You can squeeze more profits from diamonds if you are knowledgeable
and consider this menu of possibilities
Diamond certificates can be the proverbial double-edged sword. They help
you justify a price when selling to a consumer. But they can weaken your
negotiating position when buying from a dealer if you rely on them rather
than your own knowledge of diamonds.
A generation ago, diamond buyers would visit a dealer's office and examine
diamonds for the location, size, type and number of flaws as well
as the cut and color before negotiating a price, says Tom Tivol, president
of Tivol Jewels, Kansas City, MO. Today, precertification makes such examination
"The precertification of diamonds by labs with varying degrees of
expertise has had the unintended effect of eliminating the retail jeweler's
need to know about diamonds," he says. "Buyers who have authentic
knowledge of diamonds make better profits. If you know the difference between
a feather and cleavage, a chip and an indented natural, for example, you
can use this information in negotiating price." You can save 2%-5%
because of durability flaws, he says, as long as you represent the diamond
honorably to consumers.
Tivol offered this and other tips to increase diamond profitability,
along with the caveat they can affect your image, so you have to consider
- Don't reduce diamonds to a commodity by negotiating a certain percentage
below the Rapaport Report price list, he says. This gives the supplier
the advantage in setting prices. Tivol encourages you to buy five 1-ct.
precertified diamonds that are G, H or I color and VS2, SI1 or SI2 clarity
with the kind of cut and price you like. Then buy the same kind of diamonds
without certificates. "Our average saving is about 7% when buying
non-certified stones and having them certified later," he says.
- Shop the certificate market. Is it useful to have two independent laboratory
reports done on a diamond (at about $70 per report) on the chance they
result in slightly different grades? "If you price your diamonds based
on color and clarity grades on paper rather than on authentic knowledge
of diamonds, the answer is clearly yes," he says. "It's a problem
ethically, but if you can overcome that with your own knowledge, then from
the limited standpoint of making profit, certificate-shopping may be appropriate."
- Sell enhanced diamonds. "Tivol Jewels doesn't do this, but as
long as the enhancement is identified and represented fully, then you have
done your job with the public, and therein lies the chance for increased
profit," he says. "It is unpalatable to some; to others who are
better businesspeople than me, selling enhanced diamonds suggests tremendous
size and value opportunities for profit."
- Precision clarity shopping. There are differences in clarity grading
based on size, location, type and number of surface blemishes and imperfections
if you are willing to look at them and negotiate from that standpoint,"
he says. "This can result in 5%-10% additional margin."
- Domestic vs. international. You can buy just as low at a U.S. show
as in a foreign dealer's office on average, he says. But once you establish
a relationship with a foreign supplier and the supplier accumulates enough
of certain types of diamonds, you may be able to get better prices. Tivol,
for example, has saved 8%-15% when buying certain groups of diamonds at
certain times in Antwerp, though he says the same can be true in New York
City. The key when buying abroad, he says, is to make the arrangements
in advance rather than traveling there first blindly in hopes of negotiating
- Light sizes. Diamonds that weigh slightly less than common weights
(a little under a half carat, a little under a carat, etc.) can cost 15%-20%
less per carat. "If you choose not to buy these diamonds, it's because
you're being controlled by your customer a little too much," says
Tivol. "We are so subject to consumer preferences created by advertising
that we have forgotten our power as merchants to suggest what the customer
- Cut. Better cuts suggest the opportunity for more profits because fewer
stores offer them so there's less competitive pressure on prices. What's
more, he says, you can buy a diamond cut to Tolkowsky proportions without
a certificate and then have it certified yourself. "Therein lies your
profit, a savings of about 15% per carat."
- Taking a cut. This is an old-fashioned way to buy diamonds: for example,
taking a paper of 25 marquise diamonds in a range of sizes with some variation
in color and clarity. If you sell a range of diamond qualities, this can
yield a savings of 5%-10% overall, especially if you can negotiate out
any you really don't want.
- Memo/consignment. Tivol believes jewelers should buy diamonds rather
than obtain them on memo. For those who have developed a clientele for
larger diamonds (say 5 to 15 carats), however, memo makes sense because
of their expense or infrequent turnover, he says. But he cautions not to
accept that these larger diamonds should cost more just because they're
in your store on memo. "The diamonds are available for memo because
they cannot be sold elsewhere," he says. "The fact you are the
available merchant for them suggests a negotiating position."
- Internet competition. Tivol won't match diamond prices a customer finds
on the Internet. "That gives the customer the advantage by suggesting
you will compete for his business," says Tivol. "Why would you
want to develop a relationship with a customer who can buy diamonds very
close to the wholesale cost? What kind of goodwill ambassador would that
customer be if he can say, 'I found the stone on the Internet, took it
to Tivol's and Tivol's met the price.' Do you really want that customer
for your business?"
by Ren Miller
Copyright © 1999 by Bond Communications.