diamond Bourses (WFDB) announced that it would create its own diamond-trading platform for all bourse members. “This is a very good move. It should’ve been done earlier, but better now than never. I believe WFDB will outsource it and we will all give our inputs,” said Ankit Shah of Ankit Gems. In a survey conducted by the industry amidst approximately 900 diamond traders, 46.4 per cent of them said that they would never go back to RapNet if there is an alternate trading platform.

While a trading platform created by WDFB is a welcome change, it does pose a lot of questions. Who will run the platform and to what extent will the involvement of WFDB be? Will the people involved have a deep understanding of e-commerce/trading of diamonds online?  So, if WFDB does get into the picture, what role will it exactly play? Will it create a new trading platform or control & monitor a new price list? The entire boycott of RapNet happened because of abrupt pricing, which according to many is not driven by supply and demand of diamonds on his trading portal but his whims and fancies, where he believes he is getting more money from (conflict of interest) as his company trades and runs auctions.

Currently, there is no clear body or group of people who is heading this boycott and it is more industry driven. But now it’s important to take key decisions, as when there are too many thinking heads, it definitely leads to lack of decision making and delays. WFDB should bring in a fair mechanism to run and manage pricing of diamonds, which is fair, transparent and undisputed.

 Another school of thought, constituting a few fancy coloured diamond players and gemstone dealers believes that the industry doesn’t need a pricelist. The industry will regulate on its own as per demand and supply. People will sell diamonds not as a commodity and buyers should look around and find the best option without any price advise. This will also ensure fair margins for all. To recall an old joke by a gemstone/pearl dealer, “At end of every trade-show they make money, as they don’t have Rapaport in their business yet. Illusion is there in rough, so there is money in it. If illusion is back in polished diamonds, money will be there too.”

A Good Initiative that Didn’t Take Off

The Indian diamond fraternity in 2017-18 had come out with International Solitaire Alliance. It was an alliance created by top 20 Indian companies to get out of RapNet. The alliance was led by 5-6 people: Nilesh Chhabria from Finestar, Shreyans Dholakia from SRK, Brijesh Dholakia from Hari Krishna, Milan Parikh from Mahendra Brothers and Arun bhai from Ankit Gems. The people involved wanted to create a trading platform, which would be run by complete professionals. A format was created in such a way that funding would go into a trust. For example, if there are 100 diamantaires who put in money based on the valuation of their exports into a trust, the trust will further help in hiring leadership professionals from the ecommerce industry, who don’t have any control in the diamond industry or know nothing about diamonds. The portal would be run by someone unbiased, a thorough professional, and in the manner of a non-profit-organisation like GIA, which has no vested interest. The entity was supposed to have board members, a mixture of people from the industry and ecommerce who could oversee the smooth functioning of the platform. Unfortunately the initiative didn’t materialize. “Our Indian fraternity has always been ready for a new platform. RapNet is a leading platform today because of the Indians. WFDB can do this, but it has to do it in a similiar format where it lends support and the running of the platform should be left to thorough professionals,” adds Nilesh.

Competitors Grabbing the Opportunity

As we all know, when there is competition online, it is survival of the fittest. There is no space for second best. For example, in the search engine space, earlier it was only Yahoo dominating the market. Later when Google came with a better algorithm, Yahoo and Microsoft’s Bing lost their share drastically and were left with less than 10% share and Google is still dominating. Reason being when a user knows what he wants is available on Google and is better, then why compromise and search on second best?

Similarly, 15 years back, Polygon, Idex and DW all came with a marketplace and they did manage to grab some market share but slowly lost when users realised that RapNet has all the listings, then why list on multiple trading portals. This resulted in monopoly and RapNet misused it by increasing fees 3 to 4 times over a period of time.

In the meantime, many companies moved their inventories to Get-Diamonds.com opened by the Israel Diamond Institute. There are others too like IDex which are now offering free listings for new members till August and Polygon which has offered till June. And now there is VDB which is a relatively newer player and has always been free for all.

The Big Question - Why didn’t this Boycott Happen Before?

These kind of abrupt changes in price list happened earlier as well. The global standstill has united all. There is no business happening and everyone is giving their opinions on the matter at hand and the time is just right to boycott. It is an undeniable fact that business was driven by RapNet, so even if he asks for more, members would pay. They didn’t have a choice. Over time, he did manage to gain enough buyers’ database to dictate his terms and price. So even if the industry manages to get a new price list and a new trading floor, it is very important to get buyers too. On the day market opens and all these 700 companies who have boycotted don’t get sales for more than 15-20 days, slowly we will see a movement back.

Latest Reply by Rapaport on 25^th March 2020

In the meantime, industry sources said that Rapaport sent a letter to its members stating that the Rapaport Group is under attack. He mentioned that boycotting RapNet is an act of blackmailing. He alleged that several members are being threatened by so-called suppliers to remove their stocks from RapNet. So, RapNet has decided to implement the ability to list diamonds anonymously. After a vote amongst its members, RapNet also decided to suspend its price list until May 1^st.