There is an old adage that "diamonds are forever," but that is far from the truth. As a natural resource, the world's supply of diamonds ultimately is limited, and mining them is time-consuming.
While there is no spot price on the conventional market for diamonds as there is for gold or silver--aside from jewelers and pawn shops--figures show increasing demand. A recent report by Diamonds.net found that U.S. polished diamonds imports grew 2.3 percent in a year-to-year comparison to $3.09 billion in May 2016. Meanwhile, the average engagement ring cost goes for $4,758, according to the WeddingWire's 2015 Newlywed Report, an analysis of 6,000 couples throughout the U.S.
So, what happens to the valuable ring after the estimated 50 percent of couples divorce?
Secondary marketplaces such as Worthy.com, an online auction house for pre-owned luxury goods, are emerging as options. The consumer-driven, data-rich platform identifies the market value of the assets and puts the seller in control. Real-time updates are provided to both the buyers and sellers.
"The business started as an effort to lend money more affordably than pawn shops," says founder Ben De Kalo, a former Wall Street investment banker. "However, people started approaching us wanting to sell their luxury items (diamond rings, watches, necklaces and other fine jewelry) rather than borrow. We are helping consumers sell their luxury items that they don't want to keep."
His "Aha" moment came when he was traveling to England and identified that there was a high demand in borrowing money against assets from pawn shops that can charge up to 50% in interest.
De Kalo set up partnerships with the Gemological Institute of America (GIA) and International Gemology Institute (IGA) to protect buyers and sellers on the marketplace and make sure appraisals are done in a safe, transparent environment. After being evaluated for the factors that go into evaluating a diamond -- carat, cut, color, and clarity (AKA "The Four Cs") -- the jewelry then goes through an automatic pricing engine. Bidders can take confidence because of the reputation of the evaluating organizations.
"It's just like stocks, bonds. We reveal the prices of diamonds, which helps both sides," said De Kalo of his company's authentication process.
According to Worthy's founder, De Beers owns 80 percent of the market, so they make the pricing decisions and control the margins.
"Jewelers make more money on the setting than the diamond," De Kalo explains. "We are providing a new source of supply based on true market value. The buyers and sellers both win.
The average transaction on the Worthy marketplace is $4,500 and more than 60,000 items have been sold to nearly 4,000 professional buyers on the platform. That's nearly $1 billion in revenue in about two years' time. It is a new way of buying and selling jewelry in the 21st century and has proven popular with divorcees.
Each year, there are $3 billion worth of diamonds that get sold in secondary markets. Divorce accounts for a significant part of the supply side. Many women want to quickly rid themselves of anything that reminds them of their former spouses -- especially wedding and engagement rings and other fine jewelry.
Divorcees aren't the only sellers that the marketplace attracts. Inheritances and life-changing events, such as a breadwinner losing his or her job, change the finances of Worthy's other sellers.
"There are an estimated $1 trillion worth of diamonds sitting in U.S. households," De Kalo says. "It is the single biggest diamond mine in the world. Instead of having valuable jewelry sit in a drawer, a safe or a jewelry box, they can sell the items at a much better return than if they went to a traditional pawn shop."
"Using our online platform not only fetches a better price, but it also removes the stigma of walking into a pawn shop and trying to sell a $10,000 piece of jewelry."
Technology is changing the marketplace for selling diamonds, just as it has revolutionized music (iTunes and other digital download sites), travel (Uber, Expedia), retail (Amazon) and small business finance, my industry. Worthy has found a tech-based solution to an age-old problem that helps streamline the transaction in terms of speed and safety.