Good luck - but i expect your elite lifestyle might endDate: 2/11/2007 11:56:56 PM
Author: elliette
A diamond could be an investment if it were purchased on a secondary market for the beat-up ''dumping'' price and then re-sold to a broker for a profit.
My 2 cents worth.
No-one needs to "dump" Diamonds that are worth investing in!!!Date: 2/11/2007 11:56:56 PM
Author: elliette
A diamond could be an investment if it were purchased on a secondary market for the beat-up ''dumping'' price and then re-sold to a broker for a profit.
My 2 cents worth.
Date: 2/11/2007 11:56:56 PM
Author: elliette
A diamond could be an investment if it were purchased on a secondary market for the beat-up ''dumping'' price and then re-sold to a broker for a profit.
My 2 cents worth.
There is money to be made by trading in secondhand diamonds and jewelry. Diamond dealers, pawn brokers and others do it all the time. There’s also money in used cars and even used suits. In all cases it’s necessary to both buy right and to be able to sell right. Buying diamonds from the public in venues like garage sales, flea markets and smoke filled bars can produce some terrific deals for those who are diligent, lucky or both. Deaths, divorces, robberies and other things all tend to produce motivated and possibly uneducated sellers who may be willing to sell for less than they might be able to get if they sold in a more sensible fashion (for example, if they sold the same way you plan to sell).
2) You need to recognize a good deal. Spotting a VVS diamond that’s being sold at a secondhand shop for SI prices in 5 seconds or less using nothing but a loupe is a remarkable skill, as is spotting the dimantoid garnets in the $1/each bin at the garage sale. People who are good at this can occasionally find some bargains. People who THINK they are good at this can get skinned.
The full original price trade-up is a very important consideration if one has hopes and dreams of a larger, finer diamond down the road. The example shows the value of such a trade-up privilege compared to the cold turkey approach of selling the old stone and paying the going price for a new one. A large loss can be prevented with a good trade-up policy in place.
If one "had " to invest in anything, even diamonds or colored gems, one should look for those with the best liquidity forecast and the highest potential for popularity. Only a gem or diamond dealer must invest in his/her inventory in order to do more business. If anyone feels they must buy gems as an investment, then it is good advice to buy those at the very best end of the market. The most rare, the most fine, the most in demand all will outperform the low to average stones of the same varieties which generally flood all the markets all the time. The finest gems may appreciate the fastest, but they may be among the most difficult to sell. Very few people really want to pay for the very best. They want a Rolls Royce, but only have money for a nice Chevy. Dealers tend to believe and to recommend what they own as "investments". To them, these things are an investment. To non-dealers these gems may be someone else's investment, but it is difficult to place non-dealers into the same constraints as dealers work in. I sure would love fine tourmaline and super sapphire compared to gem rhodochrosite or gem moonstone as an "investment", but knowing what I know, I prefer other investment strategies altogether.
Certain dealers do extremely well with low end goods and would have a terrible time selling the expensive items. It depends entirely on their own market niche. Walmart has become the biggest jeweler in America selling items that most people here wouldn’t touch. Buying cheap goods cheaply is a superb business decision for some and a terrible mistake for others. There is no simple formula, even for those in the business.
If prices go up it’s a no lose deal, as long as you’re reasonably good at cash flow management and as long as you only offer the program on things that you can actually resell. That’s why dealers will only offer trade-in on things that they specialize in. They’re investing in inventory at old prices but they still need to get the right inventory after all. Even at no inflation with a 100% trade-in offer, they are effectively borrowing money from their customers at 0% interest and they still get to sell the mounting, labor, matching earrings and the like.
What if prices go down? Let’s assume they go down a survivable amount, say 25%. In the same scenario, that same customer trades in the same stone only now instead of selling it for $7500 to the next customer, you can only get $4500 (25% less than you got the first time). You’re still making a profit on the deal but that’s a bite to be sure since the rent and payroll probably haven’t dropped. Thats bad news, but the real bath you’re taking on the rest of your inventory - that stone in the showcase that you paid $5k for and now must sell for $4500 because the market has dropped.
What if prices go way down? The market crashes or people decide to stop buying diamonds. It’s simple - you close the doors and go get a real job. This is the same thing that happens to every merchant that finds themselves offering things the people no longer want to buy. It’s the problem faced by icemen and blacksmiths everywhere. There is no FDIC insurance and the customers find that they can’t trade in at your store because your store is history.
Even at 100% trade in, you can survive a price drop, it’s just more difficult. With my scenario above I used an 80% tradein and you make $1800 on the first deal and $5000 on the 2nd & 3rd using a 20% markup. If you offered a 100% tradein on the same deal where prices drop 25%, you are still making the $1800 on the first deal but only $500 on the others. This may not be enough to pay the rent, but it’s not a total disaster either, as long as there’s not a pattern of it. Changing the markup, of course, also has an effect. The protection for the jeweler mostly comes in the requirement that the customer buys something that’s more expensive the second time, which allows a markup at the then prevailing prices as well as the fact that 10-20% of each of the deals isn’t actually part of the program in the form of mountings, setting labor, appraisal fees, giftwrapping, etc. It’s also worth noting that most stones sold with a trade in offer are never actually traded in. Presumably this is being offered because it increases the dealers sales, and consequently profits in the first place.
I’m sure it varies from store to store and it will depend somewhat on the offer but when I was involved in retail we offered an 80% trade in credit towards anything in the store that was at least twice the price of the trade-in credit. Way less than 10% of the customers ever took us up on it. There are several retailers that participate here who have variations on this sort of program in place and who may be willing to share their experiences with you but it wouldn’t surprise me if they counted this sort of detail as a proprietary secret.
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