A part of the trade for over 100 years, memos are as relevant as ever in today’s market.
Sending goods on memo “has been a widespread practice in the industry for generations,” says Sara Yood, senior counsel of the Jewelers Vigilance Committee (JVC). However, it is hard to determine when this type of consignment actually began.
“Our archives contain minutes of meetings from the 1890s where memos were being discussed and debated,” reports Richard Weisenfeld, president of the Jewelers Board of Trade (JBT). And as the gem and jewelry industry has evolved, memos have taken different forms.
“Memos can apply in 100 different situations,” Weisenfeld notes. “Memos on a large diamond for a special purchase have absolutely nothing in common with a manufacturer launching a new brand and sending the entire shipment on memo hoping it will be a success.”
The former, for instance, would generally be shorter-term and less of a risk, because in most cases, there is a customer for that diamond. In the latter case, the term would likely be longer and the risk would rise, since there would be more merchandise — and therefore more money — involved.
Measures of security
Risks, of course, have been around since the beginning, and the industry has developed standards over time to lower them. One such safeguard is to file a Uniform Commercial Code (UCC-1) statement, which secures the wholesaler’s financial interest in the consigned goods in case the merchant goes bankrupt.
The code was first published in 1952, though it’s unclear how long it took to become a common protective measure in the trade. Additionally, both the JBT and the JVC advocate short payment terms of 15 to 30 days.
Besides bankruptcy and late payments, there may also be concerns about “whether the supplier will be able to identify his products once [they’re] intermingled with other jewelry or precious stones in the merchant’s possession,” says Yood. To prevent confusion and make the items easier to identify, she suggests segregating and tagging them, or even having them stamped with the wholesaler’s trademark.
Memo has adapted well to the demands of the modern marketplace. “Consumers are so knowledgeable now; they go online, and as a result, when they walk into a jeweler’s store, their requests are very specific ,” explains Eric Mor, owner of New York-based wholesaler Abe Mor Diamond Cutters. “Twenty-five years
ago, a customer would go to their corner jewelry store and say, ‘I have a $10,000 budget and I want a round diamond.’ And the customer would go home with a diamond. Now, because the customer has researched everything, she comes into the store requesting a 1.3- to 1.49-carat, G [color], SI2 [clarity] triple Ex.”
Under those conditions, consignment has become a more viable option. As Mor notes, “it is not economically feasible for a store to have 1,000 diamonds in stock to cover every possible request.”