Diamond value and pricing


This seems crazy

How can a certified 1.00 carat H-VS2 diamond sell for $8,000 with my local jeweler, $5,000 at the mall and run anywhere from $3,500-8,500 on the internet?

We’re here to help

Decoding diamond value and pricing is one of the biggest challenges shoppers face.

We would like to dispel some myths, confirm some realities and provide a real-time exercise you can use to eliminate irregularities and determine a fair retail pricing baseline for loose diamonds you may be considering.

Aren’t diamonds marked up 100%?

No. That ship sailed with the internet age. There are exceptions, however, and we’ll cover them below.


3 rules of engagement

Rule #1: When a deal seems too good to be true it usually is.

Ok, that’s no secret, but we need to say it.

Rule #2: Buy the diamond, not the paper.

We say this because grading reports don't tell the whole story. Diamond traders use their eyes to barter because of this fact. A trader examining an H-VS1 diamond won’t pay an F-VVS2 price for it, even if the paper says that. But some traders might buy that H-VS1 (at the H-VS1 price), and then use its overgraded F-VVS2 certificate to sell it to unsuspecting consumers as if it were “a bargain.”

Rule #3: Restrictions are a deal-breaker.

A diamond is forever, so seek permanent guarantees. Walk away from signs proclaiming “all sales final” or “no returns." Professionals give each other time to verify details before binding a purchase, so consumers should receive similar treatment. For added security, insist on long-term benefits such as unrestricted lifetime upgrades and lifetime buyback. These are the best value indicators of all. A seller who will not offer such guarantees wants to move the diamond out and never have it come back.

With these rules in mind, we'll help you detemine viable pricing for diamonds in the category you're considering, account for the value of the support package offered with the diamond, and know the markup model of the market in which you're shopping.


PART I. DETERMINE VIABLE PRICING

The diamond business is extremely competitive. Pricing for viable diamonds will be similar in the same market. There are no fire-sales or bargains. If a diamond's price is lower it has been reduced for one of the following reasons.

  • Overgrading: Economy-labs use GIA terminology but the actual grades can be 2+ colors or 2+ clarities lower than those listed.
  • Not eye-clean: Diamonds in clarity grades VS1-VS2-SI1-SI2-I1-I2-I3 can have eye-visible inclusions.
  • Cut Deductions: Diamonds frequently have subtractive spread and/or reduced brightness due to wide cut grading standards.
  • Undisclosed Issues: Diamonds may have “lucky certs” and/or haziness, brown tint, green tint or milkiness that is not disclosed.
Commonly heard quote:

“The internet only has leftover diamonds that no jewelry store wanted.” 

That’s not completely true, but it’s not wrong either. Millions of online diamonds are not owned or stocked by the sellers listing them. Those “virtual diamonds” are warehoused somewhere. Many were rejected, indeed, and are discounted due to systemic issues.


Perform this 3-step exercise to see what we mean.

Step A: Fill the Virtual Diamond pool

- Go to any popular website offering thousands of diamonds.
- Search GIA-AGS graded round brilliants in a single carat, color and clarity range (Our example: 1.00-1.09 H VS2)
- Sort by price and check out the high and low.

Our example: 402 results, descending from $ 8,600 to $ 3,700 (last updated July 4, 2017)

The cut grade goes from EX to FAIR, but that doesn’t begin to explain why some are 55% less than others.

Tip! You can use the online HCA tool to see which diamonds have been lowered for cut deductions, but determining which are not eye-clean or have undisclosed issues such as haze, tint or a “lucky cert” requires inspection by an expert with the diamond in-hand.

Beware: The discount for issues behind industry doors may or may not be wholly reflected in the advertised retail price.

For example, here two 1.00 carat H-VS2 diamonds are being offered for $7,000 (discounted from the $8,000 range). One of them has a prong-able crystal (not eye-clean) and this discount takes it to a high H-SI1 price which is fair, but not generous. The other $7,000 H-VS2 has undisclosed haze affecting transparency (known as a ‘sleepy stone’). This diamond would trade for only $2,500 behind industry doors, but the supplier marked it up nearly 200%, trusting that this haze may be overlooked by an inexperienced shopper who buys it online.

This virtual pool gets deeper over time. Stockpiles of problematic stones increase as traders reject them. Many are never brought to the USA. They remain in overseas cutting centers like India and China until ordered by an online shopper.


Step B: Find the Vetted diamonds

- Let's clean the virtual pool.
- Limit the search to the company’s “Signature” collection. This will narrow the field dramatically.

Our example: 6 results (from 402), descending from $ 8,600 to $ 8,070 (last updated July 4, 2017)

Most "Signature" collections have been vetted for diamonds confirmed to have accurate color-clarity grades and negligible undisclosed issues. This narrowing theoretically eliminates diamonds with "lucky certs," severe cut deductions, undisclosed issues and other unknowns.

Tip! You can use the online HCA tool to see which of these diamonds have been lowered for cut deductions. Those which are not eye-clean will still need to be determined by consulting an expert with the diamond in hand.

VIABLE PRICING BASELINE

The surviving examples give you an indication of how the seller prices viable diamonds in that selected carat, color and clarity range. And, by comparing pricing from several sellers, you can intuit a reasonable retail pricing baseline for the same range. 


Step C: Eliminate cut deductions

Using advanced filters:

Limit results to Ideal Polish & Symmetry, Table% 55-57, Depth% 60-61.5.
Open grading reports and discard all with Pavilion Angles outside of 40.6-40.8 and Crown Angles outside of 34.1-34.9.

Our example: 1 result (last updated July 4, 2017)

Those which are not eye-clean will still need to be determined by consulting an expert with the diamond in hand.


Step D: Choice diamonds

The steps above should provide you with an online pricing baseline for no-frills generic diamonds.

Above this pool are diamonds chosen to be offered under a specific flag or brand. Such choice diamonds have been held to a higher set of published standards and usually come with a suite of strong guarantees which demonstrates their greater value.

High Performance Diamonds

This is a logical place to remind our readers that no grading report discloses crafting precision. No laboratory measures dispersion or scintillation. And no generically produced diamonds are fine-tuned with Crafted by Infinity’s focused crafting goals which reliably produce more fire, more sparkle and more life. This is a level of superior precision craftsmanship and performance optics that does not appear in normal diamond productions.

This brings us to the next critical component of diamond pricing and value, the Support Package.

 

PART II. ACCOUNT FOR THE SUPPORT PACKAGE

The support package involved fixed short and long terms expenses incurred by the seller. This varies from store to store.

Short term support

Seller A brings every diamond in to be vetted for accurate grading and rejects those which are not. Seller B has diamonds drop-shipped from his Indian or domestic suppliers to the customer without ever seeing them.

Seller A creates a full suite of photos and video for each diamond and jewelry piece, to document and demonstrate the truth of its pedigree. Seller B has no photos or videos, or uses a contract-service without handling them himself.

Seller A provides a cut-quality kit, tools or viewers and underwrites 2-way shipping. Seller B does not provide cut-analysis tools and extends one-way shipping.

Long term support

Seller A provides an unrestricted lifetime upgrade policy so the client’s credit toward something more valuable is always waiting for him there. Seller B provides no upgrade policy, restricts it to 2X the original price or places an expiration date on it.

Seller A provides an emergency cash buyback for life, ensuring the value of this spend. Seller B provides no buyback terms, limits it or places an expiration date on it.

In each case Seller A has more expenses than Seller B, but is also protecting his clients in a more robust way. It is also undeniable that long term guarantees reflect the way a seller perceived the value of what he is selling.

 

PART III. KNOW THE MARKUP MODEL

The good old days

For many years diamonds sold in jewelry stores commanded markups of 100% or more. All of that changed with online sellers and the evolution of a competitive digital landscape. Those old markup models have long since vanished for loose diamonds. As we’ve outlined in sections 1 and 2, there is still abundant opacity and variability in the diamond shopping experience, but consumers willing to do their homework can track down the balance of quality and fair value which suits their needs.

Where are the highest markups?

Cheap finished jewelry sales. These sellers have signage proclaiming “Everything 70% Off” and “Going out of business” (again and again). In these cases you’ll find items tagged “discounted from…” some imaginary price that never existed.

While many people won’t mind paying $30 (discounted from an imaginary $75) for a bangle that cost the seller $10, they may feel differently about spending $2,499 (discounted from an imaginary $6,000) on a diamond engagement ring that cost the seller $1,000. 

Department stores and big commercial outlets also have major markups. When a ring is sold with an overgraded economy report and a guarantee of "free replacement for life" if the diamond ever falls out; you can be sure the premium you paid was hefty enough to cover that replacement.

Destination boutiques have high markups too. Diamond jewelry pieces may double or triple in price when sold at a ski lodge in Vail, a jewelry store in Caesar's Palace or the Four Seasons in Dubai, for example.

What about Tiffany and Cartier?

This is a different situation. These are choice diamonds, high in quality, which come with a nice support package. Yes their markup model is high, but that isn’t problematic because their client base seeks prestige as a value-added factor. It’s safe to assume their customers enter those transactions fully aware they are paying for the store’s name, as much as they are the product.

What about online diamonds?

In general terms, the online markup for vetted viable diamonds hovers around 20%. That number can drop into the single digits for higher value sales. The main differences among online sellers have more to do with the value of the support package than the markup.

Independent Jewelry Stores?

Independent jewelry stores may start with a higher markup, which they truly need, but they are being forced, more and more, to compete with online pricing. This is a difficult situation for jewelers in community-convenient locations (high rent), stocking items they have purchased for customers to see and try on (investment), offering free-cleaning, battery-replacement, etc. (goodwill), and employing specialists in different disciplines (payroll) have significant fixed expenses. Not only may they lose some percentage of their local traffic to online sellers, their own customers may expect discounts that take pricing below their fixed expenses. Sadly, this situation has caused many good jewelers to retire or close.

Where will I get fair value?

Google and Bing can be used to research any seller.

There are wonderful showrooms and online sellers offering vetted diamonds at a fair value. There are several choice collections and brands offering an even higher level of quality and support. High Performance Diamonds is proud to stand at the peak of all choices offering Crafted by Infinity Diamonds; the best product at the best value, with a suite of unmatched guarantees, for shoppers seeking the very best.

We hope the extensive information and exercises above will prove useful in your search, whether you shop with us or not.

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