Are diamonds really a woman’s best friend? In part due to incredible marketing efforts (and questionably ethical chokehold De Beers held on the industry for the better part of a century), diamonds are culturally synonymous with love and ‘forever’. The pressure of purchasing a gem without getting ripped off (or buying from unethical sources) and a lack of transparency in the supply chain and industry led Ajay Anand to found ‘Rare Carat’, aptly referred to as the “Kayak of Diamonds”. Frustrated by his own purchase process for his fiancée, he aimed to create an unbiased marketplace for diamond shoppers, powered by artificial intelligence, data science, blockchain, and virtual reality.
The average consumer looking to find the perfect ring to pop “The Question” does a significant amount of research before converting to a purchase. This can be one of their most expensive life purchases – following shortly behind a first house or car. And in the diamond market, a number of factors can influence price, such as color, carat, cut, clarity, and fluorescence. The market is full of information asymmetry, with gemologists often incentivized to sell certain stones based on commissions or other sales incentives. None of this has the actual customer in mind.
How it works:
Rare Carat is an online marketplace and doesn’t stock or sell any of its own diamonds. Users visit the platform and input a variety of metrics (such as price, shape, and carat) and a number of relevant listings for comparison with complete price transparency and reviews from unbiased gemologists are populated as results. It follows a similar user experience to Kayak or Expedia, but instead of flights and hotels, users are searching for diamonds. The website also aims to educate consumers on the diamond shopping process with free content on their website.
Rare Carat also introduced the first diamond ‘chat bot’ named Rocky (powered by IBM’s Watson services), as a way to guide users through their search and purchase experience, similar to the in-store brick and mortar experience, but with complete unbiased transparency. Rocky offers shopping tips to customers, similar to that of a real gemologist, and evaluates diamonds on their carat, cut, color, clarity, polish and depth. Rocky’s only motivation is to get customers the best possible deal based on their inputted parameters. “Rare Carat’s technology pulls on the deep trove of data that it has generated over the last four months, including 10 million data points on diamond prices and parameters, as well as more than 2 million user searches, and more than 100,000 messages the company has exchanged with users,” reveals Anand. Rocky is also continuously improving through machine learning. A gemologist reviews everything that the bot has completed every day, which feeds back into IBM’s Watson services, continuously making Rocky better at finding the best deals for customers.
Because one of Rare Carat’s priorities was to remain unbiased, they don’t stock or sell any of their own diamonds. The platform is entirely a marketplace, connecting suppliers to buyers through information transparency. Rare Carat is not compensated through any kind of commission, but rather all revenue is ad-based.
Rare Carat is not looking to target the higher end customer segment that wishes to purchase top quality gems from retailers like Tiffany’s and Cartier. Instead, they wish to help out the larger average millennial segment just trying to get their money’s worth and are comfortable with online shopping.
Value Creation & Value Capture Strategy
Rare Carat looks to create value for diamond shoppers by providing information and price transparency, as well as advice from human gemologists and a step-by-step purchase process guided by Rocky the chatbot. Through the use of AI, machine learning, data science, and virtual reality, Rare Carat is democratizing the diamond purchase process, much of which has previously been shrouded in smoke and mirrors. Rare Carat’s mission is to simply help the average millennial online shopper make one of the most important purchase decisions of their lives. To remain unbiased, their value capture strategy is solely ad-based, and doesn’t involve any commission for directing traffic to certain retailers.
Opportunities and Challenges
While their mission and value capture strategy are noble, there are some weaknesses in being an ad-based business. For one, beyond paid marketing, it will be difficult to grow revenues for the platform. There are many opportunities that Rare Carat are moving into, such as:
- Blockchain technologies to allow customers to understand the mining and processing supply chain from where each gem originates, leading to further transparency in a market that is often unethical in nature. This technology comes from a partnership with Everledger.
- Rare Carat is seeking to incorporate virtual reality as an additional technology for their platform. This would allow ring shoppers to emulate the process of trying on jewelry and understanding what it would look like on them once purchased.
- Additional Watson services to be added on their chatbot, Rocky, including Watson Vision to read gem grade reports.
“Chatbots, when applied to the right industry and use case, can be incredibly helpful,” said Ajay Anand, CEO of Rare Carat. “We’ve found that diamonds are a uniquely good fit for the medium, particularly given the very structured decision process which follows the famous four Cs of diamonds: Carat, Cut, Color, and Clarity. Rocky has proven to be an expert in the diamond buying decision process, helping our beta testers make the best decisions possible.”