Unlocking The Secrets of the New York Diamond District..
What happens when you put an unregulated market that offers a very expensive product in the middle of NYC? A market where the customer is a layperson who can’t distinguish between a $2000 and the $20,000 offering, yet is highly motivate to spend the money anyway. Wait! Before you answer that, overlay the fact that the group of basically 2500 businesses operates in an oligopoly-like environment, moving 90% of the US diamond inventory each year – worth (at least) $24b. Add to that the fact that (according to Pareto’s 80/20 rule) the largest 20% of the players account for about 80% of the product sales? Then, add to all of that the fact that most powerful participants have every incentive to not provide price transparency because each sale is individually negotiated and giving buyers accurate price information would mean less profit?
Welcome to the New York Diamond District my friends…
Jewelers Row in NYC operates quite possibly the most opaque business segment in the Big Apple. And many of the players want to keep it that way. The power elite on 47th Street have so many divergent motivations, one could write a Harvard Business School case study and still miss some of the key issues.
At Jewelers.NYC, we’ll do our best to reveal them here, and then at the end of this article, we’ll give you the “nuclear option” that will give you a high degree of certainty on price and quality for your upcoming purchase.
Let’s Begin with the Hierarchy on Jewelers Row…
First, understand that not every one of those 2500 businesses is a retail store. In fact, we estimate that over half are not retail at all. Many are business-to-business. Wholesale operations selling to retailers such as Zales, Tiffany, etc. This little factoid is where the confusion about “getting a wholesale price” comes into play. Most of the street level jewelers can’t get you true wholesale prices because they can’t get those themselves. Yes, they will do better than big jewelry store chains, but that is because their overhead is tiny compared to a 1500 square foot diamond store located in a high-end mall. But they can’t acquire the diamond at 39% of retail (see out price input infrograph above) because they are not the diamond manufacturer. In other words, they are not General Motors, they are the GM Dealer down the street from your house…
Now, imagine an unsuspecting buyer who has heard of the New York diamond district wholesale lore who travels to 47th Street… The most popular diamond, (round brilliant cut, one carat stone) can have almost three hundred different combinations of color, cut and clarity. This means a buyer can pick up a lower grade “jewelry quality” diamond for about $2,000 or a nearly flawless one for $20,000 (or more!). Can you see how this might create an “opportunity” for an unscrupulous jeweler who knows the buyer has traveled to diamond row for a discount, to sell a “wholesale,” diamond that is really just cheap in quality, not cheap in price??
Next are the diamond stores that have diamond cutters in their employ. Buyers mistakenly think the NYC diamond district jeweler is somehow digging up the diamond in the rough themselves and then polishing and cutting it. That my friends is just not true. Unless their last name is DeBeers, they don’t dig the diamonds out of the ground, they buy the diamond in the rough from someone who buys it from the likes of DeBeers. The store may employ master diamond cutters, but they are not end-to-end.
Next Problem: No Standard Price…
How much is a beautiful painting of a rose worth? Well the artist will think it’s priceless, but ultimately the art market decides. There are variations in the prices of nearly identical quality diamonds because the artists (cutters) and their partners (diamond dealers) set their own prices. If you went onto JamesAllen.com right now and searched for a 1.01 carat, round, G colored, VS1 clarity, excellent cut diamond, you’d find no less than 50 different pricing points with a price variance of up to 30%. Give it a try, we have that exact search here.
It’s important to note that James Allen does not own those diamonds, they sell them on consignment. This means the variation in price is being determined by the starting point – the diamond seller on the other end. It’s entirely likely that a lower priced diamond will possess the same quality and sparkle as a higher priced diamond, but “the artist” of the higher priced stone is demanding more. Enough said…
Then: Secrecy Inside the Diamond Trade
Wouldn’t it be nice if we all got along? If diamond sellers gave each other price and inventory transparency so that everyone could compete fairly and more evenly…
Try telling that to the 20% of the NYC diamond sellers who have captured 80% of the market. Also try telling that to the other 80% who have dreams of one day being in the elite 20%. They do not want to disclose their “X factor” to each other because if they did, the possibility of outsized profits would disappear. Gone would be the possibility of the house in the Hamptons, the seaside villa in the Mediterranian, etc. In other words, they do not want to become commoditized. Remember that cartel-like behavior has existed in this industry for a long time, with the players at the top controlling inventory to keep prices high. If the message from the top has been one of profit optimization, what does this mean down the chain??
Finally: The Nuclear (Only) Option to Getting the Best Price
20 years ago, a buyer would have needed to be an insider to get a great price. Yes, they could have shopped around a bit and got small discounts, but they would not have seen much in the way of price fluctuation. Today things are different. Today buyers have several good online reference points for true discount prices. When I say true discount prices, I’m referring to no haggle prices where you don’t get talked into buying something you shouldn’t. In a nutshell I am talking about James Allen, Blue Nile, Zoara and Brian Gavin. Our top recommendation among the group is A+ rated James Allen.
Why James Allen
James Allen won our 2017 Battle of the Online Discount Diamond Titans contest (two years in a row), based on quality and price. They offer an excellent selection of “GIA graded” diamonds. GIA grading is the is the missing piece in this article.
Gemological Institute of America (GIA) Graded Diamonds
Up until this point, we have talked about price, price, and price. Now let’s talk about quality. More importantly let’s discuss how a highly skilled, consumer focused, independent expert will tell you the quality of the diamond you are considering so you do not have to “eyeball” whether it’s worth $2000 or $20,000. That independent expert is your guardian angel and its name is the Gemological Institute of America, or “GIA.” GIA is the most respected diamond grading service in the world (in our and many other’s opinion), and they will tell you what the 4C’s of color, cut, clarity and carat weight are for your diamond. They are viewed by most as the most consistent (and accurate) diamond grading lab in the world. In other words, they will test and grade your diamond, verify its quality and then all YOU need to do is negotiate the best price. The best part is that all reputable jewelers will offer GIA graded diamonds as a large part of their inventory. If they don’t, then walk away…
GIA is important because the hardest part of buying a diamond is getting a bearing on the diamond quality that you want. Once you have that, then the rest is about price discovery. To help we recommend that you read our articles on color, cut, clarity and carat weight. Once you know what you want, THEN it’s time to get the right price. Never go in reverse…
How to discover what you should pay. We have made this SO simple for you. Once click – start with carat weight – below. Choose the carat weight you are considering and then play with the variables on James Allen’s webpage. BTW, we estimate James Allen to be about 40% off retail This is approaching “best deal” territory.
Know The Wholesale Diamond Price Before You Go. Visit:
JAMES ALLEN – Jewelers.NYC’s Online Discount Diamond Store of the Year – 2017 (~40% off)
Most Popular: Round>GIA>Ideal Cut>VS2 Clarity> G Color> One Click – 3D
1/2 Carat | 3/4 Carat | 1 Carat | 1-1/2 Carat | 2 Carat | 2-1/2 Carat | 3 Carat
JW