The American diamond trade likes to complain that foreign dealers are poaching on their business, offering fire-sale discounts to U.S. retailers. Independent retailers see it differently. While they acknowledge receiving more calls from foreign dealers in the past year, most say they’re passing up alleged bargains in favor of diamond dealers who offer consistent, accurate grading and reliable service.

That’s the word from a JCK survey of nearly 300 independent retailers throughout the country. Overseas dealers, it appears, are taking little business from established diamond suppliers.

Loyalty pays. Just over half the retailers surveyed say they’ve been “cold-called” by foreign diamond dealers. The percentage is higher—about two-thirds—for stores with top Jewelers Board of Trade credit ratings. Of all those called, only 15% say they’ve purchased goods. And even among those who did buy, fewer than a third say they cut back purchases from their regular suppliers—although asking prices from the foreign dealers generally were much lower. Retailers are learning that loyalty to regular suppliers pays.

“I’m of the old generation where you develop a relationship with your dealer,” says Susan Eisen of Susan Eisen Fine Jewelry in El Paso, Texas. “Just because they dangle a carrot in front of my nose, I’m not going to switch my business. It takes years to develop a relationship with vendors. I won’t switch unless it’s something fabulous.”

“Anyone can come up with a one-time price,” adds Terry Call, president of 12-store Call Jewelers in Phoenix. “But I look for consistency. I’ve found sometimes that [dealers] will come in and low-ball price, and then you reorder and they sell you something that’s not the same goods.”

All the retailers who’ve received calls or visits from foreign dealers say they were offered lower prices than those of U.S. dealers. Eight of 10 jewelers report that the quoted prices were at least 10% below their current suppliers’ for comparable goods. But even those discounts don’t tempt many jewelers, although diamond margins are lower than ever.

Dubious tactics. “The guys on the road are a one-shot deal,” says Phil Silverstein of Phil’s Jewelers, a two-store chain in Anderson, S.C. “If something’s wrong, you can’t find them. They don’t grade GIA and they’re not very accurate and consistent. I tried one or two times and was disappointed.”

Lack of consistent grading topped the list of retailers’ complaints about foreign dealers. But there are other reasons why retailers say they no longer jump at bargains.

Blake Tidwell of Bell’s Jewelers in Murfreesboro, Tenn., sympathizes with the plight of dealers who’ve lost their Asian and Latin American clientele but is troubled by the business tactics of some suppliers. “There must be 5,000 guys out there selling diamonds, all of them claiming to be directly from cutters in Israel or Antwerp,” he says. “It worries me that they are starting to do what New York dealers are doing—selling directly to the public. Some of these people call doctors, lawyers, businesspeople in town, bypassing everyone else.”

One retailer tells the story of a dealer who happened to overhear a customer asking about a large diamond for a ring he wanted made. Several months later the customer came in with a diamond ring asking to have it sized. “When we asked him where he bought the ring, it turned out the dealer called him right after his visit to our store and sold him the diamond,” says the retailer.

Others have been soured by deceptive claims. Some retailers, for example, report that while dealers carry “sample” parcels of well-graded, well-made stones with attractive price tags, the stones they actually purchase are graded and cut to much lower standards.

An eye for quality. For retailer Bill Underwood of Fayetteville, Ark., it all comes down to quality. As a top-rated store with a lot of diamond-buying customers, he gets at least two or three phone calls a day from dealers as well as a fair number of unsolicited visitors. Underwood will look at the goods that dealers bring through the door, but his rigorous standards weed out all but the most serious.

“We check thoroughly every diamond we buy,” says Underwood. “We separate the bad makes right away but then we have to color- and clarity-grade them and that often takes time—several days at least—because we have to do it after hours. Usually these dealers aren’t willing to leave their goods for that length of time.”

After grading, Underwood takes the 5% that actually pass his test and does what he calls a “spread check”—comparing asking prices with what he thinks they’re actually worth. In the end, most of what he buys from overseas dealers are things his regular suppliers rarely have, such as colored diamonds or unusual cuts. “Some dealers do offer us really good buys,” says Underwood. “Many others have poor buys—it really depends on how many hands their goods have gone through.”

Many retailers surveyed say their quality standards deter many callers. Says one, “They’ve learned that the discounters are much easier to sell to since they just pass along the dealers’ grading and cut [standards] to customers who still think they are getting a bargain.”

Best (and Worst) Sellers

Larger stones that are nearly colorless are in demand. These are the stones most sought-after on the U.S. market, according to dealers:

• Bigger stones, particularly 1.5 cts. and larger.

• “White” stones, particularly in the G-J range.

• Fine-make stones, especially Ideal cuts and “60-60s.” Ideal cuts are so popular there’s a shortage in some sizes.

• Stones with grading reports. “Certed” stones have always been popular in the U.S. market, but some say they’re now more popular than ever. The Gemological Institute of America remains the main player in this market, but some are finding greater acceptance of certs from other labs.

On the other hand, dealers said these stones are not selling well:

• Off-makes

• Low colors

• High clarities

Internally flawless stones are “a dead item,” says Alan Rehs of Rehs and Co. in New York. He sometimes considers dropping the price of internally flawless stones to the price of VS stones. “It makes you want to hold the money up in those goods, which is not a good philosophy,” says Rehs. “But there just comes a point where it’s so absurd.”

What Else Went Wrong?

The accompanying story relates retailers’ reasons for not leaping at diamond bargains offered by hard-pressed foreign dealers. We also wondered how domestic diamond dealers interpret the situation. Here’s what they told us.

One reason the foreigners struck out is that they carry stones originally earmarked for the now-dormant Far East market, and those don’t necessarily sell well in the United States. “They come with an awful lot of goods,” says Sam Schick, secretary of the Diamond Dealers Club in New York. “But you look through their wallets and a lot of it is not salable.”

And while many overseas buyers tried to play the U.S. credit game, some found it treacherous. A prime example is Israeli giant Lorenzi, which made a splash when it set up shop in New York two years ago but ended up in hot water when it couldn’t collect from many of its U.S. accounts. “A lot of the overseas dealers don’t have the knowledge of the market as people here have,” says one dealer.

New York dealers also think the overseas buyers couldn’t service American jewelers the way they were accustomed to. “Maybe a retailer will buy from [an overseas dealer] once, but he can’t track them down when he’s in desperate need of a stone,” says one dealer.

For domestic dealers, the biggest problem with the overseas influx is not direct competition but a troubling domino effect. With the foreigners offering generous memo and credit terms, domestic dealers have been forced to do the same. Some worry this is putting them in financial peril. “With memo, you’re walking a tightrope,” says Isi Starck of Chicago’s I. Starck and Co. “You don’t want to feed people too much money, but on the other hand, some businesses exist just by long-term memo.”