Jewelry is a product that people don’t buy every day and jewelry stores only turn their pricey inventory about once a year, so the markup is generally 100 percent. (Unless you buy from a wholesaler like us.) The 50% Off Sale & Huge Sales at Jewelry Stores are not really sales.
If you see a sale price in the newspaper, don’t fall for it. You will probably pay much more than the regular price. Some major retail jewelry stores, prior to a sale, will mark up diamond rings double or triple the normal selling price, then marked them half-price during a sale.
At Diamond and Gold Warehouse our Dallas Wholesale Diamond Rings and Dallas Engagement Rings are priced at the regular price. We don’t mark up our jewelry to bring it down just to make a sale. Our Dallas Wholesale Rings and Dallas Engagement Rings are the best quality. They are beautiful, vibrant in color and gorgeous on the finger. The expression on her face when she sees your gift of love for her……is priceless.
VIEW OUR WHOLESALE ENGAGEMENT RINGS
The trade isn’t happy that there is a price list for diamonds. The Rapaport Diamond Report is a necessary evil though, and all diamond dealers reference it when they sell. However, Rap sheet isn’t necessarily a wholesale diamond price list.
There is a cushion built in so that jewelers have some room for profit now that jewelry customers have become savvier with their purchasing. To get the best quality for your money in Dallas Wholesale Diamond Rings and Dallas Engagement Rings, come and see our selection at Diamond and Gold Warehouse.
VIEW OUR WHOLESALE LOOSE DIAMONDS
How good of a diamond do you need to buy? We will teach you everything you need to know about the Four Cs of Diamonds, but remember this: diamonds are graded UPSIDE DOWN. Even people who grade diamonds for a living can’t tell the color or clarity grade when the stone is right side up, which is the only way that you will ever see it once it is set in a ring.
The diamond quality factor that makes the most difference in the beauty of the stone is also the factor that makes the least amount of difference in its price: CUT
The cut of a diamond isn’t just its shape but the angles, proportion, and finish of its profile. The cut of a diamond determines how well the diamond handles light.
When a stone is well cut, almost all of the light that goes in bounces around and comes back out, showing up as all those sparkles of brilliance. It is the same principle as a prism; the angles have to be exactly right to reflect the light back out at your eye.
The Gemological Institute of America did a study to test expert and non-expert opinions on diamond appearance and fluorescence (science). They showed diamonds with identical grades except fluorescence to a large group of dealers and asked them which was better.
They couldn’t tell the difference, except when the color of the original diamond was in the yellowish range (K and down.) In those cases, the diamond dealers thought that the fluorescent diamonds had better color than they really did. You can make up for color with fluorescence, which is a positive factor, especially on your wallet.
Furthermore, the Gemological Institute of America checked their database of diamonds and calculated what percentage had fluorescence, and found diamonds with fluorescence were rarer!
Diamond pricing is based on rarity, so the bigger the diamond the more it costs per carat. But diamond prices don’t increase in a smooth rational curve. They go up on steps because people think in round numbers. The biggest step, not surprisingly, happens at 1.00-carat. People want a 1.00 carat diamond.
They don’t want a 0.96-carat diamond. Therefore a 1.00 carat diamond costs a lot more per carat. And because cutters are trying very hard to hit that magic number, a lot of 1.00-carat diamonds aren’t very well cut. The cutters are trying to hold onto a few more points.
By choosing a 0.96-carat diamond you could potentially save yourself thousands of dollars. You still achieve the same effect, while saving money. Only a trusted jeweler will help you make these decisions during your diamond buying process.
Diamond comparison shopping seems pretty straightforward. You get a grading report with the color, clarity, carat weight, and a little bit of cut information and you just take the best deal. There’s just one problem.
There are a lot of companies that issue diamond grading reports. And they don’t all grade to the same standards. The most recognized standard for grading is the GIA and EGL USA.
There are many fine reputable skilled people who are jewelry appraisers, but appraisals are one of the jewelry industry’s many dirty secrets. Many of the appraisers are gemologists, not jewelers. They usually have a diamond master set and are fair at grading diamonds, but will often look up the price of the diamond on the Rapaport Sheet.
The problem is that they need to be able to grade fine colored gemstones and know the market, and many of them lack the market expertise. And if the jewelry being appraised is Estate jewelry, the ability to appraise the price is less.
The reason is that they’re not taught appraisal skills at gemology school. They’re taught gem identification, which doesn’t include researching markets, how to find comparisons, what the differences are between retail replacement, liquidation, and estate values are. Their lack of knowledge in the jewelry market will hurt your appraisal.
However, this does not mean you want to stick with jewelry stores either. The reason being is their conflict of interest. Most appraisals are done by retail jewelers, which usually means they are either selling the piece to you, judging a piece that their competition sold you, or evaluating a piece that you want to sell to them. The ability to be fully objective is nearly impossible.
On a side note always be careful of any appraisal from a retailer that gives a value for the item that is more than you are paying.
Why is the appraisal so important? When you are having your jewelry appraised for insurance purposes. Undervalued jewelry or overpriced jewelry will cost you if something happens to the piece. Insurance companies could solve this issue by only accepting appraisals from really qualified people, but they don’t.
And because many appraisers don’t understand the law or how insurance works, the appraisals are incomplete, which can cost you in the end.
The insurance company, in most cases, only has to replace your item, and the replacement is based on the pathetically inadequate description on the appraisal, using their own wholesale sources. You pay insurance based on the retail value of the piece; the insurance company buys it at wholesale (half) and gives it to you.
To truly avoid any loss of value you need an insurance policy that specifies retail replacement at the place you bought the item. There is only one company that does that nationwide (although a few states require it of all insurance companies).
It is in your best interest to trust a GIA or EGL USA or AGS Diamond grading report, and to be careful of other appraisers and the insurance you buy for that piece of jewelry.
These are certainly beautiful stones at very attractive prices, but what are they, actually? Lab stones are diamonds with the same optical, chemical and physical properties as earth mined diamonds. They handle light the same way as a naturally formed diamond. So, the stones sparkle and scintillate beautifully just as you’d expect a quality diamond to do.
They are chemically like natural diamonds; lab stones are made from just carbon—like your natural diamond. Finally, they also are completely transparent and rank very close in hardness to earth mined diamonds on the Mohs scale; your lab diamond is hard and durable, much like an earth mined one.
Unlike the diamond industry, which is full of big, well-capitalized multinational mining companies, most colored gemstone miners are about one step up from a guy with a shovel and panning basket. (And in many cases that’s exactly who mines gems.) Therefore, production is pretty small and inconsistent and dealers have put a lot of effort into maximizing what they have. What that means for you is that whatever a colored gemstone looks like when it comes out of the ground, someone will try to make it look better.
The most ingenious example of this is high-temperature heating of ruby and sapphire. Both of these gemstones are the mineral corundum, which is aluminum oxide. The color is created by trace elements, chromium in the case of ruby and titanium and iron in the case of sapphire.
When treaters take ruby or sapphire up close to the melting point, more of these trace elements are dissolved, basically (OK, there is some stuff about valence states, and oxygen does go in or out, but you get the general idea.) Heat maximizes the potential of what is already there, which is why the trade decided that it was an acceptable enhancement and could be sold as a normal product. Today, a lot of gems are heated, most at temperatures much lower than that required for ruby and sapphire, including tanzanite, citrine, aquamarine, tourmaline, and amethyst.
Diamonds have a reputation for being expensive and most people have the impression that jewelers make a lot of money. But, is that true?
Are jewelers raking in huge profits on diamonds because they are overpriced? How much do jewelers pay for their diamonds? What is the average markup on diamonds?
These are all valid questions that a curious consumer may find hard to ask or get direct answers to. More importantly, I’m sure no one wants to overpay or get ripped off when buying a diamond engagement ring.
In this write up, we will reveal answers to these questions and more. Here’s a breakdown of the topics we will be covering:
Here’s a breakdown of what we will be covering:
How to Determine the Markup on Diamonds?
First of all, the definition of markup is basically the amount added to the cost price of goods to cover profit and other business overheads. It is usually proprietary information that most businesses will not divulge publicly.
Let’s use Tiffany & Co as an example.
They are a listed company and its financial results are publicly available for anyone to read. Although they do break down their business segments in their annual reports, Tiffany & Co does not reveal the exact margins they make on their diamond rings.
This is because of competitive reasons and it’s likely why most jewelers will not be upfront about what they are making on a sale. So, if that’s the case and if markups are so secretive, how and where do you find out the information?
Well, it helps to be in the industry and have good relationships with people on both sides of the supply and retail business. And because of insider information, I do have a good sense of the markups for different types of jewelry businesses.
Also, there is a publicly available tool called Rapnet where anyone can access current market prices that global suppliers and buyers are using to trade diamonds. With Rapnet (paid subscription), you can use it reverse engineer and perform a good estimate of the markups that are charged by jewelers.
What is the Average Markup on Diamonds?
The short answer is it depends. Based on the type of diamond jewelry and the place where it is sold, the markup can vary from as low as 5% to as high as 300% in more extreme cases.
Before the advent of Internet sellers, a lot of jewelry retailers can get away with a mark up of 2-3 times the wholesale cost of their diamonds. In the industry, the term for this is called keystone pricing.
Keystone = wholesale cost of an item x 2
In other words, if a jewelry retailer bought a diamond for $500, they could sell it at a retail price of $1000. Doing so would net them a profit of $500. Some of the higher-end brands in the market could even charge a 300% markup (triple-keystone pricing) for their goods.
Today, the markup of diamonds had come down to less than 20% because of the disruptive prices posed by online diamond stores like Blue Nile and James Allen. For more competitive online stores, the average markup on diamonds is less than 10%.
On the other end of the spectrum, big names like Tiffany and Harry Winston can get away with high margins in the 200% range because of their branding and marketing reach.
If you want to get a bigger bang for your buck, online retailers like Blue Nile and James Allen offer high quality GIA certified diamonds at a fraction of prices you pay in a physical retail store.
What is the Profit Margin on a Diamond Sale?
As I stated earlier, the profit margins on a diamond largely depend on who is selling the diamond and where you are buying it from. One other factor affecting the markup is the cost of the diamond that the jeweler acquires.
Most jewelers have higher markups on cheaper jewelry compared to more expensive jewelry. For example, if a diamond costs $2,000 from the wholesaler, it is common to see physical retailers marking up the diamond to $4,000. This represents a profit margin of 100%.
However, when dealing with more expensive (and usually larger sized carat weights above 2 carats) diamonds, the same jeweler will have slimmer markups. For example, if a diamond cost $25,000 from the wholesaler, you can expect to see lower markups and the diamond could be sold for $30,000 for a profit of $5,000. This represents a 20% profit margin compared to cheaper-priced goods.
Likewise, if we were to use a competitive online retailer as an example, the 10% markup on lower value diamonds can shrink to a markup of only 3%-5% if they are selling a high value diamond.
The reason behind this phenomenon can be attributed to market dynamics and pricing structures.
How Much Profit Do Jewelers Make on Diamonds?
In today’s economic climate and market, profit margins for smaller players in the industry have been hammered because of online competition and the rise of lab grown diamonds.
Unless you have the financial muscle or big brand equity like Tiffany or Harry Winston, it is extremely hard for small-scale jewelers to mark retail prices really high and be able to sell their diamonds.
The truth is, diamonds are usually not the main profit makers that make jewelers money. When profit margins on loose diamonds are low, a lot of jewelers rely on settings or the sale of other gemstones to stay afloat.
And unlike diamonds which are treated like a commodity in the market, a jeweler can use a ring setting or mounting to add their unique value proposition to the consumer. They also have more control over their manufacturing costs and prices they can sell their settings at.
Are You Paying a Fair Price For a Diamond Ring?
It depends on what you define as “fair”.
Is paying a 200% markup on a Tiffany ring fair or foolish? Do you need to help the big brands pay for their marketing expenses and expensive retail locations by paying excessively more for their products? On the other hand, would you be considered a cheapo if you buy an unbranded diamond ring at a lower price?
If you asked the same questions to different people, you will get different answers depending on an individual’s values. Also, there is a big difference in the business operations between big stores and small retailers. And this makes it very difficult to use the same yardstick of “fairness” to compare prices.
I feel that as long as a jeweler doesn’t market their products unethically or try to rip their clients off by misrepresenting their product quality (i.e. selling uncertified diamonds), it is OK to pay a little more or a little less for your purchase.
The key is to understand what you are buying and to be making educated decisions when shopping for a diamond ring.
My personal guideline of a fair price is that it should NOT be 15% more than what it would cost me to find a like-for-like diamond online.
You see, I’m a practical person and I see no reasons to pay more for a diamond at any specific jeweler unless there is a compelling reason like a special ring setting or unique diamond attribute that isn’t available elsewhere.
Summary – Retail Markup on Diamonds
The purpose of this write-up isn’t to engage in public shaming of any companies or jewelry businesses but rather, it is to provide the consumer with a better idea of prices and what they are paying for.
The average markup on diamonds will vary from one seller to another because of the different overheads and profit margins they have. In general, you can expect businesses to pass their operating costs onto you.
Big brand names like Tiffany and Cartier spend a ton of cash on marketing, inventory costs and rentals in prime locations. As a result, their mark ups will be very high compared to online retailers operating on a different cost structure.
But bear in mind that, paying more for a diamond ring doesn’t necessarily translate into getting better quality. Vice versa, just because an online diamond store has lower prices and markups doesn’t mean that there is a compromise in quality or service standards.
In fact, the converse is often true. Online retailers generally offer better quality diamonds at much lower prices compared to physical retailers. The point I am driving across here is that the price tag alone doesn’t tell you whether a diamond is a good or a bad purchase.
Ultimately, the details (beyond just pricing) really do matter when it comes to selecting a beautiful diamond.
And there you have it. I hope this article offered useful insights into the markups that jewelers are charging. If you have further questions or need help with an engagement ring purchase, feel free to reach out to me via email or drop a comment below.
Blue Nile and James Allen are 2 reputable vendors that I highly recommend for buying a diamond engagement ring. Their superior shopping experience and low prices offer you a complete peace of mind. Check them out today!
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