There’s a saying in the IT game. It’s called GIGO, garbage in, garbage out. While the saying is crude, rude and a little skewed, when it comes to diamond shopping tips it is still none the less, well… shrewd.
The premise is that if you start with bad inputs upfront, there is no way, no matter how hard you try, to have a good output on the back end. The same can be said for buying a diamond. Whether you’re going to the Diamond District, NYC or shopping for Online Diamonds, the quality and cost of diamonds are often very little to do with one another.
Let’s start with a basic truth – 71% of the cost of a retail diamond is markup. This data comes from the well respected consulting firm Bain and Company.
For most people their first thought is holy s***! Not so fast partner, when you buy a cup, handsaw, tie or just about anything, the item’s price is often doubled and then doubled again before you buy it. First the manufacturer sells it to the wholesaler for say $1. The wholesaler, who needs to make a profit, sells it to the retailer for $2 and the retailer who needs to make a profit, sells it to you for $4. In other words, the finished product had a 75% markup, so don’t get too upset, because wholesalers and retail stores have to pay for rent, salespeople, interest on loans, etc.
The same is true in the diamond trade. Diamond manufacturer’s sell the finished product to wholesalers who put it through the channel and it comes out the other end at Tiffany, Zale, etc – with about a 71% markup. It’s not quite as linear in the diamond game, because there are “several middlemen,” (see info graph on the right) with the last one being the diamond district jeweler. Their breakeven is not 25% of the retail price, it’s closer to 50% +/-.
So the reason anyone buys a diamond in the New York Diamond District is to avoid (or reduce) the markup from wholesaler to retailer. It’s no more difficult than that. The New York Diamond District IS the middleman and online diamond stores (like James Allen, our #1 rated online diamond store for 2016) are somewhere in between, because they have no major overhead to speak of.
This is where the tug of war begins in the Diamond District. Diamond District Jewelers operate small show rooms and most don’t advertise their price. They want you to pay more and you want them to charge less. The middle ground between wholesale (50% off) and retail (0% off) is where negotiation lies.
So you need to go in with three things. 1) know who the reputable jewelers in the NYC Diamond District are; 2) know the 4C’s of the diamond you want to buy before you go; 3) know what a good price actually is;
Fortunately, we’ve done some of the hard work for you…
This is the 24 billion dollar question… Who are the Top Jewelers in the NYC Diamond District? Let me begin with a general comment, many diamond district jewelers are hard working, fair and just trying to do the right thing while earning a living in a very secretive trade; however, there are also some that would take cash from an unsuspecting customer faster than a bank robber at Carson City National.
We can’t tell you how to find all of them, but we can tell you one of the best places to start. Start with our report, Top 10 Diamond District NYC Stores. At the time we wrote that article, each store had a Better Business Bureau Rating of A+, most had dozens and dozens of rock solid 5 star YELP ratings, and many had tens of thousands of Facebook likes. You of course need to check them out yourself; however, we believe for someone who has no other diamond expertise or references into the diamond district, these criteria are the most meaningful. BTW, less than 3% of the jewelers in the New York Diamond District met the criteria above.
This is tough for some, because they don’t actually know what to buy. They are hoping that “it will come to them” when they see it. If this is you, don’t make the Diamond District your first stop, make it your last. Go to the Mall to Zale, etc. and find one you like, then go to the Diamond District. For your reference, our research shows that the average, color, cut and clarity of purchasers of diamonds, 1 carat and higher is: GIA graded, G color, Ideal (Excellent) cut, and SI1 clarity. Here’s why this is the case:
G Color is the first grade outside of “colorless.” F is the last colorless grade, but truth be told everything except D has some color under magnification, and close examination. F and G are nearly identical in actual lack of color (to you, me and most recipients), but they are priced noticeably less.
SI1 Clarity – SI1 is the last point where inclusions (specks) are not noticeable to the naked eye. At SI2, under very close inspection, tiny specks begin to become visible.
Ideal Cut – always go for the best cut you can afford – this is not the area to skim. An ideal/excellent cut diamond reflects light brilliantly back up through the crown and gives diamonds the colorful flash that they are known for.
GIA – the most respected and consistent diamond-grading-lab in the world is GIA. They grade more diamonds than any other lab. GIA graded diamonds are also available at virtually all reputable stores in large quantities.
If the battleground is between 50% and 0% off retail, where 50% means the jeweler makes no profit and 0% means they make retail profit, you can expect to meet somewhere in the middle. However, make sure you go in armed so that you don’t actually pay retail prices. We recommend going to James Allen’s online diamond pricing page (A+ rated, about 40% off) to see what a good price really is. Click here – no login or email required.
That’s the diamond advice we have for you today. Good luck in the NYC Diamond District and thanks for reading.