Price Margins for Online Vendors?!?!

[BristowVA]

I've read that price margins for diamonds from online vendors, while less than B&M, run in the 15-20% markup range.

In searching for a cushion, I've contacted a few places that had stones listed on pricescope. As I've learned most of these vendors have virtual inventories and a source the stones from many of the same cutters.

So what type of actual markup are we talking? For example, I found a stone on Pricescope listed for $20k with one vendor, $19k with another and $18.5 with another.

I then called one vendor and told him about the $18.5k price. He said that was lower than his cost and if he could buy it for that much he would buy it himself. I then spoke with another vendor who offered me the stone at $18k flat. I called back the previous vendor who was my first contact and he said the second vendor couldn't possibly be selling it for that much because he knows they don't even get stones from this particular owner? He said the most he's discounted on this type of stone would be $500 from the list and that is a great bargain.

So really what type of margains are we working with here? If its a 20% markup - they're making $4k on a stone. This seems suspicious. As I found the actual stone on pricescope, looked at the GIA cert and the picture and then told that company that had it listed I wanted it. The rep at the company didn't do anything except say "yea, that looks like a good stone". Which is what he has said for all the stones I've asked about. Basically, they're just acting as a middle man between the seller and me?

So, I guess the question is. What kind of markups are we really dealing with here for pricescope vendors with virtual inventory? How can one claim that the rate one vendor offered a stone to me for is less than his cost?

 

[RockHugger]

He doesn't want to sell it to you at that price. So he's saying he's losing money if he does. Some vendors can get special pricing because they order many stones, so they pay less per stone, or because they have a long term relationship with a manufacturer. But most stones have a set wholesale price within a slight range.

I'm not sure about virtual inventories as I only carry physical stock and have only worked with physical stock, but if you are direct ordering one stone I don't think there would be that dramatic of a price difference. That's what makes me think the first vendor just doesn't want to lower his price that much.

As for price margin, it could be between 50-20%. It all depends on a bunch of variables. I know B and M stores have a 200-400% margin. I worked in one and I couldn't believe the prices the owner purchased the stones for, and what he flipped them for.

 

[february2003bride]

Have you contaced Mark at Engagement Rings Direct? Many Pricescopers have gotten gorgeous cushions from him.

 

[denverappraiser]

So, I guess the question is. What kind of markups are we really dealing with here for pricescope vendors with virtual inventory? How can one claim that the rate one vendor offered a stone to me for is less than his cost?

The choices I see are:

a) He's lying. He doesn't want to sell at a discount and he doesn't want to reveal his cost so he's saying something comfortable to placate you.

b) He's buying from a different source than where the online vendor is getting it or he's allocating costs differently for things like shipping and insurance. There may be a middleman and his cost may very well be higher (or lower).

c) They aren't actually the same stone but rather different but similar stones that are coming from completely different sources.

d) The online guys can't actually deliver it at the price quoted. This can be caused by things as simple as typos in the data or if the stone was previously sold to someone else and the list hasn't been updated yet.

What his cost is doesn't really matter but if he's really paying more for it than you can buy it for at retail, he needs to have a heart to heart conversation with his supplier. That said, what matters is how much he's charging you, what he's adding to the deal to make it better to buy from him vs. his competitors, and if you're willing to pay the price for that added stuff. What stuff? Things like a convenient showroom, a cheerful sales staff, financing, return priviliges, fast delivery, good presentation, access to their designers, spiffy web design, etc. Different stores have different bundles of benefits and not everyone is looking for the same things. If he doesn't have what you want, or you don't like the price, walk away. If he does and you can live with the price, don't sweat his cost, that's between him and the IRS. It's YOUR cost that counts after all.

 

[TheDoctor]

I know B and M stores have a 200-400% margin. I worked in one and I couldn't believe the prices the owner purchased the stones for, and what he flipped them for.

Your shred of truth demands a better explanation.

As a blanket statement, what you said is pretty misleading, or lacks the necessary clarity to be understood by the OP.
A drop shipper can have a pretty nice lifestyle on a 10% commision from a large number of sales. A retailer needs to buy and hold huge inventories to be credible in the public eye. 400 percent on a few cheap cost items like crystal, beads, charms, etc, but buddy wasn't asking about those things, was he?
200 percent on semi-mounts sometimes, but what about loose diamonds? |Maybe your former boss had super-cheap merchandise with industrial-grade melee sold at x4, but that wasn't said.
In the sizes the OP is asking about, retailers seldom see margins beyond 25 percent...and they have rent/leasehold costs, they work shopping complex hours, and they need staff to handle all the savvy, smug internet purchasers who visit to trifle with them and then cut them up online when they get snarky.

To answer the OP's question, I'll suggest he should buy the stone from the vendor who offers the best stone at the best price...without the BS.

Clarity is as important in what you say, as in what you sell. You may quote me on that.
David Keeling

 

[antelope1]

The margins David cites sound like the margins I've heard from an appraiser in NoVA.

It's totally true that costs are higher with B&M merchants, which is why their margins are higher. They have to cover their costs and make a profit. Now, if you were to compare profit margins between B&M vs internet retailers (both dropshippers and those that hold inventory), I would bet you that the profit margin (after taking into account costs) are similar -- because someone who drop ships diamonds could easily set up a B&M store as well. They already have contacts in the trade, suppliers, staff, and just need a physical retail location. Similarly, a B&M merchant could set up an internet business (by hiring one good web developer / photographer) for the same reasons.

The skill set and the contacts are interchangeable between B&M and internet sellers, so the opportunity cost (total profit in this case) of being in one part of the industry vs the other are also probably similar.

Now, from a consumer's perspective, I'd buy online because even though the profit margin is similar, the retail markup is smaller, which means a better deal for me.

BristowVA, I'd find an internet merchant that I can trust, and go with them. For a cushion, most people recommend Jon @ GOG, Perry with Leon Mege, and Mark @ ERD. Since you have a pretty nice size budget, could you spend $500 of that on a day trip to NYC to meet with the merchants? I'd call ahead and make sure that they each have 3 diamonds of your specs in house when you come to visit.

 

[ChloeLe]

I actually have a question for people here. Usually you are advised to come to big store like Tiffany or so to check your color sensitiveness, your favorite shape etc but you won't buy from them. Then how do you feel when you left the store, do you feel like you really take advantage from them? Do you buy some small thing to actually pay them the fee that they would incur to serve you, pay the rent and the inventory so that you have real diamonds to look at before you buy online?

 

[antelope1]

I don't buy when I look, and I don't feel bad about it. The only way you can figure out what you like is by looking, and every store is trying to make a sale, so they provide you with "different" information. You MUST go to multiple stores to get something like a well-balanced perspective, and you can't buy something from every one of them, you'd go broke and the merchants know this -- if it's obvious that you're not buying that day, they may send you to the B sales associate or spend less time with you, but that's ok with me, I just want to see.

 

[puppylover10]

I didn't feel bad and never thought I should feel bad... I think in exchange for you browsing their diamonds, sales people get your time. My fiance and I sat with a Robin's Bro. sales person for over an hour listening to him talk about diamonds and how they offer a better package than online vendors. We only looked at diamonds for 15-20 minutes of that time. We were honest in saying that we were thinking of buying online and wanted to see the diamonds before doing so. We were able to see what range we wanted for our diamond. They got a chance to try to convince us to buy at their store. Pretty good deal for all involved I think.
I guess it could create a problem for shops if the staff is super busy and you are taking away their opportunity to speak to a customer that would be more likely to buy from them. But even just browsing at the mall, I've never gone into a store where all the sales associates were busy.
I did feel a little weird when I went to store that I never bought anything from and asked for my ring to be cleaned. But the guy there happily did it and didn't try to get us to buy or even look at anything. BUT we ended up browsing some wedding bands and after talking to the guy some, I felt he was really knowledge. So If I were to buy some jewelry at a B&M store, I would much more likely to go back to the store.

 

[Dancing Fire]

He doesn't want to sell it to you at that price. So he's saying he's losing money if he does. Some vendors can get special pricing because they order many stones, so they pay less per stone, or because they have a long term relationship with a manufacturer. But most stones have a set wholesale price within a slight range.

I'm not sure about virtual inventories as I only carry physical stock and have only worked with physical stock, but if you are direct ordering one stone I don't think there would be that dramatic of a price difference. That's what makes me think the first vendor just doesn't want to lower his price that much.

As for price margin, it could be between 50-20%. It all depends on a bunch of variables. I know B and M stores have a 200-400% margin. I worked in one and I couldn't believe the prices the owner purchased the stones for, and what he flipped them for.

not these days. how the heck can they sell a $10k stone for $20-$40K?...

 

[iota15]

No need to buy something (unless it's something you like). Visiting their B&M store where you otherwise would not, gives the store an opportunity to obtain your sale. Just because I probably won't buy my ering from them doesn't mean something else won't catch my eye.

A positive experience from a B&M can translate into the sale of a wedding band, a watch, a brooch or some Tiffany trinket. I never would have saw them if I didn't walk in. You're giving them an opportunity to wow you.

Plus, I'm sure plenty of guys have read stuff from PS and decided to go with a local vendor instead. There are tangible benefits to having a local jeweler afterall, but you pay the premium for them.

If you feel bad, take a long look at the other merchandise they have. If something catches your eye, perhaps a hint for an anniversary gift or a treat yourself moment is in order.

 

[RockHugger]

Walk into a sales or a jarred. They sell a 1ct diamond for 8k. That is a 200-400% markup. I wasn't talking beads or cheap jewelry. I was talking diamonds.

I watched an owner purchase a lot of 4 1ct diamonds for $4500 from a dealer. He sold 2 of them within a day for 6500 each. I also know his expenses were 500/day. Over 400%. Happened all the time in the couple stores I worked in.

As someone who knows what diamonds wholesale for, I can say without a doubt, b and m stores have a huge markup.

Now this is bm stores, not Internet sales.

 

[Dancing Fire]

Walk into a sales or a jarred. They sell a 1ct diamond for 8k. That is a 200-400% markup. I wasn't talking beads or cheap jewelry. I was talking diamonds.

I watched an owner purchase a lot of 4 1ct diamonds for $4500 from a dealer. He sold 2 of them within a day for 6500 each. I also know his expenses were 500/day. Over 400%. Happened all the time in the couple stores I worked in.

As someone who knows what diamonds wholesale for, I can say without a doubt, b and m stores have a huge markup.

Now this is bm stores, not Internet sales.

$1125 per stone??.. what kind of garbage was that??...

 

[RockHugger]

I remember they were SI but a little yellow. Maybe k-m. Not too bad.
Notas nice as a lot of the diamonds I see people buy from ps vendors :p. But I'm taking about the huge markup not so much the quality.

 

[iota15]

I don't think the dealer's margins are really you concern though. In the end, are you willing to pay what they are offering? No vendor/dealer/middle man/retailer is going to be willing to take a loss for you outside of some very limited, extenuating circumstances.

They provide some type of service, even if it's just coordinating, maintaining their connections with the suppliers and shipping the stone to you. They deserve to make some money for their efforts.

Feel free to bargain with them as much as you want. One dealer has obviously said no to you; it's just not worth it to them. Regardless of what he told you, effectively he understood you were trying to get a better price by pitting various vendor's willingness to take a lower margin (or their ability to cut costs/keep expenses low). I think he just decided not to play that game with you.

 

[Rockdiamond]

Rockhugger- all due respect, but your statements are a bit misleading.
As DF asked- what kind of 1ct diamonds can we, a dealer, buy for $1125?

We're talking drek- I mean really bad stuff.
It's going to be a dingy color and incredibly imperfect. Nothing like a K SI1.
25 years ago, maybe a dealer could buy decent looking carat stones for $1125, but not in recent memory.
Maybe the stones you saw were Yehuda treated stones- that would be the only possible way to get anything that even resembles a K-M SI for that kind of money- and even those are going for more today.

Zales and Jared may indeed have a higher margin structure than both independent jewelers, certainly internet sellers.
But it looks like there may not be a Zales for much longer.
For sure there are buyers who may be drawn in to buying horrible looking 1ct stones for $6000- but they are very few and far between- especially nowadays.
If we're talking about lower priced items- say below $1000- there's a possibility of both much higher margins, and more buyers who may lack the savvy to notice really junky stuff.
But today, most buyers that do have the $6k are going to be far more likely to find a place like this- or have the wherewithal to realize what a better stone looks like.

 

[RockHugger]

Oh I'm sorry, I misunderstood DF's question.

I don't deal a lot in diamonds, and usually will only order a couple at a time or will buy when I have a demand for it. Like I said, I am going from personal experience working in shops, not my own business. I do remember looking through owners diamonds because I typed up / photographed the appraisals for them. I don't remember seeing any dingy diamonds, and this was about 4 years ago.

Prices of diamonds and margins also vary based on location. Some dealers need 40% to pay the mortgage, and some only need 10%.

Everyone has to make a profit of course, or else no one would want to sell 'em. As much fun as it is looking at sparkles all day, fun doesn't pay the bills .