Unsatisfied consumer demand in certain sizes, can this be fixed?

[Paul-Antwerp]

We had some recent discussions on the 4 C's, size and apparent size, and this is an attempt at a next step in the thought-process.

Links to the previous threads are:
https://www.pricescope.com/communit...ooks-like-a-0-95ct-diamond-acceptable.243685/
and
https://www.pricescope.com/community/threads/what-makes-a-diamond-valuable-the-4-cs-really.243729/

This thread starts with an assumption:

Most people educating consumers about diamond-prices will at some point in time highlight the attraction of searching a weight just below a 'magic weight'. For instance, 0.90 is far less expensive than 1.00
My assumption is that there is a lot of unsatisfied consumer demand in these sizes. And experience shows that whenever such sizes pop up, they generally are sold relatively fast, as if consumers are waiting for them to pop up. Thus, my assumption is that consumer demand in the ranges like 0.90-0.99, 1.35-4.49, 1.80-1.99 and even 0.80-0.89 is far higher than supply.

Next comes the tricky part: how should we approach satisfying this unsatisfied consumer demand?

What do you think? Am I right in assuming a level of unsatisfied demand, often with well-educated consumers, who end up frustrated?

If so, I have some ideas to try and fix this, but I am also looking forward to suggestions.

Live long,

 

[Karl_K]

It's the lower price per ct that is in demand for a stone that is visually similar in size.
As long as rough is sold by potential weight of the polished, I dont see an answer.
Lets face it you would go broke trying to fill the demand under the current system.

 

[Double E]

I think it's true that demand just below magic weight is high, and agree with Karl that the current pricing system is the main reason. Take myself as an example, I was looking for 0.85-0.89 but in vain after a certain period of time and finally set on a 0.93, which although is more expensive, is another sweet spot under 1ct.

If I couldn't find this 0.93, I might probably need to do something like compromise on colour to get bigger stone, and this obviously is not exactly what I desired. People are facing similar situations again and again, and would love to see solutions.

 

[oldminer]

I don't know the exact reality of relative costs for rough which would yield 1ct+ compared to rough that would yield <1ct. However, assuming you made CBI cut grade diamonds from both types of rough and sold the <1ct stones at twice the rate of 1ct+ ones while using a slightly lower profit margin on those under 1ct, you'd end up making more dollars on the <1ct business on an annual basis. The problem would be speed of production and working more and making less per stone. I don't personally see working at your level of skill just as if you were working for quantity as being equally satisfying or motivating. At your high level, you may need to capture the slightly higher margin at a lower rate of production per year. Let the secondary level of the cutting industry work harder and faster and you keep to the best quality possible.

Karl should design a 0.90ct-0.95ct stone that is the full spread of a 1ct+ CBI diamond and had reasonably equal light performance. It would not be identical in every respect. Let that get cut by mass producers for virtually no profit margin and watch them sell like crazy. You'd still be okay and live well. You need to do what you do best without becoming distracted by potential elsewhere that is more imaginary than real.

 

[sledge]

It's the lower price per ct that is in demand for a stone that is visually similar in size.
As long as rough is sold by potential weight of the polished, I dont see an answer.
Lets face it you would go broke trying to fill the demand under the current system.

Agree with @Karl_K.

I might add that because demand is greater than supply, there is an opportunity for suppliers to increase profit margins in these size ranges. Generally speaking as prices inflate then demand would equalize out.

For fun...using RareCarat....

• General Criteria: 54-57 table, 60-62 depth, 34-35 crown, 40.6-41 pavilion, thin-thick, AGS/GIA, none-faint fluor
• 1.00-1.01ct, G, VS2: $6,200 to $6,750. Will assume approx $6,500 per carat as average
• 0.90-0.99ct, G, VS2: Only 1 result with 0.90 carat weight. $4,750 / 0.90 = $5,278 per carat

Assuming this 0.90 carat isn't already carrying a little premium, there is about $1,250 of difference between the two stones. Seems like a retailer would see this, split the difference and sell the 0.90-0.99ct stones for about $5,900 per carat to fatten their pocket while still making it attractive enough to buyers looking for a bargain.

The trick is that at some point, the dollar savings have to be great enough to overcome the size mentality thing.

 

[krusty900]

Definetly hard to find and demand is there. I was going to purchase a wf expert selection g that popped up. .97 carat, around 5500, 6.4mm spread and it was gone before they got back to me with an second email regarding a question I had. Should have reserved it.

 

[LightBright]

Paul, I’m curious to hear your ideas which you mention in your post to resolve the demand/supply imbalance for these types of stones.

I was lucky enough to purchase a .95 carat E SI1 “unicorn” CBI earlier this year. It’s spectacular. I’d be curious to hear your ideas, as I’d love to buy more.

One thing you could do is offer price conscious consumers lower cost setting options so that it costs less to set a more expensive stone. Or offer an inexpensive starter setting to begin with before a more permanent setting, so the consumer can spread the costs out over time. I know this doesn’t address the extreme demand for sub carat stones though.

Good luck with a wonderful product!

 

[Dancing Fire]

If so, I have some ideas to try and fix this, but I am also looking forward to suggestions.
Live long,

Paul
I would like a 2.75ct G/H VS1 CBI for 2.5ct price.

 

[cflutist]

As an owner of five CBI diamonds I would like to read Paul's ideas about how to increase supply for these weights that educated PSers prefer. I snapped up the 2.79 F-VS1 CBI when I saw it because I had not seen too many with that weight, color, and clarity combo on the HPD inventory.

 

[krusty900]

D-G .95-.99 eye clean si1 here please

 

[Paul-Antwerp]

Agree with @Karl_K.

I might add that because demand is greater than supply, there is an opportunity for suppliers to increase profit margins in these size ranges. Generally speaking as prices inflate then demand would equalize out.

For fun...using RareCarat....

• General Criteria: 54-57 table, 60-62 depth, 34-35 crown, 40.6-41 pavilion, thin-thick, AGS/GIA, none-faint fluor
• 1.00-1.01ct, G, VS2: $6,200 to $6,750. Will assume approx $6,500 per carat as average
• 0.90-0.99ct, G, VS2: Only 1 result with 0.90 carat weight. $4,750 / 0.90 = $5,278 per carat

Assuming this 0.90 carat isn't already carrying a little premium, there is about $1,250 of difference between the two stones. Seems like a retailer would see this, split the difference and sell the 0.90-0.99ct stones for about $5,900 per carat to fatten their pocket while still making it attractive enough to buyers looking for a bargain.

The trick is that at some point, the dollar savings have to be great enough to overcome the size mentality thing.

I seem to see confirmation of there being unsatisfied consumer demand. But also some confusion, as some seem to relate this to CBI specifically. I would like to clarify that this thread is not CBI-specific, not even necessarily cut-quality-specific, thus rather general.

I am specifically quoting Sledge's reply, as it is in the line of my thinking: If there is unsatisfied consumer demand, price-increases in these areas can both decrease the demand as well as increase the production, leading at the end to an equilibrium. That is simple economic logic.

However, I fear that there are two tendencies in the industry which pose hurdles to this happening:

1. One is the industry's exaggerated reliance on the Rap-sheet. Rapaport dictates basic price-differences between various categories, and most cutters and wholesalers adapt that starting-position only in a very minimal way. I think that if we want supply and demand to be more in equilibrium, a big part of the industry will have to work more intelligently and freely with the Rap-sheet.

2. Retailers have the habit of working on a cost-plus basis, adding the same mark-up on all stones offered, regardless of them being in high or low demand. Retailers being closest to consumers have the intelligence to adapt their pricing and mark-ups somewhat to demand. If they manage to sell a 'rare' size at a slightly higher price, they can offer a premium to the wholesaler or cutter next time, making sure that these goods go to that retailer, and gradually giving the cutters more room for more production of these rare sizes. Exactly what Sledge is suggesting in his post.

Thinking further, on PS, if Garry's plans to include a metric for apparent size as a discerning feature come to fruition, consumers on PS will become even more educated to look at size and apparent size, and not only to carat weight, leading to increased demand for these rare sizes. I think that we can only welcome Garry's plans, as they are truly defending the interests of consumers.

In order for this to work though, retailers will need to reconsider their cost-plus-thinking and fixed markups and wholesalers and cutters will need to take the Rap-sheet with a lot more salt.

Live long,

 

[Karl_K]

The closer in price a .95 to a 1ct the less demand there will be for them.
Given the way diamonds are marketed and perceived many people would rather have a 1ct.
Raising the price of them will just dampen demand not fill it.

 

[Karl_K]

I live in an area where the most common erings are around .25ct with some .3 and .5 and larger than .5 being not hugely common.
A lot of the time 1ct is seen as an anniversary upgrade and a .95 would be seen by some as the SO being cheap.
Not that I agree but that is the way it the cookie crumbles.

 

[Paul-Antwerp]

The closer in price a .95 to a 1ct the less demand there will be for them.
Given the way diamonds are marketed and perceived many people would rather have a 1ct.
Raising the price of them will just dampen demand not fill it.

I think that you are misunderstanding, Karl.

If, for instance, the current price-difference is 20% and many consumers are in vain searching for the non-existing 0.95 Ct-stone, reducing the price-difference to 15%, possibly 10% will reduce the number of consumers searching for these, as well as increase the production. Somewhere, there will be equilibrium with no consumer searching in vain for non-existing stones.

On a PS-level, if Garry goes forward with his project of giving more information on perceived diameter as opposed to carat weight only, the demand for such sizes will increase at the PS-level. If we do not do anything about the current unsatisfied demand, the problem of unsatisfied demand will only increase.

By the way, how many friends, family and other observers know the actual carat weight of a diamond they see on somebody's finger? For sure, there are many thinking that what weighs 1Ct looks like 0.80Ct, while with other diamonds, they think it looks like 1.50 Ct while the actual weight is only 1.30.

Live long,

 

[Karl_K]

By the way, how many friends, family and other observers know the actual carat weight of a diamond they see on somebody's finger? For sure, there are many thinking that what weighs 1Ct looks like 0.80Ct, while with other diamonds, they think it looks like 1.50 Ct while the actual weight is only 1.30.

Live long,

When someone gets a new diamond that is larger than the average they will get asked how big is it.
Sometimes by complete strangers.
If everyone has a 1ct in ones circle then one could pull off a well cut .95 and not comment on it.
That works when the person wearing it is ok with it and even better selects it.

In the age of buying from lists I don't see higher priced under ct working on a macro market like the PS market just because of the competition of the lists and it will not work on the larger market.
If the larger market was just like the PS market it could work.

 

[Double E]

I think that you are misunderstanding, Karl.

If, for instance, the current price-difference is 20% and many consumers are in vain searching for the non-existing 0.95 Ct-stone, reducing the price-difference to 15%, possibly 10% will reduce the number of consumers searching for these, as well as increase the production. Somewhere, there will be equilibrium with no consumer searching in vain for non-existing stones.

On a PS-level, if Garry goes forward with his project of giving more information on perceived diameter as opposed to carat weight only, the demand for such sizes will increase at the PS-level. If we do not do anything about the current unsatisfied demand, the problem of unsatisfied demand will only increase.

By the way, how many friends, family and other observers know the actual carat weight of a diamond they see on somebody's finger? For sure, there are many thinking that what weighs 1Ct looks like 0.80Ct, while with other diamonds, they think it looks like 1.50 Ct while the actual weight is only 1.30.

Live long,

Depending on the exact price difference between the traditional "benchmark carat weight" and "just below benchmark weight", part of the demand shifts to diamonds with other 4C combo:
-similar to Karl mentioned, break the next benchmark, this may be due to the money saved not convincing some consumers to give up a particular weight or face up diameter
-remain at the "below benchmark" but lower in the other C while still being personally acceptable because originally targeted stones with a particular raised price are no longer what they desired. However, if general production of these "below benchmark" does increases, there is a high chance to be a good news for many since there will be a wider selection

I think Karl's point is that we are moving and distributing the demands but not having it there and filling it. Please correct me if I am wrong

 

[Paul-Antwerp]

Karl and Double E,

These are Garry's exact words in the other thread:

"
However the numbers of diamonds with smaller millimetre spreads that are below optimal 0.95ct that weigh 1.00ct plus is horrific."

What you see as a system that cannot be changed, churns out a lot of 1Ct-diamonds with horrific diameters, well below that of a 0.95Ct, priced a whole lot higher than the 0.95. One can find thousands of such 'diamonds' available for sale, while it is extremely hard to find a decent one in the 0.90-range. And the reactions to my OP show that there is indeed unsatisfied demand in the 0.90-range, or other ranges like 1.35-1.49 and 1.80-1.99.

Further good education of consumers will only lead to increased demand in these sizes. There is no use in educating consumers if it only leads to them not finding what they want. Thus, something will inevitably have to change in the supply-equation.

I do not think a few people asking whether that seemingly big diamond truly is a 1Ct, and their snobbish reaction if it is not, are going to block that change. I think the truly educated consumer will shrug seeing that reaction.

Live long,