Price Increase in 266 RBCD Categories Last Night

[niceice]

Well, prices went up again last night according to the Rapaport. They published a price increase for 266 categories of round brilliant cut diamonds starting at the 1.00 carat mark and passing through the 4.99 carat mark. We seem to be seeing these every other week or so now, looks like the market is returning to "normal" in terms of the frequency of these updates, it was pretty quiet for awhile after 9/11. Interestingly enough, Rap is not responding / publishing increases to the heights that the DTC and it's competitors are reporting price increases, but the cutters are offering siginificantly reduced discounts to the dealers who we've talked to... In other words, we're all paying more for each stone on a dealer level in the form of reduced discounts off of Rap than we were before the DTC, et al, increased prices, regardless of what Rap is posting in the form of increases so consumers can expect dealer discounts off of Rap to decrease significantly. It looks like the days when we were all selling "in back of Rap" may be coming to an end. It's really all relative however, traditional B&M retailers buy diamonds from the same sources that we all do, so their prices will increase accordingly and the internet will still be the most competitive place to buy a diamond and (in most cases) the best place to buy a diamond in terms of disclosure and education.

 

[Nicrez]

No offense, but I have noted that the Diamond industry likes to follow RAP prices, but isn't it more of a guideline for the industry than a driver?

And how does Rappaport KNOW the prices have gone up so quickly? Isn't is a study of the averages of prices, wouldn't the increases then be outdated by the time they are published, if the industry is really moving that fast?

What is the role of RAP sheets in the market? If they are not for consumers to use, then why are they always quoted when considering pricing. Sorry all this has always confused me, and never really been explained to me where I understand it really...

Thanks for the post Robin and Todd!

 

[Rank Amateur]

I think the internet undercutting margin will continue to outweigh the price increases. It's all still good for the consumer.

 

[niceice]

----------------
On 4/23/2004 11:36:56 AM Nicrez wrote:

No offense, but I have noted that the Diamond industry likes to follow RAP prices, but isn't it more of a guideline for the industry than a driver?----------------

No offense taken, we don't publish it.

As much as we would all like to ignore the Rapaport, it is relied on heavily by the cutters and ourselves as a guideline for buying stones... There is also "The Guide" which might successfully be argued as being more relevant, but it is less used nonetheless. When we buy diamonds on a dealer level, everything is discussed as "off Rap" or "over Rap" in terms of discounts for volume.

----------------
On 4/23/2004 11:36:56 AM Nicrez wrote:

And how does Rappaport KNOW the prices have gone up so quickly? Isn't is a study of the averages of prices, wouldn't the increases then be outdated by the time they are published, if the industry is really moving that fast?----------------

Martin Rapaport has his fingers in a lot of places within the diamond industry, he not only publishes Rapaport Diamond Magazine, but also the Rapaport Diamond Report which is his interpretation of the current selling prices for diamonds. As we stated, while the Rap is not reflecting as rapid of an increase in the price of diamonds, the discounts off of Rap are rapidly decreasing and thus we are all paying higher prices for the diamonds that we purchase.

----------------
On 4/23/2004 11:36:56 AM Nicrez wrote:

What is the role of RAP sheets in the market? If they are not for consumers to use, then why are they always quoted when considering pricing. Sorry all this has always confused me, and never really been explained to me where I understand it really...----------------

It is kind of like the Kelly Blue Book for automobiles, it is essentially a market tool designed for use by the trade, however it is often referenced in discussions with the public and (incorrectly we believe) used as a selling tool with the public. We feel that the practice of selling diamonds to the public based upon the "off Rap" concept is irresponsible because of the simple fact that the majority of the public do not understand how the Rapaport works. There is a page on our web site that explains what we commonly refer to as The Rap Trap which Martin Rapaport actually called to telephone us to say that he thought it was quite good

 

[WinkHPD]

----------------
On 4/23/2004 11:36:56 AM Nicrez wrote:

No offense, but I have noted that the Diamond industry likes to follow RAP prices, but isn't it more of a guideline for the industry than a driver?

And how does Rappaport KNOW the prices have gone up so quickly? Isn't is a study of the averages of prices, wouldn't the increases then be outdated by the time they are published, if the industry is really moving that fast?

What is the role of RAP sheets in the market? If they are not for consumers to use, then why are they always quoted when considering pricing. Sorry all this has always confused me, and never really been explained to me where I understand it really...

Thanks for the post Robin and Todd!----------------

Wow, what a can of worms your questions can open. There is so much history here that a short answer can not suffice completely. I will try to answer some of your questions, but I am sure there are other experts here who can do it more completely.

Martin Rapaport started his sheet back in the late 70's I believe, during the "investment" craze that drove the price of a one carat D-IF with GIA papers to the unheard of price of $65,000 per carat BETWEEN DEALERS at the Diamond club in New York. Because this put so much information in the hands of consumers (Jewelers, the habit of putting this in the hand of the public had not then become as common place as it is now) Mr. Rapaport was largely hated by the diamond dealers of the day. He was, I believe, actually thrown out of the Diamond Dealers Club and had to sue for reinstatement. (I may be wrong about this, but it is what I have been told many times, I have never actually researched this to see if it is true) and he had his life and property threatened.

You may think that Jewelers hate it that you have access to the Rap sheet, and we do, but imagine how secretive the DDC was that they hated it that we jewelers should have access to this information.

Imagine, me, a small jeweler hidden in the sticks of Boise, Idaho, should now know what I might otherwise have had to travel to New York to research and hopefully learn in a year or two. No longer could I be approached by dozens of traveling salesmen wanting to offer me the "lowest possible" pricing on diamonds to get my account, and then sell me higher priced diamonds when I called to reorder. I could just look at "The Sheet" and know how good or how bad the deal was. Gasp! The audacity of it all!

Of course a solution to this was to inflate the pricing somewhat and it would take a period of another couple of years before we hicks in the sticks would figure out that these "High Cash Asking Prices" in New York were fictional and that we should be buying at a discount. Of course the discount varies depending on the cut. In tough times the discount is higher, in hot times, such as November and December the official price might not rise, but the discount was less.

Now most educated buyers from the public are aware of the fact that the price of a stone can vary by 50-60% from the highest quality cut costing say, $1000 and the worst cut costing as little as $400. Of course the $400 stone in my example will be excremental in its lack of beauty, but the difference between the $650 stone and the $1000 stone may be only marginally visible. The task of the jeweler is to be able to accurately translate and explain the differences to the ultimate client. Of course many of you have made this easy by only buying the $1000 H&A stones. (My apologies if this analogy doesn't work for you, but using numbers for an example works better for me than using percentages.)

All of that having been said. Yes, the Rap sheet is only a guide. DeBeers did in fact recently raise the pricing of rough, but it is only as it comes from the cutters that we see exactly how the price increase was applied, to which sizes and grades, etc. BUT, it is such a stong guide that many suppliers just quote prices to us as so many percentage points back. They do not even bother to finish the price with "of Rap".

Now some of you may have diligently learned that a one carat is x% back of Rap and then blighthly go into your search assuming that you can get the same price for a 1.5 or a .25ct stone. Oh, but were it only that simple. The discount to the trade for a .25ct is NOT the same as for a one carat. Try getting a one carat discount for a 1.95ct stone and you will normally be in for a dissapointment.

As for how does he know so quickly, heck, sometimes he tells the trade what the new pricing will be, and when you wake up in the morning, this it was written, thus it is. (That is probably a slight exageration, please do not beat me.) Idealy his guide should be only a guide, but in reality, especially outside of the major market areas it is a driver. It is our window into what is going on in the major trade centers, and it does affect the pricing that we pay and the pricing that we sell for.

I just bought a business of H&A cut stones this last night at a huge discount from Rap, 20% below what I normally pay for such stones. I will sell it at very good prices, but it will be at the new pricing that was announced this morning. Lucky me, one day later and I should have had to pay the new price. To me that definitely qualifies as driving!

Wink

 

[WinkHPD]

And as usual, if you write a long answer, someone will write a shorter better answer while you are doing it!

Wink

 

[Nicrez]

Thank you both R/T and Wink for your eloquent and insightful responses!

Well frankly, from what I gather, I'd be happy to come back in my next life as Martin Rappoport!

For a guide to become a driver, it must have been fairly accurate, and as you say helpful to those further geographically... But in the advent of the internet, would the need for a RAP sheet become less prevalent, as there are prices that vary and information can be gotten from anywhere almost instantly...

Example, cutters sell to jewelers and online dealers. Their prices may vary, also depending on volume moved and sold, the price can be dictated by such factors. Well if RAP offeres a stable pricing where the percentages over and under determine diamond prices sold, why are the numbers not closer to the ACTUAL prices paid?

Do jewlers and retailers TRULY ever pay RAP price or ABOVE RAP prices for these items? If so, WHY?! with the added markup for profit, that would make a stone almost ridiculously over RAP for a consumer, I can't imagine that these stones will sell. At least not on PriceScope!

)

So, why doesn't RAP drop to the numbers that are more closely reflected in the selling and buying of stones in the market BEFORE the end user, or are the prices inflated so as to indicate to the casually informed consumer that THESE higher prices are what a diamond SHOULD sell for, and behind the scenes they are really inflated and retailers are getting prices off RAP in the 40% and less...

Again, there is a difference in good cuts, but do H&A even go for RAP price? Even we paid below RAP from a B&M for a branded (2B rated cut) Radiant cut, which indicated to me RAP was just way off. We saw other 2B radiants and they are WELL below RAP #'s, so what gives?

 

[niceice]

----------------
On 4/23/2004 1:24:48 PM Nicrez wrote:


Do jewlers and retailers TRULY ever pay RAP price or ABOVE RAP prices for these items? If so, WHY?!----------------

Oh yea, we do. Diamonds that are "rare" in a "current market" often trade at Rap or slightly over on a Dealer level, something like a 1.40 carat, D, VS-1 with tight zero ideal cut proportions for instance. Demand drives the price, if a cutter is the only one with a diamond like that in a market where it is desireable, he can sell it for whatever the market will bear.

Hey, is that "Wink" the 8* Dealer? Good to see you buddy!

 

[Nicrez]

Fair enough. Thanks for all the responses. I didn't mean to hijack your thread!!!

Always full of questions, and sometimes I am just a pain!

But if these are these stones are the minority, why does this still keep the RAP prices so high?

 

[niceice]

----------------
On 4/23/2004 1:55:37 PM Nicrez wrote:


But if these are these stones are the minority, why does this still keep the RAP prices so high? ----------------

The Rap prices are Martin's interpretation of what the "average asking price" is for diamonds of that quality, BUT it is only a baseline. From that point, diamonds are sold under or over Rap based upon their individual characteristics and this is where the public can really get scorched if they don't understand the inner workings of the concept behind the report... A diamond with poor proportions might sell as much as 65% or more off of Rap on a dealer level while an ideal cut diamond will sell very close to Rap on a dealer level, a person not aware of this might happily pay -10% off of Rap for a poorly cut stone thinking they are "getting a deal" when in fact, they just got packed... At the same time, the customer is looking at an ideal cut diamond being offered by another dealer that is priced at Rap +/- a little bit and thinking that the dealer is trying to rip him / her off because the customer may be completely unaware of the concept of proportions and finish (polish and symmetry) and only shopping by carat weight, color and clarity.

Can you "hi-jack" a thread that is an open discussion? Oooh, do we get "property rights" here on Price Scope? Oh boy, oh boy, the Gold Rush is on, better watch out Leonid

 

[WinkHPD]

I pay over Rap, well over, for my EightStars and they sell. A Rolls costs more than a Yugo, and they sell too.

As for why not lower the pricing on the Rap sheet so the consumer knows every thing, well, if it aint broke, why fix it? You must remember that this was a compromise that Mr. Rapaport worked out with the DDC. Even though it is many years later there are still many people who wish "The Sheet" and every thing like it would disspear. That will never again happen, but it probably works very well the way it is. It is tough enough to make the 5 - 10% margins that we fight to make these days without you (the public) ever knowing exactly what our cost is and knocking it even lower. If we can not make something, you will have no where to buy.

There are currently huge battles going on in the back ground with some trying to restrict the sale of loose stones to internet vendors and others trying to loosen it up even more. Many of the middle men are being eliminated and others are finding new ways to do business. Many cutters now sell direct and make no attempt to hide it, some still try to sell to both the "retail" and the wholesale market. It will be interesting to watch what happens as a result of the sheet that Mr. Rapaport started so many years ago and the internet which made it instantly available to so many, along with so much other information.

The consumer is, for now at least, the clear cut winner. It is what happens in the future that will make this a fabulous period of time to look back on as all sorts of businesses make complete changes from one form to another. If we only knew what the changes will be and how to profit from them.

Wink

 

[WinkHPD]

Robin,

Yes, it is me. Nice to see you again too. I hope I don't get "spanked" for admitting publicly that there are battles going on in the back ground.

Wink

 

[diamondsbylauren]

Theoretically, the Rap sheet should reflect what the market is doing.


for example: Most dealers do pay prices below rap on most stones ( the exception being the branded diamonds)- .


In my opinion, the sheet goes up when it's clear the discounts are shrinking consistently.


It's not possible to be 100% "up to the minute" current because theoretically market forces drive the prices of the Rap sheet.




As far as stones selling above rap- try buying a H&A AGS0 1.45 G/SI1- it might actually cost a dealer more than rap.