higher profit on smaller stones??

[Maxine]

Several retailers/diamond salespeople have told me that there is a higher markup on smaller stones....Is that generally true??? Just curious........If it is true, WHY????

 

[denverappraiser]

Maxine,

Yes, in general this is true. It isn’t limited to diamonds either. For merchants to make a living, they need to make every sale worth their effort. A 10% markup on a $10,000 item produces enough money that it is worth working pretty hard to get the sale. A 10% markup on a $10 sale is barely worth the cost of the paper invoice and if it takes more than a few minutes of an employees time it actually becomes a money loss. The result is that less expensive things pretty much always involve a higher markup than higher priced things. It’s also the nature of customers that they tend to be far more price sensitive on more costly items. Few people object to the price of watch batteries, for example, despite the fact that they have a huge percentage markup. It’s still only an $8 sale.

Neil Beaty
GG(GIA) ISA NAJA
Independent Appraisals in Denver

 

[niceice]

Higher profit does not necessarily equate to higher profits on the part of the vendor. It takes just as much time, if not more, to properly evaluate a quarter carat diamond as it does to evaluate a one carat diamond. If time is money, then the vendor is likely to be losing time handling the smaller stones. In our case, we handle diamonds smaller than one carat primarily as a courtesy of sorts, diamonds below a carat are essentially a lost leader for us. This is true for a large portion of the industry, several of our cutters have actually stopped producing diamonds smaller than one carat over the past few months simply because the production cost is not a profitable portion of their business and given the high cost of rough and the cutting process they are electing to let that portion of their business fall by the way side. Very few of the diamonds we see in smaller sizes are meeting our selection criteria at this time which is why our inventory of smaller diamonds is dwindling on a daily basis while our one carat and higher inventory continues to fluorish... This is not to say that we will not continue to service the market for diamonds smaller than a carat, but rather serves to explain why higher profits do not necessarily equate to higher profits and why there are fewer diamonds in the >1.00 carat range to choose from in what we consider to be well cut goods.

 

[Garry H (Cut Nut)]

In my business we grade and bar code every diamond from .10ct up and group all below and from 1/2 a point to .09ct in a G+ SI+. All are selected with an ideal-scope - often with 70 -90% rejection rates.

When we have an order to make a 5 stone ring with 1ct total - the stones will all be ideal cut and all within one grade of the same clarity and color. Can we do that for cost plus 20% on diamonds that cost $150? No - it does not pay the wages.

 

[niceice]

Date: 3/17/2005 5:46:39 AM
Author: Garry H (Cut Nut)
In my business we grade and bar code every diamond from .10ct up and group all below and from 1/2 a point to .09ct in a G+ SI+. All are selected with an ideal-scope - often with 70 -90% rejection rates.

When we have an order to make a 5 stone ring with 1ct total - the stones will all be ideal cut and all within one grade of the same clarity and color. Can we do that for cost plus 20% on diamonds that cost $150? No - it does not pay the wages.

I hear you on that! But don''t those bar code stickers make it difficult to see the diamonds?

 

[Maxine]

An appraiser told me that a large part of the price of the setting which includes lots of small stones involves the labor costs. Did Wink say that those "little guys" are cut by machine? It seems like it would be really hard to cut such tiny RBs by hand.....

 

[Maxine]

(rest of my thought)....but if they''re cut by machine, wouldn''t they be cheaper????

 

[Garry H (Cut Nut)]

Here is an example of Human Machines in Vietnam from the IDEX magazine.
They specialize in smalls.

Machine cutting actually looses more weight from the rough as a rule - it is not suitable for all types of goods. but you get consistent sausages out the other end.

The Far East mindset replicates machine processes because these people often grow up with strict rules. Automatum''s is the way one guy i know describes the workers in his jewellery factory in China.

Western, Israeli and Indians are more want to use their creativity. They can get better yeilds, or better quality - what ever pleases their boss.

Australians just want to be relaxed and happy - they will work out a way to do as little work for as many beers and days off. There are no diamond factores in Australia.

 

[jelyjelo]

That''s funny but true, Garry

 

[Maxine]

I wonder where the best place to buy them would be.........

 

[Garry H (Cut Nut)]

They would not sell them in Vietnam.
When i am in Surat India - the manufacturers do not know what the prices are.
making is maikng, selling is selling.
Buy where you are protected by consumer laws

 

[valeria101]

Date: 3/17/2005 9:36:24 PM
Author: Maxine
I wonder where the best place to buy them would be.........

The US

(btw. how do you establish the nationality of a website like this though ?)

The more diamonds sell in a place, the better. With just a few selling in each shop per year in this town, prices are anybody''s guess. The same jeweler can (and does) markup the merchandise based on how each customer looks. No surprise there - allot of other goods come priced the same way.

 

[valeria101]

Date: 3/16/2005 10:51:38 PM
Author: denverappraiser

Yes, in general this is true. It isn’t limited to diamonds either. For merchants to make a living, they need to make every sale worth their effort.

... sure. This "bigger is better" argument certainly rings true from the point of view of a relatively small volume operation. But the same argument does not explain (to my understanding) why overall it makes sawing the rough to produce several smaller diamonds instead of a large one (relating to a very dated event of technical revolution revolution). At some point along the production chain, smaller is better...

I am not sure the two pieces of info actually conflict. This is just a sloppy question