Diamond Buying and Selling Spread

[ana77]

Hi,
I am interested in converting some of my money into diamonds. After I buy a diamond, how do I sell it? Who buys diamonds? What is the spread for buying and selling? If I bought and sold a diamond today, would I be able to sell for what I paid for it?

Where would I get the best price on buying stones without settings? Is whiteflash overpriced?

Thanks,
Ana

 

[Rockdiamond]

HI Ana,
Selling diamonds is a very full time job.
Consumers can not sell for the same prices as established stores.
Look at it this way, if some private individual is selling the same diamond as a store with a good reputation, which place would you feel more comfortable buying from?
This means the store will be able to sell for a higher price- due to the increased service they offer.

 

[ana77]

Hi,
Does anyone know much about The Rapaport Group. Is it possible for an individual to buy and sell diamonds at wholesale costs on this trading network?

Ana

 

[Rockdiamond]

The Rap network is accessible only if an individual is in the diamond trade.

 

[denverappraiser]

I know quite a bit about the Rapaport group.
Here’s your short answer.
No.

Here’s a slightly longer answer.
Hah!

Not only is it not possible for individuals to sell to Rap, it’s not even possible for dealers to sell to Rap. They are an advertising venue. Dealers who have stones for sale can list them on Rap’s network and hopefully someone will buy them. This network is called rapnet.com. The deal is directly between the seller and the buyer. Rap isn’t involved. A Rap member is under no obligation to do business with another Rap member and, in fact, most don’t. That is to say, simply listing the stone does not mean that people will be willing to buy from you, nor does it mean you want to sell to THEM. It costs about $600 per year to join but that doesn’t end the issue. The problem here is about credit. When you list a stone, and someone sees and wants to buy it, what do you do? They aren’t going to pay you cash up front and you aren’t going to want to extend them credit unless you’ve already got a relationship, or unless you’re a fool. No one takes credit cards because of the fees and the chargebacks. The effect is that for Rapnet to be directly useful as a sales platform you need well established trade credit and references. A 3-6 year excellent track record of a few hundred thousand dollars a year is usually good enough to establish this. More is better.

One thing you CAN do is consign to a dealer who advertises on Rapnet if you would like. Lots of dealers do consignment and for the right stone, this is a perfectly reasonable path although it’s far from the only one. It can take anywhere from a few days to a year but it works just fine. I’ve seen commissions to do this range from about 10% to about 25% depending on what you have.

Rap also has an auction service where they run a diamond auction every month or so. Dealers bid, pay cash and the deal is done in a few weeks. Rap takes a commission and you’re dealer is going to take a commission. The end result is about the same as far as fees go. The advantage is it’s often faster and there's a fixed date for when the sale will happen so it's easier to plan around. The disadvantage is that it usually makes less money. Whether or not this is better depends on what you have and what your objectives are.

Don’t confuse the Rapaport Diamond Report with Rapnet by the way. It’s an easy mistake because they are both from the same company. Rapnet is a trading platform rather like the database here. RDR is a pricing grid that gets used as starting point for negotiations. They are not the same. Selling prices on Rapnet range from about the Rapaport list prices to as little as half (before shipping and commissions). The difference has to do with exactly what you have. Tiny details matter.

 

[denverappraiser]

By the way, ‘wholesale cost’ is a problem phrase. What does that mean? I’m going to guess you mean something like the price that jewelers pay for diamonds. The problem is that jewelers don’t pay the same prices. The SAME jeweler buying from the SAME seller doesn’t even pay the same prices. Each stone is priced individually. The seller is trying to get as much as they can and the buyer is trying to get it as cheaply as they can. Sometimes they go high and sometimes they go low but a claim of ‘wholesale’ in the way it is used for most manufactured goods is an illusion. If you are buying from a 'wholesaler' who hasn't explained this to you, you are being misled. If your 'wholesaler' is pointing to one of the various Rap products and calling that wholesale cost without explanation, you are being misled.

 

[ana77]

Thank you so much for your detailed response.

I guess that means Rapnet trading network may not the best option for me. What I am looking to do is buy some diamonds and keep them for years. Then sell them one by one as the need arises. what I am afraid of is how hard it would be to sell them (how liquid they are).

Can anyone recommend a reputable place to sell diamonds?

If I bought and sold the same diamond today, would it be likely that I would lose money on the sale?

If you were going to buy diamonds, what process would you take? Would you buy a Rapaport Diamond Report and look for sellers that sell certified diamonds as close to these prices as possible?

 

[Ashleigh]

I'm only a consumer sharing my 2 cents. Diamonds had a price hike last 2 years. No idea if diamond price will drop. If it does, you essentially buy high and sell low.

 

[oldminer]

ANA77, the way your questions are posed makes me sincerely doubt that you ought to even consider buying diamonds for the purpose of selling them later on. Such a process requires intimate knowledge of buying and selling an item that has its own unique issues with business and has elements of value attached not only to the US economy, but to the economies of the world. No one can begin to guess the future when it comes to diamonds. Who knows how the game may change?

Likely it would be just fine to buy diamonds like members of the retail jewelry trade often buy them from the public. Most of the time the retailer pays quite a low price versus retail and has lots of flexibility built in on the selling side. You just can't begin to buy that way without a bunch of things being in place first such as reputation, a respectable place of business and some amount of advertising to pull folks in off the street.

Buy diamonds to wear them or to give them as gifts. They may prove to be decent investments over long periods of time, but no one can assure me that they are immune from unexpected changes in value. Shopping to buy diamonds at a fair retail price is very smart. Buying right is an essential part of dealing with diamonds that a consumer is able to do these days which could not have been done 20 years ago.

 

[VRBeauty]

Ana - I'm not an expert by any means but here's what I've picked up hanging around here. And if any experts out there want to chime in and correct me, please feel free to do so!

Unless you're in the trade, you're not going to be able to buy diamonds a wholesale prices. The best you can do is be able to buy the best valued diamonds out there, or with some luck or diligence find the few that might be undervalued, and try to buy them from the retailer who sells them at the lowest mark-up. Remember that anyone who might be buying your diamond from you has access to the same sources you have access to, so your chances of finding someone who would be willing to buy that diamond from you today, at more than you paid for it, are very small. You can of course hope that the diamonds will appreciate in value, but even then you'll likely be selling back to people who also have access to wholesale stones, so you're probably not going to be able to sell them at the new retail value. Occasionally someone who's upgrading their ring has reported here that a retailer offered them more for their original diamond than what they had paid... but we haven't seen enough of those stories to be able to tell you how long you'd have to hold a diamond to make a profit like that, or what size and quality are best for getting such offers.

Pricescope does offer sort of a diamond listing service. You and enter the specs of a diamond you want to sell, and vendors who are interested in buying your stone will send you their offers. I've never used it, and I don't know how the offers compare to the prices the vendors are asking for comparable stones.

The general wisdom around here is that a diamond has to be pretty expensive in the first place for you to be able to count on selling it at a profit within a reasonable time. So the question becomes... if you have over 50K to invest, are diamonds the best place to put that money if you're trying to grow your money?

BTW I have heard stories of people who bartered family jewels and jewelry for necessities or safe passage in times of war. During those circumstances of course all bets are off... I doubt they got what we'd consider fair market value for their jewels, but if those trades kept them alive, perhaps that was enough for them under the circumstances.

I think there are some savvy PS shoppers out there who have been able to find diamond jewelry on ebay, or in local pawn shops and auctions, at prices that would allow them to re-sell that jewelry at a profit, but I suspect that's a different route than the one you're considering.

 

[denverappraiser]

Buying diamonds at 'wholesale' prices is actually pretty easy although there's lots of games over the definition of what constitutes wholesale and most of the biggest scams in the business revolve around this very issue. As you've observed, the trick is mostly in the selling.

I know lots of people who buy and sell diamonds and make a profit on the deal. They're called jewelers although lately they seem to dislike that word and have taken to calling themselves diamond dealers, wholesalers, jobbers, cutters, importers, brokers and a whole variety of other terms that mean the same thing. Some are a lot better at it than others and it doesn't much matter what they call themselves. There is money on the table here and it's a fair question to ask if there's a way to get a piece. I've written quite a bit both in the forum and in the journal on this topic as well as given talks to jewelers, web entrepreneurs and even investment groups about it. The answer is remarkably simple. The people who are good at it are the people who are good at SELLING things. They devote their energies to that. They advertise. They schmooze. They set up fancy stores, discount offices, fancy websites, bare bones deals out of barrooms and investment programs. They hire designers, line up celebrity endorsements and work at it for decades. The underlying thing here is that they're SELLING. Get that down and suppliers will flock to your door to partner with you and bankers will be eager to finance you. Everything else tends to fall into place. Fail on that and you're done before you start.

You don't want to do that. It takes talent, time, and investment. I understand. Presumably you already have a job and you're looking for an investment vehicle, not a new career. You want it to be automatic like it is with stocks and bonds or relatively inexpensive to hire out like it is with real estate. You can want that, and you can probably even find a salesperson who will offer it to you, but unless you're talking big big money, it's just not there. I know literally hundreds of people making money in diamonds and every single one of them has to work it. The ones who work the hardest tend to be the ones who do the best. Funny how much of life is like that.

It's not all grim news. If you believe in the future of diamonds, there are ways for passive investors to get in on the act. For starters, many of the big players are public companies. This includes companies ranging from Rio Tinto to Tiffany to Zales to Blue Nile. Buy or short their stock depending on what you think of their business models. Some companies, like Harry Winston, offer investment trusts where you can buy into a pool of diamonds that they then sell off through their stores (at a significant commission by the way).

 

[Rockdiamond]

I agree with much of what Neil and David wrote... But, I think Neil is under emphasizing the importance of buying diamonds correctly. There is also tremendous skill involved in this, and if you do it wrong, no matter how good one is at selling, they will fail.

 

[distracts]

Can anyone recommend a reputable place to sell diamonds?

If I bought and sold the same diamond today, would it be likely that I would lose money on the sale?

If you were going to buy diamonds, what process would you take? Would you buy a Rapaport Diamond Report and look for sellers that sell certified diamonds as close to these prices as possible?

If you need to ask these questions, you should NOT be thinking about buying and selling diamonds for profit. Just buy stocks or bonds.

But to answer some of them... if you bought and sold the same diamond today, you WOULD lose money on the sale. In order to sell that diamond asap, you can't wait for a consumer to come around, so you'd be shopping it to jewelers. You'd lose at least 30%, probably more. If you sold it for 50% of what you bought it for, you'd be doing well. If no jewelers wanted it, you'd have to take it to a pawn shop, and they seem to offer about 30% of the retail price from what I've seen.

For a reputable place to sell diamonds... well, there's not really a place set up that is reputable for random people who no one knows to sell diamonds. There are places like ebay and craigslist. Alternatively, if you want a more reputable place, you can consign at a jewelers, but they'll take a big consignment fee, and you have to wait for a consumer who wants that particular diamond to come through that particular jeweler and pay the price you want. As a rule, the lower the price, the faster the sale. So if you want to make back your money, your sale will likely take longer, and since you can't offer the trade-in/upgrade/warranty policies that the jeweler can on his own stones, your stone is selling at a disadvantage. The only way to get around all that is to become a jeweler yourself and buy/sell for a living so you can offer the same incentives/assurances that are why people buy through jewelers rather than individuals. But that is starting a business, not merely investing.

 

[denverappraiser]

I agree with much of what Neil and David wrote... But, I think Neil is under emphasizing the importance of buying diamonds correctly. There is also tremendous skill involved in this, and if you do it wrong, no matter how good one is at selling, they will fail.

To be sure, there's a competitive marketplace amongst people selling to jewelers and it pays off for jewelers to shop wisely, manage their investment dollars carefully and to choose their business partners well but it's amazing how much easier this process becomes if they're are moving product. Good sellers want to partner with good jewelers, and good jewelers are the ones who move a lot of merchandise quickly, pay their bills, and don't get a lot of returns. Most jewelers aren't doing especially well these days and are making their money doing things other than diamond sales but I still maintain that the problem with diamonds is primarily on the selling end. How to do it successfully is different for each dealer and it goes way beyond what can be written here. I dare say, the people who are good at it have some important talents that I lack (hence the reason I don't have Tom Shane's or Laurence Graff's job). I'm pointing all of this out not as a primer for jewelers as much as a commentary that it's NOT easy money. A lot of people dabble at it and remarkably few would objectively be called successful. 'Investors' do even worse. They do have an advantage in that they can usually be a lot more patient in waiting for sales to come along but I think that advantage is more than offset by the disadvantages of amateur status.

By the way, I'm actually a fan of commissions on the sales end. Naturally it's important to keep it in check but professional sales talent can be very helpful for private sellers. Often they can get higher prices even net of the commission to justify the deal and that doesn't even count the fact that most people don't really want to turn themselves into diamond dealers. They've got better things to do with their time.

 

[Rockdiamond]

This is kind of like an "which came first, the chicken or the egg ?" discussion- We all agree that investing in diamonds for consumers is a lose lose proposition, if it's investing for monetary profit only.. But as it relates to the OP's original question, I would have to say that the skill in diamond buying is the primary way to increase the spread and profit margin.
The largest Internet virtual diamond sites are not diamond "buyers". They may be good at selling diamonds, but they leave the buying to the consumers. Using the example that you gave , Graff – or my former employer, Harry Winston, it is the skill in purchasing that allows these companies to sell for much higher prices- increasing the "spread"
Before one can be one of the best sellers when it comes to the "spread", they need to be one of the best buyers.
And as we all agree, consumers will not qualify for either of these positions she if comes to "spread" -or buying diamonds for re-sale

 

[delight]

I think the common consensus here is that diamonds for investment is a poor idea. Unless you want to go into Christie or Sothebys to bid for rare goods, the general consumer purchase for smaller diamonds isn't going to be easy given the lack of industrial knowledge.

Spending the money on stocks or other options is a way better idea than using diamonds.

 

[denverappraiser]

Unless you want to go into Christie or Sothebys to bid for rare goods, the general consumer purchase for smaller diamonds isn't going to be easy given the lack of industrial knowledge.

The 'spread' for items purchased at Sotheby's, meaning the amount lost if you buy an item one day and sell it the next to a buyer who pays the same amount as you is 20-40% plus a bunch of fees for sales under $100,000. It varies with location. +There's also a fee if your item doesn't make your reserve price and therefore doesn't sell at all. Even for items costing over $1,000,000 it's 14%.

Here's their fee structure for those who are interested.
http://www.thefreelibrary.com/Sotheby's+Announces+New+Commission+Structure.-a061399769