Diamond Prices: A Comparison Conundrum

If you are reading this blog, you are probably a web-savvy person like myself that researches every purchase to the fullest extent to find the best quality and price for an item.  This price comparison method works great with electronics and other items that are branded and have model numbers for quick reference.  Mother Nature, however, never gave her diamonds model numbers.  She did give them varying color, clarity, and size.  But is that enough to compare diamond prices by matching color, clarity, and carat weight?  Nope.  I tell every client I see this one simple phrase that may seem cliche, but keep it in your mind through every step of your diamond shopping: "A diamond is more than the sum of its parts."

Diamond pricing (and gemstone and finished jewelry pricing for that matter) is complicated.  Each stone is unique and has its own set of value factors.  While most people are familiar with the concept the Four C's, these four characteristics offer a very limited way to compare diamond prices.  Assuming the value of a diamond by only taking into account the 4 C's is a gross generalization.  As a Graduate Gemologist and diamond salesperson, it is my job to search the inventory of loose diamonds from vendors across the globe.  I can quickly and easily set acceptable ranges for the Four C's, but this only narrows down the selection of diamonds to a general area.  Now I have several dozen diamonds that are extremely similar in carat weight, color, clarity, and cut grade but all have varying prices.  How am I supposed to pick the best stone for my client now?

Let us look at an actual example.  I just performed a search for round brilliant diamonds weighing exactly 1.00 carat with GIA grades of G color, VS2 clarity, and Excellent cut.  After setting these parameters, I am left with 21 diamonds that are, to the extent of the Four C's, exactly the same but all have different prices.  Think about it.  Is the carat weight different?  No.  Is the color different?  No.  Is the clarity different?  No.  It must be the cut grade.  No, they're all Excellent.  In order to demonstrate the price fluctuation between these 21 diamonds, I applied our standard mark-up (same percentage) to achieve the retail prices.  The 21 diamonds range in price from $5,500 to $7,050.  That's a huge difference in price when you are a client buying a diamond.  Why should my client pay $1,550 more for the same carat weight, color, clarity, and cut grade?  How can my client compare my prices with those of others if he or she only looks at the standard Four C's?  Well, he or she really can't, and this is why diamond comparison shopping is next to impossible.

Besides the Four C's, diamond prices are affected by dozens of different factors.  Naturally, where you buy the diamond has a huge impact on price.  A retailer at a mall is probably going to have much higher operating costs than an internet retailer or a jewelry store in location off the beaten path.  Those mall retailers have to mark up their merchandise with a larger profit margin in order to cover the costs of doing business.  This concept is pretty much common knowledge now, and many people expect to see higher prices at mall stores.  In turn, those customers seek other benefits that cannot be provided by most other retailers like accessibility and one-on-one service.  A diamond's price will vary within the same mall depending on the brand reputation of the store selling the stone.  So-called "luxury retailers" enjoy much handsomer profits on the same quality stones because they can command a higher price for shopping under their name.  Despite the glitz of shopping at these locations, the increased price is rarely justified in a true difference in quality.

In our business, our customers have come to expect the very best in terms of diamond quality.  We have the knowledge and the technology to be able to explain minute differences between diamonds to clients in an understandable manner.  While offering the best merchandise makes for well-satisfied customers, it also makes more smaller profit margins.  The highest-quality diamonds constantly command the a premium price on the diamond market.  While some retailers can get by with selling a medium-quality diamond at the same price point, we have chosen to only sell the best.  Therefore, in our market, profit margins are, at best, only a few percentage points.  You may not believe me, but it is the truth.  It also a shocking juxtaposition to the hundreds of percentage points some mall retailers routinely get on their merchandise.

So, when shopping for diamonds, one has to understand that apples-to-apples comparisons of price are very seldom accurate.  Rather, it is in your best interest to research the sellers from which you are researching diamonds and make a close relationship with one of them - a relationship in which trust and straightforwardness govern the transactions.

Originally posted by me to LibertyDiamonds.com on 4/5/2010.

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