What Diamond Buyers Keep Getting Wrong About Diamonds

You know what they say when you assume? Don’t do it.

Wrong assumptions can put you at a disadvantage in making the best decisions for your business. Particularly when purchasing diamonds. At the root of most misconceptions buyers have when shopping for smart diamond deals is the perception that diamonds are a commodity.

Experts say that if buyers shop with the understanding that no two diamonds are exactly alike, despite sharing the same grades and measurements, they’ll be able to better finesse the many nuances that culminate in effective diamond buying.

Understand the merchandise, know your customers, and keep a finger on the pulse of the market to help you buy the right goods.

You cannot purchase diamonds by numbers alone.

Willie Engelhart, owner of Charles Engelhart Diamonds

Assumption: ‘All diamonds of the same color, clarity and cut grade are the same.’

Reality: Every diamond is different, even stones of the same color and clarity grades are different,” said Steven Martin for the Chicago-based diamond wholesaler/retailer, M. Martin and Company. “Even diamonds with the same measurements do not handle light or perform the same. On paper they may look the same, but in reality they are not.”

Color and clarity grades are not absolutes, they’re ranges, said Willie Engelhart, owner of Charles Engelhart Diamonds, a diamond importer/wholesaler in Chicago.

“Suppose you have a diamond H color, SI1 clarity. Is the ‘H’ closer to ‘G’ or ‘I’? Did the SI1 just miss being a VS2 or SI2? All these factors make a difference in price. It’s not simply a matter of how much is an H/SI1. There’s wide variation in how beautiful a diamond appears if ranked at the high-end of a cut grade versus one at the low end of the same grade. It could be a 30% price differential.”

Assumption: ‘Everything you need to know about a diamond is on the certificate.’

Reality: That’s like saying everything you need to know about your future spouse is on his/ her driver’s license, said Engelhart. “You cannot purchase diamonds by numbers alone. I encourage customers to look at the product, not the paper.”

There are many factors not reflected on a certificate, like tinge of color or the life of the stone that make a difference in price, said Alex Bassalian of the London diamond wholesaler, Bass Premier Co. “There are certain customers who only look at certificates. But the material may have a mix of color, a tinge of brown, which is why it’s worth much less.

The same can be said for purity. Within a clarity grade, there could be a big price gap between the lowest and highest in the range. Two SI1 grades – one with a black mark in the center, the other with two feather marks off to the side – could be more than a 10% difference in price. But it doesn’t mean the cheaper stone is the better deal.”

Martin said many buyers like to analyze the diamond’s depth and table percentages charted on a certificate. “While these numbers can eliminate certain stones as not properly cut, not even an expert can tell if a diamond is well cut by looking only at the numbers.” He said cutters can use an angle shifting technique that results in depth and table percentages that make a diamond look good on paper.

Bassalian said the same goes for fancy cuts: “Two stones may look the same on paper, but in person it’s the difference between gorgeous and oh no.”

Assumption: ‘Color and clarity are the major considerations in pricing a diamond.’

Reality: The biggest variant in diamond pricing is cut. More than any other factor, cut determines beauty and brilliance. “A ‘D’ color, even a flawless diamond may lack beauty and brilliance due to poor cutting,” said Martin. “To find a diamond that’s both beautiful and brilliant, search for a stone that’s well proportioned, then balance color, clarity, and size with budget.

Each color and clarity grade sets a range of prices that overlap. Cut alone may cause as much as a 50% variation in price for a specific color and clarity grade. Inherent shortcomings in the diamond may add another 25%. Two diamonds with the same weight, color, and clarity could vary in price as much as 75%.”

Two diamonds with the same weight, color, and clarity could vary in price by as much as 75%.

Steve Martin of M. Martin and Company

Martin said that most cut diamonds are not properly proportioned. The more a cutter strays from the ideal proportioning of the diamond, the more weight the stone retains.

“A cutter may have a rough crystal that if cut to ideal proportions would produce a diamond weighing .85 carats. But if the same rough is cut with a high crown and deep pavilion, it now weighs 1 carat. Some
would pitch this as a bargain, a 1 carat off-make diamond for the same price as the .85-carat, well proportioned one. But it still has the diameter of the .85-carat diamond and the off angles of the facets would make it less brilliant.”

Assumption: ‘You will find the best diamond deal if you choose a specific color and clarity grade and shop for the lowest price…’

Reality: The lowest priced diamond of any specific color and clarity grade is usually the one with the worst cut or some inherent gemological shortcomings, said Martin.

“Unfortunately, the opposite is not true. There is no way to tell how good the most expensive stone on the list is. It may be a mediocre stone; it’s just the best the dealer carries. Each grade combination is always in a range of prices.”

Engelhart said retailers often focus too much on cost price. “I don’t imply that price is irrelevant. But the determining factor in a jeweler’s success isn’t the last dollar on the buy; it’s the entire package. Some things you can quantify, some things you can’t.”

Retailers say they need a big markup to pay their bills.

Willie Engelhart, owner of Charles Engelhart Diamonds

Retailers complain that the diamond market is so competitive they have to buy right, said Engelhart. “But it’s more than difference in cost price that affect their success, unless the price difference is gross. Jewelers should use vendors to their mutual advantage. Just as you can’t beat up your vendor over price,
your vendor has the obligation to leave something in it for you. I give customers the best value for the money, not only in product but also service and relationship. That’s part of my value proposition.”

Simply put, profit margin is more about what you can get for the goods, and less about what you pay for them.

Engelhart said he often sees high mark ups at retail. “While retailers say they need a big markup to pay their bills, I say they need sales. If you make three out of 10 sales with a 25% mark up and zero sales with a bigger mark up, which is better? Take the smart profit margin. The downside: You’ll sell too much goods!”

Image: IIDGR