How much profit do they really make? Is it as bad as people say?
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That is actually a very difficult question for diamonds, though in any other industry it might be a simple one. For most retail items from clothes to toys, the markup is usually 100%, meaning the cost to the store would be $10, and the store sells it for $20 to cover their expenses and salaries.
Two major parts to the answer for diamond markups ::
1 — One store might sell a diamond for $10,900 while another sells the same stone for $30,000.
Why such a difference? In the diamond trade, you will find every style of business from a discount broker in a tiny downtown office to a large retail chain store in a high-rent mall.
Each of these business models has a different list of expenses and therefore different markups. Markups are necessary to cover costs, but with the efficiency of the Internet, costs are coming down and competition is rising. This can represent big savings for you, the consumer — if you shop intelligently.
So the direct honest answer to your question has to be a range… which I find to be from the lowest markup to anything you are likely to buy, to a fairly high markup. I would say it ranges in % format, from 9% or so, to about 300%. That means you could find a diamond that cost the best dealers $10,000, selling at one store for $10,900 to consumers, and at another store for $30,000. The high number is slowling coming down, but it can still be found out there. At the lower markup, I see no way a business can stay in business, because it costs more than that to stock the stone. But somehow they do it, for short periods of time.
2 — Every diamond is unique… no two are alike. That means you can not easily compare apples with apples when it comes to diamonds.
Even if two diamonds have the same color, clarity, shape, and carat weight (the Four C’s), you could still have up to a 10% – 100% difference in value due to proportions, finish, age of the certificate, fluorescence, etc.
So how do you compare prices from one diamond to another and one dealer to another without becoming a gemologist?
Talk to a professional, or get information from experts. But remember the information is biased if the expert sells diamonds, since he or she will try to persuade you to buy a diamond from that store. An unbiased expert can tell you the true wholesale price from the info on any good lab certificate, adjusted for each factor of color, cut, carat weight, clarity, fluoresence and other complicated factors.
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