How to Get in to Gem Business: Part 2

This is the second article in our “How to Get in to Gem Business” learning gemstones series. In here we discuss about how a newcomer in to the business should buy gemstones for resale.

This is where you actually start your business in dealing with gemstones. All classroom learning and online webinars going to be put in to test.

The first step you take in the actual business is buying few gemstones for re-sale. A trial and error period in your new business. It is ok to fail here, but it should be within a manageable amount in time and money.

The big question you would be asking are;
From where I’m going to buy?
How do I buy it?
What kind of gemstone?
Precious or semi-precious?
Raw stones or cut and polished stones?

It is up to you to decide from where you start. Here are a few things you must consider.

  1. Semi precious or precious gemstones?

What kind of gemstones that you can easily buy. Since you’re new to the trade, give priority to physical buying; touching and seeing through naked eye before buying will help you to know more about the gemstones than online purchases.

If you’re living in a country that produces or has a market for precious gemstones, it is sensible to go for precious stones first. Precious stones are expensive, a wrong decision would wipe out a major part of your early investment.

Starting with semi precious stones would be the safe way to start. Less investment and losses are low if anything goes wrong. As mentioned earlier sourcing, market and your investment are key factors to decide which way to start.

2. Do a market analysis

Before investing in any business, it’s important to carry out a detailed market analysis to identify the opportunities and threats to the business continuity in the long term. The gem trading business is unlike other industries and still happens mostly within a closed business community. Any outsiders coming in looked and felt as intimidating and uneasy.

Try to understand how the local market operates; how dealers in the market value gemstones, what are the gemstones/ color that commands high rates and demand patterns.  For example; blue sapphire, rubies command high prices and have a good demand in the market, while yellow sapphire does not carry a demand as much.

3. Raw stones or cut and polished stones?

Gemstone trading can be further divided into two. There are two types of gemstone traders;

Buy raw stones and get the stones cut & polished, then sell it to other traders or supply it to the jewelers.

Raw stone traders mostly operate in and from the gemstones mining countries or from the source markets. They buy raw stone and sell it in the gemstone traders markets; famous markets for raw stones are Chantabury in Thailand and Ratnapura in Sri Lanka.

Buy cut and polished stones and sell them at a profit.

Buying cut & polished gemstones for re-sale is a lower risk than buying raw stones for cut & polish. Cutting and polishing process can be riskier at times, it could wipe out the value of the stone if the buyer didn’t estimate the outcome correctly at the time of the purchase. The return on investment or profits in cut & polished stones trading is comparatively lower than raw to polished stones business.

4. Buying from a trusted seller

As a newcomer into the industry, buying from unknown sellers is riskier. If you have a trusted source the problem is half solved for you.

It might take years of experience to know all the tricks of the trade.

5. Ask a test certificate from a recognized gem testing lab

Synthetics in trade is the biggest challenge you would face.   Demanding a test certificate from a recognized gem testing lab would solve the problem, but rough stone sellers hardly get test certificates in a trader’s market. The buyer is expected to be well conversant with the stone quality and value.

6. Write down everything

Write down all the transactions; use a note book, ledger book, use excel spreadsheet or use gem merchant software.

It is important for you to account all the business transactions. Cost of each stones, stone color, varieties, treatment, supplier name, etc,..   Doing this from the very beginning is something you should strictly follow. It could help you to understand in later stages how you fared in the beginning and how things changed.

We’ll be covering the How to Sell Gemstones Locally and Internationally in the next article, so keep us subscribed.