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Margins on Stones


basherboy
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So as I get ready to buy my first diamond, I am becoming more fascinated by them than I thought I ever would.

 

From reading this forum I have learnt allot.

 

As with almost all purchases and sales this forum has indicated that there is certainly some "bargain" room. What kind of wiggle room does a high-end establishment have--i.e. what kind of margins are they working on. This is an important piece of information to allow me the consumer be able to make reasonable requests on the seller. Few people would expect to get something at less than cost--and I certainly would not expect the seller to not make a reasonable amount of profit for all the work and other expenses that allow him/her to serve me.

 

So my question as I am looking at the "sticker price" is how much wiggle is there in that price. Are these poor guys making pennies on the sale and is it a matter of volume, or is the sale very lucrative.

 

Thanks in Advance for any advice/help/information

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It depends. As I understand, jewelers used to make 100%+ profit on each sale. They even have a name for this -- it's called "making keystone", or used as a verb, "keystoning".

 

Those days are long gone for all but the most high-end establishments such as Tiffany & Co and the like. Most mom & pop jewelry stores that sell unbranded diamonds sell them for 15%-25% gross margin for your typical 1ct stone (the % margins shrink as the size of the stone increases). That's pretty slim when you consider all the overhead involved in operating a jewelry store; things like carrying an expensive inventory, staffing by trained professionals, equipment, security, insurance, rent at a decent retail location, etc.

 

If you take out all the overhead, you will find some of the more cavalier out-of-the-basement online Internet sellers that sell loose diamonds from virtual inventories for as little as 8%.

 

I would strongly suggest you focus on finding a jeweler with whom you're comfortable, and who you know has reasonable prices. Then work with that jeweler to make sure you get a ring and diamond that you love. Like everything else, you get what you pay for and it is rarely a good idea to buy rock-bottom (pardon the pun!), especially for big purchases intended to last a lifetime.

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Well I have found a jewler who I feel comfortable with as well as know that his prices fall within the same ballpark as those on this site. If anything he is 1-2% more expensive based on the numbers. So let me assume that he is makinf 15-25% per sale (small diamonds more than large). Realizing that every jewler is diferent, and I respect that they have been working sith me very patiently--what kind of a margin would they find acceptable if we got to "wheeling and dealing." I am thinking 15% would be a good goal.

 

Thanks

 

Sebastian

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It never hurts to ask for a discount.. There are a lot of variables to whether or not you will get one or not.. Overhead and margin are two, relationship is another.. You are much more likely to get a discount if you are a repeat customer - or give the impression that you will be - etc..

 

But you will also find that a lot of jewelers are getting rid of the discount all together.. The price is the price.. The prices are set at the fairest point possible and there simply is no room to negotiate.. With jewelry becoming more and more of a commodity than an art it is beginning to be priced just like any other retail item you would buy at Wal-Mart or Mashall Fields..

 

As for keystone.. I'm not sure why that became a "bad thing".. Most retail is set at keystone or better.. Bottled water can be at as much as 10 key (1000% markup) but no one beats up the guy selling bottled water for a discount.. B)

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I have a question - what are you going to base the 15% on? a markup is a markup, but asking to pay 15% over wholesale won't work unless you know what wholesale is, and unlike the auto industry, you can't easily determine those numbers.

 

I guess my feelings are if you have found a jeweler with whom you feel comfortable and from whom you feel you are getting the quality product you seek, why would you want to keep him from making his profit? As was said earlier (see above!) asking for a discount never hurt anyone, but setting a profit margin for your reseller might be offensive.

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unlike the auto industry, you can't easily determine those numbers

 

I've got news for you.

 

The so-called "invoice price" is not the real price that dealers pay for the cars. This was invented by dealers to comfort those who think they are savvy buyers.

 

The real price is determined by a combination of the invoice price and some other dealer incentives between the manufacturers and the dealers. Sometimes they are less, sometimes more, but there is no way for us outsiders to tell. The proof in this is that I was able to get my last car for 12% *below* the so-called invoice price as reported by Consumer Reports and such.

 

Every industry is different. In the auto world, each dealer is usually exclusive to one manufacturer. This tight relationship allows all sorts of pricing optimizations. In the jewelry industry, jewelry stores typically source from a wide variety of manufacturers.

 

what kind of a margin would they find acceptable if we got to "wheeling and dealing." I am thinking 15% would be a good goal.

 

This is a gross oversimplification. First of all, there is no way to know the real underlying cost structure, especially since they will be aggregating two differently sourced pieces (ie a ring + a diamond) plus the cost of the labor (and the risk of cracking the stone). So, you will never be able to enforce any particular margin.

 

Second, and this is the most important point -- you are buying more than a diamond ring. You are buying the jeweler's expertise in helping you make a good selection, in setting the diamond, and in sizing the ring correctly. You're also buying into a relationship that will last a lifetime.

 

So, I'll repeat my advice: Find a jeweler that you feel comfortable with, make sure they have reasonable pricing as a matter of policy, then forget about costs and work with that jeweler to design exactly the ring you want.

 

Focus on the ring, because in 1, 5, or 50 years, the ring is what you will have... you will have long forgotten how much you paid for it.

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Forbidden, I didn't mean to come across so harshly. I do fully agree with your bottom-line, that:

 

1. Setting an absolute (15%) margin is impossible because you have don't know the true wholesale cost, and

 

2. Setting a profit margin for the jeweler in such terms will be deemed offensive.

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I agree with everyone. I didn't mean to say that I would set a margin for the jewler, just that there is probably very little room to wiggle, and still alow the jewler to make make his or her due. More than likley there is a small amount of "wiggle."

 

For some people like me part of the "fun" of the purchase is to "get a good deal," at the same time I know that the overhead and the time that this particular jewler has spent with me is something that I not only should pay for, but I feel I want to pay for.

 

Thanks for everyone's help.

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