Is Ebay neutral?

Tiffany has sued Ebay for willingly (all eyes closed) profiting from fraud, counterfeiting and trademark infringements. So far it looks as if Tiffany has done its homework and Ebay's business model of a "neutral" market organizer is jeopardized, and rightly so, I think.

In a specific case they tracked down a ring of companies on the same street in Rhode Island who give each other positive feedbacks to maintain credibility for the faked jewelry they source together. Though exposed, Ebay did not do anything against them.

Tiffany says out of the 200 items they bought under cover 150 were faked. 75%!

Of course, we know gemstones are even more difficult to judge than jewelry and they have no trademarks. No doubt, we also know that many honest people sell on Ebay but in the big picture, the majority of stones sold (not offered) on Ebay smell bad.  

The sheer volumes make the business: A lot of small but unhappy clients can be perfectly profitable.

Return policies? Yes, sure, but who sends a stone back that he bought for $20, when the reenlisting fee is $10 and the transport $5, plus the bother to pack and go to the post etc.? However these people are mostly not sure whether what they got is real or not.

At the end of the day, these buyers are frustrated and turn away from stones on the web.

I hope Tiffany is getting through and Ebay will at least have to take complains more seriously.

Ebay says they are not specialists in any of their product categories but only a "neutral" website specialist. Yes, true, but they could have definitely afforded someone with know-how who once in while checks out the obvious questionable offers, but instead they even ignore complains of cheated buyers.

The point is they didn't want to follow the complaints, because they care more about the seller than the buyer. And that is not neutral at all!

Edward Bristol

Do gems finance the Tamil Tigers?

The Tigers say they started fighting for political independence because the Tamils were hindered from participating in the then booming Sri Lankan economy.

In regard to the gem business, this was true: Traditionally Tamils were not part of the gem trade. The simple reason for this was not racism on the Singhalese side, but geological circumstances. Despite the fact that 80% of Sri Lanka is said to be gem bearing, no significant gem deposits are found in the east-north Tamil Tiger areas.

As for the other reasons the Tigers come up with, yes, I do remember that 25 years ago when driving from west to east, roads would become bad and public infrastructure would decline. The Singhalese say that was because the Tamils are lazy (which is definitely not true) but in any case this is no excuse to invent suicide bombings.

Today one may say "Fortunately no gems are found", because the Tigers are broke, and that is good news. They have run down their areas and have not, as promised, brought them to independent blossom (for whatever reasons). Now there is not enough cash to recruit even children (the cheapest soldiers) anymore, let alone to buy new more sophisticated weapons. Therefore they have started to work with landmines washed out of the army camps by the tsunami. The latest attacks, including the air attacks, are hopefully the final death rattle of a deeply sick organization. 

Does one have to cook gems to survive?

Many miners and traders of colored stones face falling prices, mainly due to the vast amounts of cheap treated material that floods the market.

We find ourselves caught in a classical business dilemma and have to choose between price and quality.

From a business point of view a supplier facing falling prices has two choices:

1. Reduce cost (e.g. use cheaper material meaning that treatment becomes a necessity) or
2. Increase quality (e.g. specialize in new cuts or ecological mining).

Making a decision is in any case better than wavering until financial realities take over. Worst case is not to decide for one direction at all and thus get wasted between increasing or constant cost on one side, and falling prices on the other side - the so called "stuck in the middle".

Nevertheless, the decision to treat stones and thus cut cost while increasing out-put might also be shortsighted, because this strategy can only be maintained until prices fall again, then below cost or with margins going so slim that even volume doesn't help.

The outcome of falling prices combined with increasing supply usually turns out bad for the participating majority in the market and society in general. While e.g. the garment and transport industry has gone into cost cutting followed by epidemic bankruptcy for decades, oil and diamond prices are kept artificially high.

These examples show the two main possible reactions of a market:

a)  A competitive shake out leaves only the hardcore cost cutters to survive, usually in low salary economies e.g. the garment factories in China.

b)  Governments and monopolistic structures fix prices far above real cost (mainly to the disadvantage of consumers e.g. in the diamond market or on the back of other third parties e.g. with oil prices being kept high by the simple but effective means of war).

In the colored gemstone industry alternative b) is not likely to take place because of its high fragmentation and global diversity (no De Beers). Thus one might expect a shake-out with only some big players being able to survive on high volume and low margins.   

For many companies this will mean the end and thus the end to the current diversity in the gemstone market. As much as small garment factories in Europe have become history, small miners and lapidaries are doomed to die out.

From a micro-economical frog-view it can therefore make perfect sense not to meet falling prices with an increase of supply, but to concentrate on high-quality and added values.

And there is definitely a lot of need and room for improvement, be it in mining, cutting or the trade. 

Edward Bristol