Internet Price Comparison Technique

[cruzan]

I''m a newbie that finds this internet diamond buying game very interesting. After some research it seems dozens of sites pay $90 / month to the diamondse website to use the diamond search database tools. The diamond search engine website allows each vendor to markup diamonds by various percentages based on the 4 c''s and who knows what else.

So, many sites sell the same diamonds using the same search engine - but, with a different markup. So, who''s the cheapest? Try a simple test, search out a very specific diamond. It''s not too hard - specify something very limited such as size of something like 1.22 to 1.22, grade G, clarity VS2 on Pricescope''s search. With some browsing you can find the same diamond but at different prices. Look at the specs, if possible, the GIA report, to be certain it''s the same. So, there''s the key to identifying how much various sites markup the wholesale price.

Now, I haven''t tried it yet, but I expect you can take the GIA report number and search most diamond sites for the GIA number and expand the percent markup search a bit more. Heck, with some math and 3 or 4 different prices one could probably figure out how much the wholesale price actually is.

Lesson for me is, knowing the lowest margin gives some idea of how much room the vendor you choose can deal.

Personnally, I don''t want anything to do with the lowest price dealer. Being a computer pro I know how easy it is to set up a website, so, knowing that I could be a diamond seller makes me realize a lot of the sites aren''t backed by good diamond people. I''ll pay more for a company that has returns, maybe a real storefront, a trade-up policy, lots of good equipment to assess the diamond with, and the interest / knowledge to guide me. But, it helps to know how much more I''m paying. Comments?

 

[YoungPapa]

Cruzan,

Your analysis of the market is brilliant, but a bit like Columbus discovering America in 1970. A few others have beat you to the punch.

 

[oldminer]

Discovering the best price or even the actual cost of the diamond is of interest to many people, but it is only of medium importance to the overall transaction for a consumer. A consumer probably won't buy more than a few diamonds in a lifetime and getting the absolute bottom price won't be critical to their financial well-being status. Buying well from a reliable and honest source who provides the right mix of reasonable mark-up and all the rest of what makes such a big purchase a pleasant experience is the best course to follow.

Your time will be better spent in deciphering the nuances of what makes a diamond look its best. Once you arrive at the proper combination of cut, color, clarity, weight, shape and budget, you will have done a lot of decision making and learning already. Then, look for a vendor selling what you want. Interact with them a bit and see how they treat you. Do they care? Do they have warranties, examination periods, trade-up privileges, and other consumer features which may fit you better than their competitors? This is where they will differ beyond their mark-up levels.

 

[Todd Gray]

The diamond search engine provided on the Price Scope landing page makes it extremely easy to compare prices for diamonds which are offered by several different vendors - many of whom pretty much operate by way of a script which republishes the diamonds listed on the multiple listing service available to the trade by subscription. However an analysis of the diamonds republished in this way usually only reveals who is selling for the least amount of profit, it actually reveals very little about the diamond itself and a quick review of the diamonds listed will reveal that some of the diamonds listed are sub-standard to the likes of more experienced, more educated buyers who frequent the forum. This is where tools like the HCA and a careful review of the details on the diamond grading report, such as the type of inclusion, extent and location are extremely important!

An informed consumer realizes that not all SI-1 clarity diamonds, or any other clarity diamond, are the same within their designated clarity grade; and as a commodity, diamonds are priced according to their characteristics - beyond the obvious statement of cut, carat weight, color and clarity. An SI-1 clarity diamond where the clarity grade is due to a primary inclusion which is a substantial feather or cluster of feathers which may present a durability issue is likely to cost less than an SI-1 where the primary inclusions are small diamond crystals, as it should be. If you''re buying off of a list, it is up to the consumer to be able to determine why a diamond is priced as it is and determine whether a bargain is truly a bargain - here''s a clue, it''s the diamond business, diamonds are a commodity and everything is priced accordingly.

The next tier up the perpetual ladder is the dealer group which focuses more on quality than volume. Rather than merely republishing the listings from the multiple listing service, they focus more on quality and individual transactions... These dealers tend to insist on personally evaluating every diamond that they sell, they hand select diamonds for their inventory, they provide detailed diamond information pages and analysis and as you might imagine they can not be the least expensive dealers because of the time it takes to provide this level of service. In truth, there are really only quite a few internet diamond dealers who do business this way... It is not as profitable as drop shipping diamonds that are purchased off of a multiple listing, however I feel that it is a much more rewarding way to conduct business - unless your sole purpose for being in the diamond business is to make money, off of people who shop for diamonds primarily from the perspective of price - in my opinion, it''s a Lose / Lose for both parties, but perhaps they deserve each other... I feel that he dealer is trying to take advantage of the consumer by not providing any actual value in the scope of the transaction beyond providing a list of what is available; and the consumer is trying to buy a diamond for the least amount of profit possible without regard to the reasonable profit that is required to operate a business in a way which can actually sustain itself over time.

Regardless of what level of dealer you elect to purchase a diamond from, the reality is that the profit made by any of us is far from what it should be, if people realized how little profit is actually made by any of us on a single transaction I think they would be stunned. As a dealer, the trick is to balance volume, a lot of volume, with excellent representation of the diamonds being offered. As a consumer (and we''re all consumers) the idea is to purchase an excellent product for a fair price that may not be the lowest, but certainly not the highest. A careful review of the dealers and diamonds available via Price Scope enables consumers to purchase a truly well crafted diamond of excellent quality with just a little effort.

 

[denverappraiser]

Concentrating effort on minimizing dealer ‘profit’ is, in my opinion, academically interesting but generally a bad shopping strategy. A much better approach is to maximize ‘value’ being delivered by the dealer as a function of cost. As you point out, this will be different for each buyer and can include all manner of things ranging from hand holding by the sales people, tradeup programs, financing and all manner of other non-gemological attributes. Not everyone values the same things. Not surprisingly, the dealers with the most attractive prices tend not to be sparse on these other things. It’s also worth noting that an assumed cost-plus style of selling puts a great deal of reliance on the idea that the dealers cost is a valid benchmark for shopping purposes. This is not necessarily correct. It’s true enough that quite a few dealers do market exactly as you describe but, as a shopper, it may not be in your best interest to participate. I guess it depends on what you want. Defining success as finding an offer for the lowest possible price on a stone described with a particular set of specs and then sending them some money is path lined with pitfalls.

Your choice of that particular dataset as the bottom line for all, or even most, dealers is not correct. There are dozens, even hundreds, of individual dealers who make their data available to their sales agents and the sales folks put up a website to display it however they wish. There’s quite a bit of overlap in terms of sellers who are being represented by dozens of resellers but there are also dealers who restrict their agencies to 1 or 2. It’s not nearly as homogeneous as you are imagining where the data is all neatly available in one place ad the dealers are simply applying a margin across the board.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

 

[ATM]

Cruzan,

Your analysis of the market is brilliant, but a bit like Columbus discovering America in 1970. A few others have beat you to the punch.
Jim Schultz
www.JamesAllen.com



now thats funny..

 

[Rockdiamond]

I think it''s a perfectly valid conversation.
We should remember that although some people have read a lot of what''s written here- many have not.

Another aspect to this which is not necessarily obvious is that the dealers that Todd mentioned- those that actually buy diamonds to sell- have a far greater stake in the diamonds they buy. When a consumer buys a diamond off of one of these lists, and returns it, the cutter takes it back.
Since we actually own the diamonds, if we buy a bad one it''s our problem.


It also means that the lists that are circulated by major cutters contain the left overs- stones that were not purchased by dealers that do stock the goods.
Say a person is looking for an SI2.
It could be easy to assume most SI2''s are not eye clean if you used diamonds off these lists as your example.
But dealers that stock the goods can surely find SI2- even I1 graded diamonds that are eye clean- or have non detrimental imperfections.