Memo and consignment, how it works for jewelers

Memo is how most stones get in front of most retail clients. It is also the arrangement jewelers are least likely to have read carefully, because it usually arrives as a familiar piece of paper rather than as a contract. The terms are short and worth knowing exactly.

What is a memo?

A memo transfers possession without transferring ownership. The dealer sends you a stone. You can show it, fit it and set it into a trial mounting. The dealer still owns it, and nothing is sold until you pay for it or send it back.

That is why no invoice arrives with a memo, and why a memo is not a purchase order. The memo document lists the stones, the report numbers, the memo value of each one and the date the clock started.

Because there is no sale, there is nothing to charge sales tax on yet. Your resale certificate should already be on file, but it comes into play when the memo converts to an invoice rather than when the parcel ships.

Who carries the risk while the stone is with you?

You do, from the moment it is delivered. Ownership stays with the dealer and responsibility sits with you. If a stone is lost, stolen or damaged while it is on your memo, you owe the memo value.

A jewelers block policy is the normal answer. Most include a property of others section that covers goods held on memo, but read three things in it: the total limit, the per item limit, and whether coverage extends off the premises and while in transit.

Shipping is where policies are strictest. Most require a specific method, commonly registered mail or an approved armored carrier, and a claim can be denied for using anything else. Confirm the method with the dealer in writing before the stone moves, in both directions. None of this is legal or insurance advice; your broker will read the actual policy with you in twenty minutes.

What are the usual terms?

Seven to thirty days, with seven to fourteen most common on a single stone. Our memos run seven days from delivery unless we agree a longer term in writing. Extensions are routine, and the only thing that causes a problem is not asking for one.

The last row is the one that surprises people. Once a stone is set, it has been altered and handled, and most dealers treat that as a purchase. If you need to set before the customer commits, say so up front and get it agreed.

Why do dealers ask for trade references?

Because a memo is unsecured credit paid out in goods. Sending a stone on memo is functionally the same risk as lending its value with no security. References are how that risk gets priced without a credit application.

What gets asked for is consistent across the trade: two or three trade references from other suppliers, a business address and how long you have traded there, an EIN and a resale certificate, and often a listing with a trade credit bureau. Some dealers will ask for a certificate of insurance naming them.

Getting that pack together once saves weeks later. It is the same pack that opens a wholesale account, described in how to buy loose diamonds wholesale.

How do you use a memo for a client viewing?

Pull a short, deliberate selection and book the appointment around it. Two to four stones that genuinely answer the customer's question beat ten that make her job harder. A memo is not a way to fill a display case.

Show the stones in your store, in your possession, under your light. Give the customer the report numbers so she can check them herself. Do not let a memo stone leave with a client, because at that point you have made a sale you have not invoiced.

Do not quote the memo value as your price. It is what you owe if the stone does not come back, not a cost basis, and it usually is not the number your invoice will show either. If you need the mechanics of how wholesale numbers are built, see how wholesale diamond pricing works.

What happens when you return it?

Same paper, same report, same day, signed receipt. Return the stone in the original stone paper with the laboratory report and the memo number written on the outside, by the agreed shipping method, and get written confirmation that it arrived.

Weigh and check the stone against the memo before it goes, exactly as you did when it came in. That single habit closes off the only argument that ever arises about a returned memo.

Then close the loop with the dealer. Tell them why it did not work, because that is how the next selection gets better. If it was a fit problem rather than a taste problem, reading a diamond report for calibrated layouts will usually catch it before the next parcel ships, and how to pick a center stone size covers the size conversation that causes most of them. You can also shortlist from the inventory first, whether the customer is looking at rounds or ovals, and put only the real contenders on memo.