HOW DO DIAMOND SITES WORK?

Why Can't Brick-and-Mortar Retailers Compete with Online Retailers?

The Knot also reported that nearly three in four grooms encounter challenges during their ring-buying journey, with more than a third reporting that their main problem was not being sure they were getting a good deal.

We often receive emails from readers who are hesitant to buy online even though they know it will be cheaper. So I think it’s important to explain why we understand these concerns, but also why we think these concerns are misguided. We’ve found that many more people take advantage of going into a store than they do online. Buying diamonds can be confusing, and deep down you may realize that you’ll never know as much as the professionals who sell diamonds.

Many of our readers spend hours perusing our numerous diamond reviews and diamond education articles. Buying a diamond is actually a piece of cake once you know what to look for.

But when you walk into a store, you want to be 100% sure that you haven’t forgotten any of the little details (one single quality can seriously affect the value of a diamond). After all, you’re dealing with someone who is more prepared and more incentivized to get you to leave that store with a diamond on their terms.

When you research online, you have the advantage of going at your own pace, cross-referencing (with a site like ours), and ticking all the boxes.

Did you pay attention?

All diamond websites tell you about the 4Cs and the characteristics of diamonds, but they do not show you which one to choose. They leave the choice to you and compete with each other on price. If you have read our pages, especially THE MOST IMPORTANT CRITERIA FOR A DIAMOND IS CUT If you have read our article on the subject, you know by now that price is the second factor.

For a retailer, it's the opposite. When you walk into a store, the less desirable the diamond, the more incentive the jeweler has to sell it. Which item would a jeweler prefer to sell you?

  • The highly desirable, highly valuable one that he can sell to anyone?
  • Or would they rather sell the less desirable diamond that is dead weight in their inventory bins and cash flow statements?

I have had countless readers start the diamond selection process with me. Halfway through, they send me a message saying, ‘we went to this store and found this diamond that was really important, so we’re snatching it up.’ Then I feel bad when I have to point out the things they missed – the things that turned it from a good deal to a terrible deal (not paying attention to cut values, not reading the little certification notes, incorrect certification that inflated the quality, strong fluorescence, yellow fluorescence, jeweler’s certification, etc.).

Unfortunately, most stores make it very difficult to return a diamond ring. It’s possible to find a good deal in a store (and by good deal, I mean not much more expensive than an online retailer), but you’re much more likely to fall into a sales trap. I’m not saying to stick to buying online, but in general, online shopping will give you the best price and will allow you to shop at your own pace.

Traditional Diamond Retailers

Running a brick-and-mortar jewelry store is incredibly challenging. Bear with me as I provide some background. A typical clothing retailer operates a store with a 40-50% gross margin. This gives them enough money to cover all the expenses a retailer incurs, and hopefully leave some left over for profit. While this is a typical profit margin for the store, keep in mind that the wholesaler/manufacturer who sells them the product also has healthy profit margins.

The truth is that raw materials for clothing make up only a fraction of the total cost of the product.

This is certainly not the case when it comes to diamonds and diamond jewelry. The actual cost of jewelry makes up a much larger percentage of the price than in most industries. Another issue is the cost of stocking a store. How much do you think it would cost to fill all the shelves in a store? Tens of thousands of dollars? Several hundred thousand dollars? A typical diamond jewelry store would have several million dollars worth of inventory on hand.

The overwhelming majority of stores do not have enough cash to pay for this inventory up front. They either borrow money from a bank, buy diamonds on credit from a wholesaler, or buy the product on consignment.

In any of these cases, the price would have to be higher to cover the additional cost. In addition to these costs, there are also the normal overhead costs that any retailer faces.

The rent and maintenance of a storefront (which is quite significant, considering they sell luxury goods) and the cost of having a fully staffed store. Diamonds are not simply items that people can start selling after a few hours of training.

In a real diamond shop, personnel costs are quite high.

In general, take note of the online diamond features, Buying by seeing the same features will give you a better price and a better choice.