Thursday, December 21, 2006

Internet threatens NY diamond dealers' way of life

In the confines of the Diamond Dealers Club, a Hasidic Jew from Brooklyn and a dealer from Antwerp huddle over a small, folded piece of paper.

The Hasid reaches inside to produce a flawless diamond, which his client inspects closely with a jeweler's magnifying glass. The two reach a deal, shake hands and say a Hebrew blessing "Mazal U' Bracha" ("Good luck and God bless").

This typical scene, witnessed earlier this month at the elite epicenter of New York City's diamond business, is becoming threatened by electronic commerce.
Reuters Pictures

"In the olden days, most of the trading happened on the trading floor. Now it's moved to electronic," said Elliott Krisher, treasurer of the Diamond Dealers Club. "It's become an electronic handshake."

In the last five years, membership in the club has stayed flat at 2,000. Yet 1,200 new members joined the club's Web-based trading platform launched four years ago.

Many of the old-time dealers whose shops line Manhattan's West 47th Street are having difficulty competing with online companies such as Seattle-based BlueNile.com, a jewelry company whose estimated earnings for 2006 are $250 million, up from $44 million six years ago.

The diamond merchants form an enclave along a western block of Manhattan's 47th Street that is lined with jewelry stores. The dealers club estimates some 2,000 businesses along the street are connected in some way to the diamond businesses, among them shops, dealers and gem cutters.


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