Diamonds may be widely adored as symbols of romance, but they can pose a steep learning curve for those who set out to buy the perfect gem for someone special. In this episode of Mastering Innovation on SiriusXM Channel 132, Business Radio Powered by The Wharton School, Ajay Anand (WG’13), Founder of Rare Carat, explains how the company is working to increase transparency in the diamond industry and smooth out the purchasing process for consumers.
When Anand decided to propose to his then-girlfriend in the spring of 2015, he found himself in an uncomfortable position: He wanted to buy a traditional engagement ring, but he knew next to nothing about diamonds. He went on to found Rare Carat to provide consumers a source of unbiased information about diamond rings and save customers the tedious job of researching specific gemstones. Because even tech-savvy consumers remain reluctant to conduct such a major purchase online, the company combines a brick-and-mortar presence with technological tools, like blockchain and machine learning, designed to inspire trust.
An excerpt of the interview is transcribed below. Listen to more episodes here.
Saikat Chaudhuri: Where are the hurdles and the challenges for your company, given the competition in the market and the traditional way of people buying diamonds?
Ajay Anand: Our big challenge is that the vast majority of our commerce happens online. Online retailers have struggled to penetrate the diamond market. It is one of the least-penetrated categories, and there’s a host of reasons for that. Just talking to consumers and talking to retailers, there’s a lack of romance to buying a gem online. There’s also fear. You’re sending huge amounts of money over the internet to an unknown person for an unseen item. And then there’s the question of ongoing service and support. There are many reasons people still buy locally.
Rare Carat has launched a program called Rare Carat Local, so whether it is you sitting in Philadelphia or me sitting here in New York, we can book an appointment. I can see tens of thousands of diamonds in person in New York within a couple of hours. In Philly, you’ll be able to see them tomorrow. It’s a three-layer marketplace. But that’s the main reason that online penetration has slowed. The big challenge for this space is how to get people comfortable with buying online.
“You can have that whole chain of information there, transparently, in front of you.” – Ajay Anand
Chaudhuri: How do you do that? How do you tackle these challenges and consumers’ hesitations?
Anand: We have an interesting position in the marketplace, and the most important word in the industry is trust. You trust your uncle’s friend, you trust your local jeweler, you trust the brand name, whether it’s Tiffany or Zales. That’s why you feel comfortable making the transaction. We’ve kind of uniquely positioned ourselves in a way that we’re not selling anything, so there’s an implicit trust in us, what we do, and our services. That’s really been interesting.
One of our advisors is the founder of TrueCar, and he said he found himself in the same position where the consumers, even having had a bad experience at a dealership, would always give TrueCar the benefit of the doubt. We’re finding the same thing, and the way we’ve leveraged that is into products such as the Rare Carat Report. We think of it as a Carfax, Kelly Blue Book equivalent.
You can’t buy without understanding the value and the quality of the item you’re about to buy. They’re extremely complex items. We launched this in August of last year and it’s astounding, the number of people using these reports to buy, whether locally or with Rare Carat-affiliated retailers. It’s truly an unbiased take on the diamond.
Every diamond has a unique identifying number, typically graded by the Gemological Institute of America (GIA). You put it in, and we can give back 50 data points about that diamond. Right off the top, our machine-learning models predict what we believe the fair price should be.
We also are able to analyze whether the crowning goes too steep, the depth is too deep, or whether the stone has a cavity. These kinds of things are difficult to ascertain for the average consumer. But we’ve also added the human component, and that’s really separated us. We now have a team of 12 GIA gemologists working around the clock. Your request will be farmed out to one of them, and you’ll have your new best friend as a GIA gemologist who has one motto: “What would they tell their best friend?” That kind of empowerment has not been characteristic of the industry. It’s always been this very asymmetric power dynamic between the person buying an engagement ring and the jeweler, because it’s omniscience versus incomplete information.
We’re changing in the same way that it’s happened across categories. Consumers are a lot smarter. Jeff Bezos is always talking about how consumer expectations keep rising. This is an industry that’s been slow to adapt, and I think we’re bringing changes that have been around for decades, in some cases, to this industry.
“Consumer pressure is always a good thing. It forces businesses, even in an old-school industry like the diamond industry, to adapt in positive ways.” – Ajay Anand
Chaudhuri: What I like about it is the balance: technology with people, brick-and-mortar with online. That combination is a powerful one. You use a lot of technology, you value ethical sourcing quite a bit, and you’re leveraging blockchain technology in part to help deal with that problem, and to verify the purity and authenticity of the diamond as well. Tell us a little bit about how you’re leveraging blockchain.
Anand: We’re working in partnership with a company called Everledger. Where that integrates at a consumer level is via the Rare Carat Reports which are plugged into their APIs on the back end. That’s what Everledger has been doing, and many competing platforms now too. The provenance of a diamond is obviously extremely important, especially after movies like “Blood Diamond” popularized this notion that many diamonds feed conflict. My general understanding is that it’s not as prevalent now and that there are processes in place, but still, there’s always a specter hanging over the purchase: “How do I know?”
It’s been fascinating, creating an immutable ledger that supply chain information can be entered and agreed on. They can match the rough diamond to a cut diamond based on the positioning of the inclusions, which are the idiosyncrasies of the diamond. You are able to truly track and verify the veracity of the supply chain information, so that when you buy a diamond, you can know that it came from Botswana and it was cut in India. You also know that it was purchased by a retailer in the U.S. on this and this date. You can have that whole chain of information there, transparently, in front of you.
Chaudhuri: And I imagine that some of the customers now really care about those things. That’s a way of setting yourself apart.
Anand: Right. Tiffany made a big announcement about this. It’s interesting because some of this is also driven by the rise of the lab-grown industry. We don’t search lab-grown diamonds at the moment, and I don’t think that they’ll be a large part of engagement, but it’s something that we’re always open to pivoting to. But the natural-grown diamond industry has really started to push transparency initiatives after the lab-grown diamond industry started taking the tack of painting the mined diamonds as unethical diamonds. That’s where a lot of the pressure is coming from to be transparent. That’s all the way up from De Beers on down. In general, consumer pressure is always a good thing. It always forces businesses, even in an old-school industry like the diamond industry, to adapt in positive ways.
About Our Guest
Ajay Anand is the founder of Rare Carat, a company which he describes as “a Kayak for diamonds,” referring to the discount airfare site. He founded Rare Carat after having a difficult time buying a ring for his then-girlfriend, now wife. The platform uses IBM Watson technology to compare the price of diamonds across various online retailers, including Blue Nile, Brilliant Earth, and Costco. Prior to Rare Carat, Anand founded an enterprise software as a service company used by the UN in over 50 countries to deliver aid, saving over 1 million lives. He was also the third employee of www.21Diamonds.in and a consultant with the Boston Consulting Group. Anand holds a Wharton MBA, Penn MA, and University of Michigan BBA.
Mastering Innovation is live on Thursdays at 4:00 p.m. ET. Listen to more episodes here.