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Difficult Question - Comments Appreciated


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Hello Everyone,

 

I would prefer to buy a diamond that I can see, from a local jeweller compared to an online retailer. I like seeing what I buy beforehand and knowing that dealing with any problems is more likely to be easier (not to mention the fact that keeping my business local is important too).

 

The question is this: How much more are you willing to pay a local jeweller for a stone compared to stones with the same qualities (measurable things) online? I understand that local brick and mortar dealers have higher overhead costs and less volume so therefore they have to charge more, just how much is adequate?

 

A stone I am looking at locally can be bought online for 30% less online (or the local store is 44% more than the online stone). I took an average of 30-40 stones with exactly the same ratings for colour, cut, carat, weight to get my "average" online price. Is 44% more too much of a premium to pay?

 

Thanks for chiming in on this difficult question.

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Hello Everyone,

 

I would prefer to buy a diamond that I can see, from a local jeweller compared to an online retailer. I like seeing what I buy beforehand and knowing that dealing with any problems is more likely to be easier (not to mention the fact that keeping my business local is important too).

 

The question is this: How much more are you willing to pay a local jeweller for a stone compared to stones with the same qualities (measurable things) online? I understand that local brick and mortar dealers have higher overhead costs and less volume so therefore they have to charge more, just how much is adequate?

 

I took an average of 30-40 stones with exactly the same ratings for colour, cut, carat, weight to get my "average" online price.

 

Thanks for chiming in on this difficult question.

 

Welcome to the forum. This is not a simple exercise you’re attempting. Even assuming those ratings were all assigned from the same lab (and if you were looking at anything other than AGS/GIA paper you can pretty much throw out your results), diamonds that share a certain class & category are not necessarily equal. Specs on paper don’t begin to cover all the variations. For example, a store will sell two 1ct GIA-graded F SI1 EX EX EX diamonds for much different prices if stone A is a spot-on eye-clean Tolkowsky with impeccable hearts & arrows cutting precision and stone B is borderline steep/deep (still EX) with poor optical symmetry (which is not judged) and noticeable black pique under the table or feather in a thorny stop (it can still be SI1). Only in-person inspection and analysis turns up these details. This is why diamonds that seem identical on a list can vary by a significant percentage in pricing already, depending on nuances of pedigree and sale-ability.

 

Cut is a huge issue, as cut quality can vary dramatically - most notably in fancy shapes - but also within cut grades for rounds assigned by labs. Common B&M sellers and large, drop-ship style internet sellers typically offer diamonds of pretty pedestrian cut quality. Alternately, “boutique†sellers with a focus on cut quality may be offering the top few % of diamonds on the planet in terms of cut quality that you will rarely, if ever, see in average commercial markets...Yet the 'specs' can seem the same in broad terms. There are a number of internet companies who have made such a focus on cut our “niche†(several of us participate here). As far as “seeing what you buy†beforehand…that’s the reason internet sellers offer a no-questions asked return period of a week or more. No one expects someone to finalize a purchase before they see the product.

 

Established companies typically offer long-term support in the way of generous return periods, lifetime trade-up policies and client-loyalty programs. They carry in-house inventory and have long-standing roots in the trade. Many of us bear considerable rent & insurance, building security, power/water/air, and a large payroll required to maintain a qualified staff (sales, processing, gemologists, benchworkers, platinumsmiths, designers). Those with showrooms require additional insurance and security. The most supportive sellers have been around for decades and are not going anywhere. That kind of ‘brand recognition’ can be worth a premium - to know the company you’re working with won’t disappear in a puff of smoke tomorrow. There is great security in doing business with a place that has a rep for quality and consistency. Sometimes the premium is modest, sometimes it’s quite steep (Tiffany, for example). It's wise that you are seeking this kind of longevity, but be aware that there are B&M sellers of every kind (top reputation to shady) just as there are internet sellers of every kind.

 

In general, the competitive internet market does boast the smallest markups available to consumers. These companies are already trading diamonds for less than retail stores by a notable percentage but - as you have mentioned - working with an internet seller is not everyone’s cup of tea. When deciding on your bottom line, whether B&M, 'brick & click' or internet-exclusive, consider the quality of the products, the customer service and short & long-term support that best meets your needs.

Edited by JohnQuixote
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Thanks for the feedback John.

 

I understand completely what you are saying, and I feel better buying from a local B&M store - I just wanted to try and figure out what a fair price would be. I don't blame them for trying to make the most amount of money, just as I would like to save the most amount of money.

 

From my basic knowledge, it would appear to me that the sticker prices in most jewellery stores are pretty high and that most people if not all pay something less than sticker price - I just need to figure out a starting range to work with. Since I don't think most B&M stores can match online prices, I need to find a realistic price so I was planning on taking an average of online prices I could find, from stones with the same lab, same qualities and then finding the upper and lower limits (after dropping off the outliers) and then adding a fixed percentage (for overhead) to the top prices. (I think i saw a post where neil said B&M may be around 20% more than online shops)).

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You’re correct in observing that the tag price in jewelry stores is often not what they really expect to sell things for and that this is a bit more difficult to do online where people are inclined to pick a stone from a list of hundreds or thousands and if the dealer doesn’t appear near the top of your criteria they are unlikely to ever get the opportunity to negotiate with you.

 

Jewelry store markups are not consistent across all price points, all stores or product lines. Watch batteries enjoy a fabulous margin where you can buy them for 50 cents and sell them for $10. That’s a 2000% markup! The problem is that it’s still only a $10 sale. If the store is in a location where they can sell 50 or a hundred over a lunch hour they’ve got a pretty good business going there but most stores sell more like a few to a few dozen a week. That’s certainly worth doing but it’s not going to pay the employees or even the rent. On the other extreme, say diamonds that cost $100k+, it’s hard to get a markup that even exceeds the sales tax. This too would be great if you could have a store that sold a lot of these but, for most jewelers, they may see one or two of these in their entire career. In the end, this is simply not where they can get the money to pay their expenses much less pay themselves.

 

Different stores will take different approaches to balancing these extremes. Most online stores tend to aim for low margins and low transaction costs by minimizing staff, rent, insurance, and similar costs. On moderately priced diamonds, $5000-$15000, they will often work on margins in the range of 10-15%. A low cost b&m, meaning one that doesn’t spend a ton on advertising or rent the most expensive building in town will often happily offer this same thing for a 25% margin although, as you point out, they can print whatever they want on the price tags and then offer a ‘discount’. That boils down to a 10% premium over the ‘typical’ online shop. If they are the sort of place that has lots of helpful employees, lots of ‘free’ addons, an awesome location, lots of advertising and the like, they may find they need another 10-25% beyond that.

 

Neil

Edited by denverappraiser
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