Price of diamonds???

[denverappraiser]

Paul,

Yours is not a restriction free policy any more than Jim’s, Garry’s or Costco’s. There is always fine print and it’s entirely reasonable to look at it. That's not a criticism of you, your dealers, Jim or anyone else. You've conceded the point that theres a risk here and now we're talking about how likely the risks are, how severe they are, and how to best mitigate them. Different people approach this differently and there is not a right answer that applies in all situations. Psychic powers would be very helpful in this sutation.

 

[Klokke]

Tiffany’s policy is no refunds, period. Buy something there and it’s yours as soon as you walk out the door. If you want to sell it later, that’s your problem. I’m sure that tweaks a few of their customers but, for the most part, people are ok with it. They shop there (or not) for other reasons.

This is not really correct. Tiffany has the typical trade-up/upgrade policy. They give you full credit for what you paid and you must buy something priced at least double the price of the trade-in Tiffany item.

While it's not the best policy, it's a pretty standard one and it means you don't necessarily have to sell it on your own. And it one that is advantageous if prices drop.

 

[Dancing Fire]

James Allen Schultz|1311693317|2977064" data-source="" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch">

If prices fall, then you could essentially upgrade your diamond without having to pay much out of pocket, if anything at all.

And if that happens, vendors offering restriction-free upgrade policies could face bankruptcy.

We require a 2x spend for a reason.

Jim...now look at thee other side of the coin.
we as consumers only receive credit for what we paid for the stone. our diamonds NEVER go up in price...

 

[Garry H (Cut Nut)]

Gentlemen may I throw a hypothetical in here (without being mauled).

Imagine there is a cut that has been around for a long time, and all of a sudden this cut is elevated to a much better result - say the yield is improved and the cut quality is nearly 2x as good.
A client brings you an older stone and now this stone is unsaleable and the best result is to recut it and loose a lot of weight.

Say this means that more than half the stones you sold before come back within a year because the press take up this story of an amazing advance in diamond appearance.
(Please follow the hypothisis and don't just say it is not likely to ever happen).

How would the vendors with different policies react?

 

[that_someone_special]

James Allen Schultz|1311693317|2977064" data-source="" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch">

If prices fall, then you could essentially upgrade your diamond without having to pay much out of pocket, if anything at all.

And if that happens, vendors offering restriction-free upgrade policies could face bankruptcy.

We require a 2x spend for a reason.

I always thought those policies were dumb.. But this actually makes sense now!

 

[that_someone_special]

Tiffany’s policy is no refunds, period. Buy something there and it’s yours as soon as you walk out the door. If you want to sell it later, that’s your problem. I’m sure that tweaks a few of their customers but, for the most part, people are ok with it. They shop there (or not) for other reasons.

This is not really correct. Tiffany has the typical trade-up/upgrade policy. They give you full credit for what you paid and you must buy something priced at least double the price of the trade-in Tiffany item.

While it's not the best policy, it's a pretty standard one and it means you don't necessarily have to sell it on your own. And it one that is advantageous if prices drop.

Before we got engaged we looked at Tiffany. In 2009 they said that you could upgrade- sure but you had to spend double the amount of money and within a year or so of having the ring. Lame.

 

[YoungPapa]

Gentlemen may I throw a hypothetical in here (without being mauled).

Imagine there is a cut that has been around for a long time, and all of a sudden this cut is elevated to a much better result - say the yield is improved and the cut quality is nearly 2x as good.
A client brings you an older stone and now this stone is unsaleable and the best result is to recut it and loose a lot of weight.

Say this means that more than half the stones you sold before come back within a year because the press take up this story of an amazing advance in diamond appearance.
(Please follow the hypothisis and don't just say it is not likely to ever happen).

How would the vendors with different policies react?

Garry,

I would be ecstatic, as Paul would be bankrupt and I would take all of his customers.

(Paul - I'm sure you understand this was a joke, so I hope you're not personally offended. If you're professionally offended, however, I guess that is something I'll have to hear about shortly.)

 

[Paul-Antwerp]

James Allen Schultz|1311907848|2979471" data-source="" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch">

Gentlemen may I throw a hypothetical in here (without being mauled).

Imagine there is a cut that has been around for a long time, and all of a sudden this cut is elevated to a much better result - say the yield is improved and the cut quality is nearly 2x as good.
A client brings you an older stone and now this stone is unsaleable and the best result is to recut it and loose a lot of weight.

Say this means that more than half the stones you sold before come back within a year because the press take up this story of an amazing advance in diamond appearance.
(Please follow the hypothisis and don't just say it is not likely to ever happen).

How would the vendors with different policies react?

Garry,

I would be ecstatic, as Paul would be bankrupt and I would take all of his customers.

(Paul - I'm sure you understand this was a joke, so I hope you're not personally offended. If you're professionally offended, however, I guess that is something I'll have to hear about shortly.)

Hi Garry,

I understand what you are trying to do.

You are fully aware that I voluntarily stopped contributing to PS three months ago, after I was informed that my educational and informational efforts here are not appreciated. Now that I have returned to correct misinformation, you are trying to keep me in the water.

I am sorry, my friend, but as it stands, I will limit my presence to this thread. Also, I am literally leaving on holiday in three hours from now, so I will not follow up in the next weeks.

Anyway, let me humour you in trying to follow you in your very unlikely hypothesis.

As it stands, we have a track-record of being ahead of the curve in evolutions (like stricter cut-grades because of advanced knowledge) and revolutions (like the introduction of cut-grading for fancy shapes).

In comparison, Jim, I would curb my enthusiasm, even if you are joking. You have a track-record of following evolutions years later, and even then. In a similarly joking way (bankruptcy is not funny), I would be in huge trouble faced with potentially hordes of ex-JA-customers that I am unable to supply.

All in all, your hypothesis has no relation to an upgrade-policy. Suppose that such events happen overnight with efficiency of cutting suddenly doubling AND performance also doubling, in essence an 4x-improvement. If this really catches on immediately at the consumer-level, the effect will be prices of rough diamonds simply going up 4x or more. The cutters thriving will be the ones flexible enough to adapt to the new reality.

Instead of being hypothetical however, let us be educational and informational and go back to the original topic: prices of polished diamonds have gone up a lot in the past 12 to 18 months and that movement is expected to continue in the near future. Even if we look at a much longer scope, all industry-analysts foresee prices of diamonds to remain strong in the next 10 to 15 years. Maybe, this long-term-evolution will translate into a huge increase now and in the next months, followed by steady pricing in the years to follow. In any case, one must scramble to make up disaster-scenarios leading to falling diamond-prices, and even then, one should know that even the huge financial crisis of 2008 only had limited negative effect on prices of polished diamonds.

Live long,

 

[Amys Bling]

Tiffany’s policy is no refunds, period. Buy something there and it’s yours as soon as you walk out the door. If you want to sell it later, that’s your problem. I’m sure that tweaks a few of their customers but, for the most part, people are ok with it. They shop there (or not) for other reasons.

This is not really correct. Tiffany has the typical trade-up/upgrade policy. They give you full credit for what you paid and you must buy something priced at least double the price of the trade-in Tiffany item.

While it's not the best policy, it's a pretty standard one and it means you don't necessarily have to sell it on your own. And it one that is advantageous if prices drop.

Before we got engaged we looked at Tiffany. In 2009 they said that you could upgrade- sure but you had to spend double the amount of money and within a year or so of having the ring. Lame.

I was also under the impression that there was a ONE time upgrade contingency in their policy. I think a Tiffany ERing owner stated that in a thread on PS. Could be wrong though.

 

[denverappraiser]

Tiffany’s policy is no refunds, period. Buy something there and it’s yours as soon as you walk out the door. If you want to sell it later, that’s your problem. I’m sure that tweaks a few of their customers but, for the most part, people are ok with it. They shop there (or not) for other reasons.

This is not really correct. Tiffany has the typical trade-up/upgrade policy. They give you full credit for what you paid and you must buy something priced at least double the price of the trade-in Tiffany item.

While it's not the best policy, it's a pretty standard one and it means you don't necessarily have to sell it on your own. And it one that is advantageous if prices drop.

Before we got engaged we looked at Tiffany. In 2009 they said that you could upgrade- sure but you had to spend double the amount of money and within a year or so of having the ring. Lame.

I was also under the impression that there was a ONE time upgrade contingency in their policy. I think a Tiffany ERing owner stated that in a thread on PS. Could be wrong though.

My primary source is from clients who have bought things from them and have had issues with this. As mentioned above, there may be rules that are a bit subtle and/or that have changed. I've never actually bought anything from them and I don't see the rules for the tradeup program listed on their website. I'ld love a link if someone else can find it. I"m happy to take Klokke's word for it that they offer a more-or-less standard 2x type of program but would specifically encourage any buyers who are interested in this to ask the sales staff specifically about the rules at the time of purchase if it's going to be important to you.

 

[TristanC]

From a variety of threads here about Tiffany policies, it seems there are guidelines, not printed rules and it pays to do your background checks before you go. Some claim that they hear different things from different stores, and even different sales representatives.

 

[denverappraiser]

Gentlemen may I throw a hypothetical in here (without being mauled).

Imagine there is a cut that has been around for a long time, and all of a sudden this cut is elevated to a much better result - say the yield is improved and the cut quality is nearly 2x as good.
A client brings you an older stone and now this stone is unsaleable and the best result is to recut it and loose a lot of weight.

Say this means that more than half the stones you sold before come back within a year because the press take up this story of an amazing advance in diamond appearance.
(Please follow the hypothisis and don't just say it is not likely to ever happen).

How would the vendors with different policies react?

OK, let’s make up some numbers and see how they play out:

Assume a 50% gross dealer margin.
1st time, year zero: Dealer cost $1000. Sold for $1500.
2nd time: Dealer cost for similar stone as it sits - $500. Now selling for 750 retail. Maybe more if you can fix it with a recut but that's a completelly different deal. This is about tradein programs, not the economics of recutting. It's 'worth' what it is, not what it might become.
New item being sold. Cost $2000. Selling for $3000 or cost $1000, sell for $1500 depending on which program we’re on.

Under the traditional 2x deal where tradein is based on the original selling price, the dealer will make $500 on the first deal. They’ll take into inventory a stone that would otherwise cost them $500 and they’ll break even in terms of real money on the second deal. Given that there are other costs, they’ll be losing a bit but not a ton. They may or may not have a cash flow problem depending on how other things are going. This would actually be the biggest worry because our hypothetical dealer is now investing their capital to fill up inventory with things that are obsolete. A little bit of this is ok, there are customers who buy obsolete things as well, but too much of it and you start to erode the overall sales picture because customers see your store as being full of crap and move on to your competitors.

With YOUR program, the tradein will be for $750 against a sale of $1500. You’ll make $250 on your taxes (less other costs) and will end up investing that and more in that same $500 stone. The same problems apply with regard to whether you actually want this thing in inventory. Depending on the cash flow and inventory issues, that still might be a bite, but it's not as bad.

With Costco, the refund will be $1000. They stuff it down the throat of their supplier who resells it to someone else for $500, maybe it’ll be Costco and maybe someone else. The supplier takes a hit for the $500. They write it off because Costco is a huge account and this is just part of the deal. Hopefully it doesn’t happen too much. They’ll make up for it with ‘profits’ from other clients, meaning higher prices. Too much of it and the supplier go bankrupt. Costco goes on happily.

If we use different margins, this all changes significantly. 100% markup causes both plans to makes a $1000 profit to the dealer. Everybody goes home happy except the customer who is paying big prices for the privilege of having a generous buyback program. A 10% markup is where the problem happens.

Plan A: $1000 cost, sell for $1100
Trade it for $1100 against something for $2200 (dealer cost $2000). Dealer gets the inventory.
That’s a dealer loss of $400 and they STILL have the problem of what to do with the old one.

On plan B, $1000 cost, sell for $1100.
Trade in for $550 against something selling for $1100 leaving the dealer with that pesky $500 piece of inventory.
That makes for s a $50 profit for the dealer and the same inventory problem. Not great but definitely better.

For Costco and their supplier, nothing changes. Costco goes away happy and there's a haircut for the supplier.

Note that for simplicity sake I've made several critical assumptions, including some that are clearly false in the above. One of the biggies is that the markup on the second stone is going to be the same as the markup on the first. This usually isn't the case. As prices get higher, the margin drops. That's just a market reality for dealers who want to actually make sales. 100% markup on cheap things is reasonable and easy; 25% on very expensive things is darned hard to get. In both examples, reducing the margin on the 'new' item makes the number worse.

 

[Dancing Fire]

Neil...i don't care how you do the math,but to credit customers based on 5 yrs ago purchased price is highway robbery!!. i mean, who wouldn't pay to re-purchase stones at 3-5 yrs ago prices?? ...

 

[denverappraiser]

Neil...i don't care how you do the math,but to credit customers based on 5 yrs ago purchased price is highway robbery!!. i mean, who wouldn't pay to re-purchase stones at 3-5 yrs ago prices?? ...

DF. I understand. Whether or not you want to sell at old prices will depend on what has happened to prices and how good you are at selling things, but these policies we’re discussing are a contractual restriction on the original dealer, not the buyer. As a consumer, you ALWAYS have the opportunity to sell elsewhere if it pays better. By all means you should check the alternatives before cashing in on any of these sorts of programs. The above examples are from the dealer’s perspective and involve a drastically declining market on the subject stone(s), an admittedly unlikely scenario. From the consumer side in this example, you are making out the best with exactly the program that’s using the original sales price as the trade in value. That is to say, the one that's using 3-5 year ago prices. I completely agree that this is an extremely unlikely situation and this is a largely academic discussion.

In general, prices have risen fairly steadily ever since the ‘diamond invention’ more than 100 years ago and I think this is decently likely to continue for quite a while. For consumers, the usual sting on tradeups is that they don’t pay as much attention to the pricing on the second ring because they feel trapped at the jeweler and have less negotiating power as a result. They sometimes also allow this to lead them into buying more the second time than what they really wanted in order to comply with the 2x payment restriction.

 

[risingsun]

With all due respect, Neil, most of our vendors do not require a 2x trade up. My local jeweler doesn't either. I think that the customer doesn't feel compelled to spend more than they wish with this policy. We are discussing, in these instances, top tier diamonds. I see it as a win-win situation. I can't expect the vendor to credit me with the current price, but I can and do expect to be credited with my purchase price on a stone that can go back into inventory. If a vendor sells a stone that he would rather not take back into inventory, he needs to be up front about it, and its trade up value, at time of purchase. Not to do so is misleading, at best. Just my .02, but I wouldn't purchase a diamond from a vendor that didn't stand behind it 100%.

 

[denverappraiser]

Risingsun,

I don't know the return policy on all of the PS favored dealers but I do know quite a few of them. The 2x rule is typical and it's usually only available on a limited selection of the goods they sell. Sometimes it's paired with a 'buyback' sort of offer where they'll pay you cash or credit you against a purchase that doesn't otherwise qualify but there's always a discount of 25% or so associated with this. If it's the right sorts of goods and under the right circumstances it's always negotiable but that'll be on a case by case basis. I can't think of ANY who will agree in advance to give you 100% of your cost with no meaningful restrictions ala the Costco policy above. Please correct me if I'm wrong. By the way, I"m not particularly endorsing Costco with this discussion although I do find them to be a fine outfit. They've got the best refund policy that I can recall seeing but there are other reasons people choose not to shop elsewhere.

I absolutely agree that ANY jeweler needs to be upfront about what they will and won't take back later. The rules, whatever they are, should be in writing and available at the time of sale.

 

[AN0NYM0US]

I don't think there has really been an increase in diamond prices but rather a decrease in the USD value.

Two years ago compared to my countries currency the USD was worth 40% more than today. Most vendors use the USD when selling diamonds, so logically they had to "raise" the USD price of diamonds.

Two years ago a $10,000USD would have cost me $13,500CAD, now a $10,000USD diamond costs me $9,500CAD with the exchange. I feel like I am getting a better deal now compared to summer 2009.

 

[CaprineSun]

good point.

But could it also be that the 10K diamond in 2009 was a 1.5-1.7ct diamond & now in 2011 more like a 1.1 to 1.2ct diamond?

 

[AN0NYM0US]

good point.

But could it also be that the 10K diamond in 2009 was a 1.5-1.7ct diamond & now in 2011 more like a 1.1 to 1.2ct diamond?

Which is exactly my point.

2009 = 1.5ct for $13,500CAD (9000/ct)
2011 = 1.1ct for $9,500CAD (8600/ct)

Same $10,000USD

Doesn't seem like much of an increase in $/ct to me.

 

[CaprineSun]

Oh I see.....

So does this mean the diamond prices aren't really increasing & the theory of international countries' booming economies along with shrinking supply & increase in demand ( as the main factor for the price increase) is not totally true?

I wonder... have the "true" diamond prices stayed the same, but it's really the US dollar that has declined in relation to that while the international booming economies have increased in relation. Thus, seeming like prices continue to sky-rocket for us (as the US economy continues to look bleak)--- while, on the other hand, appearing to remain the same or even lower for other stronger economies.

Essentially, their currency can hold their own against diamond values while the US currency can't? I'm just trying to figure this out a little bit.

Is the same happening for the metals-- causing the steep increases in setting prices as well?

 

[coati]

Hi folks. Just published our mid-year review of retail diamond prices. Rising Retail Diamond Prices - Mid-Year Review

Average retail diamond price increases for D-I color and VVS2-SI2 clarity from January through July 2011:

0 to 0.5 ct - 19%

0.5 to 1.0 ct - 26%

1.0 to 2.0 ct - 18%

2.0 to 3.0 ct - 16%

3.0 to 4.0 ct - 19%

4.0 to 99 ct - 22%

Linked in the blog are some current articles on rising diamond prices, and I also included Paul's thread from June 2010 titled Price increases in the diamond market. Thanks for your contribution, Paul.

 

[goodgal]

Reading this thread with great interest. So in Jan-July2011 if I had purchased a 1.5ct diamond then how much increase is expected in price buying for example by this January 2012?

 

[liarudd]

is there going to be another price increase in 2012