THE REAL MARKUP ON DIAMONDS
HOW MUCH PROFIT DO JEWELERS MAKE ON DIAMOND SALES?
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People are really under the impression that jewelers are rolling in the dough.
They think that jewelry is very overpriced and that jewelers are making tons of profit from selling diamonds (that’s why they’re so expensive, right?).
So what gives?
Are diamonds overly inflated?
Are diamonds making jewelers tons of money?
NO!
Diamonds are not overpriced. No, they are not the big money makers that everyone tends to believe.
So what do jewelers make?
Jewelers will be lucky to make keystone on diamonds (Keystone = Cost x 2)
So, a diamond that costs $200 will roughly sell for $400 (minus commissions and overhead). And what’s even more startling to most people is this fact: the bigger the diamond, the less money jewelers will make (on a $5,000 diamond sale, profits may be as little as $1,000).
More is less
The more expensive a diamond is, the less profit jewelers will make. This is because larger diamonds (1.00 carats and bigger) are expensive to begin with. The costs on large diamonds are extreme. Market pretty much dictates certain price ranges and margins to work with.
A 1.00 carat diamond, SI1 clarity, G color, GIA certified, will usually only be around 10% price difference from store to store (and actually James Allen has it selling for just $5,120). There’s just too much competition to overprice diamonds and be greedy. If a jeweler tried marking the retail prices up really high, it would backfire. They’d never sell any.
So jewelers have to keep them within acceptable limits. Plus, the market for really large diamonds is slim. How many people really buy large diamonds? Which means, a jeweler can’t overcharge. And jewelers don’t like keeping large diamonds tied up in inventory either. It locks up their cash flow and keeps them from buying new merchandise, or marketing. So jewelers are more apt to make very minimal profits on larger stones.
The truth:
Diamonds are NOT the awesome profit makers that make jewelers rich!!!
Diamonds and diamond deals are the things that get customers in the door. If it means just making a couple hundred dollars on a one carat diamond, they’ll do it. Diamonds do no good sitting around in the jewelry showcases and collecting dust.
So then, if jewelers don’t make huge profits on diamonds…
What do they make their profits on?
They make money on the mountings, gold, chains, and gemstones. Things like these keep the jewelers afloat. Especially in today’s economy.
It’s not like the olden days where jeweler’s and every business could mark things up 3 times. Today, jewelers work hard and struggle. They make less profit and do what they can to keep their existing customers, and attract new ones. But then, most companies are hurting big time right now. It’s just the way that it is. It’s a sad state all across the country and luxury items are no different.
So just because diamonds are expensive and cost lots of money, doesn’t mean the jewelers are making fortunes on them. More like a couple bucks here and there. Just enough to keep paying the bills, make a decent living, and buy new diamond rings that you’re simply going to love and enjoy.
Now that’s the real deal.
Cheers! :)
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Jewellers do make a lot of money for sure otherwise they wouldn’t be in the business. The markups are ridiculous and thats something no one would divulge. many a times its overpriced by 10 times. For instance the cost of manufacturing would be 500$ but the cost at sale would be 5000$.
To Ro1, I have been in this business for 37 years, worked in many stores as well as my own and have never seen markups like you have described. 10 time markup? Seriously? Not in the real world. The highest markup I have seen was on sterling silver jewelry made in china and could get up to a 4 time markup. MAX. In this economy jewelers are lucky to get 3X, and on diamonds maybe 1X.
I agree. Totally absurd. 3x is getting really lucky nowadays. Normally it’s 1-2 keystone. :) -Richard
Richard Scott, what would you recommend for me to do. I am thinking of selling my engagement diamond ring, 14K white gold, clarity I, tear drop or pear shaped? It is a .75 in size. I have been offered a 800.00 is that a fair selling price? I know what it cost but hmmm not sure about this price. Is that how much of a mark down you normally get when selling? Thanks for any advice
Shawn
Hi Shawn. It would be hard to judge any kind of selling price by just the few characteristics you told me. For example, a .75 carat pear shaped diamond could sell as low as $1,170 (plus $180 for the mounting). So getting $800 for that sounds wonderful (see these diamonds here). But if it’s a higher color stone, with a better symmetry and polish, GIA certified, with no fluorescence, that diamond could retail higher for $1,630 (see these diamonds here). Either way, getting $800 for it seems very reasonable to me (you usually only get about 20-30% of what it’s worth). If you have further specs on the stone, input those into the James Allen diamond search and you’ll get a better idea of current retail value. -Richard
I found a company on EBay that is based in Israel but has a 5th Ave address. They’re advertising 1 1/5 cttw natural diamond stud earrings, not enhanced, in 14k gold. The color is G and clarity is VS1-S11. This company got all favorable reviews since 2007. The earrings come with a Gel certificate and can be returned for a full refund within 40 days. Can this be the real thing?
Hi Arlene. Earrings like these, GIA certified, would sell for around $3,000 (SI1, G). Other certificate companies are more lax, meaning, these really could be an SI2, H, instead. No matter, there are many things they do not tell you; what the cut is (just saying it’s ideal doesn’t give you any indication of cut grade, polish, symmetry), if the diamond has fluorescence or not (it could have strong fluorescence). It also doesn’t show you the real diamonds, hence, they could be dark and lifeless. Keep in mind, you get what you pay for. I did a search on Ebay for such earrings, and found ones that sold for $854.99. I found them confusing and misleading, because the title said (SI1 G 1.20 Ct), but further down the page the listing says: SI1 – SI2, G – H color. Which is it? Usually it’s the lower. That would drop almost $1,000 off the price, and, like I said, these grades are probably bumped up, so then the earring grades would really be I1, I, instead. If you buy them, have them checked out with a jeweler to verify the clarity, color, and cut. -Richard
Richard, thanks for the info. My son is currently shopping for a diamond and I shared your tips with him. I know some of these posts are a few years old, but I’m sure all of it is still relevant. Thanks again!
Purchased for my wife in 2013 from Wonder Jewelers on line for $8200.00 a 1.70ct solitaire, Princess cushion cut, H Color, VS1,Excellent Cut Grade, etched Serial Number with Appraisal Certificate issued by Global Gemological Group. We used the original 14kt gold 4 prong setting for sentimental reasons. The appraisal was included with purchase and appraised with a picture for $22,935.00. by EGL. This was an upgrade size celebrating 25th anniversary. When we received ring, I didn’t see any reason to have it appraised again and spend more money. My BIG Mistake! On Sept. 2020, I had the ring appraised for insurance purposes by GIA at Jarod Jewelers in Houston. The appraisal was for only $10,744. Everything matched except for the color rating which turned out to be a J. Ring was only worn on special outings and never noticed it had a faint yellow tint to it. We are very disappointed and saddened by the new findings. Is there any recourse at this point due to the length of time??? I thought of trading up with Wonder Jewelers for a different style and using original appraisal facts that they provided to end up with the quality diamond we paid for. We are retired Seniors and can’t spend another $8,000. to do a trade up. Any advice would be appreciated.
Hi Mark. When I input the specs into current diamond listings, I see a diamond of that size; 1.70, with VS1 clarity, H color, Ideal cut, is selling for around $9,500 (see these diamonds here). If you drop the color down to J, then the price drops almost a thousand: (see these diamonds here). So the current appraisal, for $10,744, sounds appropriate to me with the values today. What I believe is that the original appraisal was inflated to make it sound like a better deal. I would trust GIA, and the new appraisal. Plus, you won’t be paying more in insurance than you have to. You paid less than that for the ring, and it’s appraised for more. So I think there’s nothing wrong with what it says. The difference in color, is just because the original appraisal was not GIA. All other grading companies are more lax. But no matter, you didn’t get ripped off, and your diamond is worth more than you paid for it. -Richard