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What Is The Markup On Diamonds?

What Is The Markup On Diamonds?

In the past 100 years, the popularity and prices of diamonds have skyrocketed. Today, diamonds are associated with luxury and elegance. Most people who want to show off their wealth and status wear expensive diamond jewelry.

Because of the high demand and the status symbol diamonds have become, the prices of diamonds are sometimes ridiculously high. Diamond sellers know what people won’t spare a penny for and use that knowledge to profit.

On top of the high price list are engagement rings. Every seller knows that most people want a big diamond ring to crown the relationship. In other words, they can place a higher markup on the product they know sells well regardless of the cost.

Moreover, famous retailers with an established and strong presence on the market can easily get away with the highest markup. That’s because, in this case, you’re paying for the brand rather than for the diamond jewelry.

If you have ever wondered what is the markup on diamonds, who controls the price of diamonds, and if jewelers make a considerable profit, this article is for you. We’ll cover everything about the diamond markup and touch upon the options you have when buying.

Who Controls The Price Of Diamonds?

Before diving into diamond markup, let’s talk about their price.

Around a century ago, diamonds were nothing more than sparkling rocks. Although it’s a bit exaggerated because diamonds were then as beautiful as they’re today, it’s a known fact that diamonds weren’t famous before 1800.

So, what brought us the sudden spike in price and popularity? The De Beers did.

They established a monopoly over diamonds and launched an ultra-successful marketing campaign in the 1880s. The phrase “A diamond is forever” comes from their campaign.

At one point, the De Beers controlled almost 90% of all diamonds worldwide. Today, they own only around 30% and share their top position with Rio Tinto and ALROSA.

These companies have a massive impact on the prices of diamonds. For example, the De Beers company invites potential sightholders to purchase their diamonds. The sightholders have two options, to accept or decline the offer.

Moreover, they also have to guarantee that neither they nor the ones they’ll be selling the diamonds to will go under the price. In other words, the price will only go up, and so will the markup.

Read More: Who Controls The Price Of Diamonds?

How And Who Determines The Markup Of Diamonds?

The markup of diamonds is the selling price reduced by its cost. In other words, it’s the profit a seller makes.

Diamond sellers are the ones who determine the markup regardless if we’re talking about retailers, wholesalers, or internet shops. The seller needs to cover their expenses and make a profit to keep the business going.

However, some sellers have an absurdly high markup. Usually, only small retailers make a reasonable markup that covers their expenses and helps them grow.

On the other hand, prominent retailers have extremely high markups simply because they can. Many people are ready to pay more for the brand, and these retailers know it.

Does The Markup On Diamonds Change?

The markup on diamonds fluctuates with their demand as well as the supply. Diamonds that are extremely rare but not famous tend to have a much lower markup than popular ordinary diamonds.

The best example is fancy diamonds like gray ones compared to classical colorless ones. An engagement ring with a colorless or yellow diamond will have a higher markup than a gray or black diamond.

However, the most significant changes you can notice are among sellers. The same diamond can have a different price depending on where you buy it.

The markup when buying from luxury retailers and jewelers is the highest. Smaller retailers mostly have a markup that can be considered reasonable and mid-range. Usually, wholesalers are those who have the lowest markup on diamonds.

If you want to learn more about where it’s best to buy diamonds depending on their markup, keep reading.

How Much Is The Average Markup On Diamonds?

The average markup on diamonds is around 160%-300%.

Many think this to be obscenely high, and this is true because you’re already paying more just because diamonds are popular gems. However, considering that some high-end retailers and jewelers have a markup of a whopping 1000% on their diamonds, the 300% markup seems pretty decent in comparison.

Retailers must cover expenses like what they’ve paid for the diamond, setting, security systems, insurance, and marketing campaign while also making a profit, but this can’t justify absurdly high markups. When markup is above 500%, it usually means you’re paying the brand rather than the diamond.

Colorless Diamonds

Colorless diamonds are the most popular among diamonds, so they have the highest markup.

Retailers’ markup is around 300%, wholesalers have a markup between 1%-30%, and online stores have a markup of 100%. Take note that this is only the average markup on colorless diamonds.

The markup varies from seller to seller. Moreover, the markup on diamonds is also dictated by the setting. A diamond engagement ring will have a higher markup than a diamond bracelet or earring because the demand is higher.

Fancy Diamonds

While fancy diamonds are much rarer than their colorless counterparts, their popularity isn’t that high. Some fancy diamonds like yellow and pink ones have become an alternative to the classic brilliant engagement ring. But still, not many dare to take such a step.

Because they’re not so famous, their markup and overall price tend to be much lower than colorless diamonds. You can expect an average markup of around 100% for a fancy diamond.

However, this can drastically change with their color intensity and setting.

Can Diamonds Rarity Justify The High Prices?

You’ve probably heard that diamonds are rare, and this is true. However, diamonds are among the most common precious stones. Especially colorless diamonds!

There are many diamond mines, retail shops, internet shops, and even small mall shops where you can buy diamonds. When so many stores have them, they can’t be that rare.

The rarity of diamonds doesn’t justify the high markup.

The best example is fancy colored diamonds. They’re much rarer than colorless diamonds, with some taking up only 1% of all diamonds. However, their markup is way lower than on clear diamonds.

Does Markup Change With Size?

Yes, it does because it has to do with popularity. Smaller stones usually have a more significant markup than larger stones.

Most people buy diamonds under 5ct. This means these gems will have a high markup depending on where you’re buying. Larger stones aren’t that popular, so retailers won’t make their most profit here.

How Much Profit Do Jewelers Make On Diamonds?

How much a jeweler will profit from selling diamonds depends on how prominent the jeweler is.

Small jewelers have only that much profit to keep the business running. On the other hand, famous jewelers like Bulgari, Cartier, and Tiffany & Co. can afford massive marketing campaigns that help them profit from diamonds.

A small shop can put a markup of 300% on a diamond. But the question is will anyone buy it for that price? Local jewelers aren’t that popular, meaning high markups won’t do them any good.

The diamond will collect dust at the store until the jeweler puts it at a discount. Even then, the jeweler can’t be sure someone will buy it.

So, the better option for small jewelers is to have a markup of around 160% or lower. This way, they can have a constant flow of customers, slowly gain more popularity, and grow their small business.

On the other hand, big, famous jewelers already have an established presence on the market. Even when they put a markup of 1000% on a diamond, with a good marketing strategy, they’ll get someone to buy it.

However, even famous jewelers have to cover their expenses. The more profit they make, the more they grow, and growth doesn’t come without cost.

While it is true that large shops pay a ridiculous amount for their marketing campaigns, interior design, and location, this still can justify the markup on some diamonds.

Read More: How Much Do Jewelers Markup Diamonds?

Buying Diamonds From A Retailer

Considering that the average markup on diamonds in retail stores starts at 160% and rises, why do so many people still choose to buy diamonds from them?

The answer is simple – Excellent customer service!

While wholesalers and internet stores may sell diamonds at a low cost compared to retailers, they don’t have the service most people seek.

At a retail store, you’ll get professional and personal service. You can ask about anything you want to know about the product you want to buy, and they’ll gladly answer all of them.

This is great because you don’t need any previous knowledge about diamonds. You can educate yourself about everything directly in the store, and you don’t have to buy the diamond immediately. You can think about everything and come back the next day or month.

Moreover, retailers offer flexible payment terms to their customers. You can use cash or credit card, deposits, layaways, deferred payments, and many more.

The diamonds you buy in retail stores also come with warranties, guarantees, and certificates. So, if anything unexpected happens, you as the customer are protected.

Retail stores also have return and exchange policies that they follow. These policies are different from store to store. Some retailers have generous return and exchange policies, while others aren’t so open-handed.

Buying diamonds from a retailer may cost you more, but it’s usually the safer option. Our recommendation is to shop from smaller retailers and look for discounts. That is, of course, if you aren’t chasing the brand more than the diamond.

Are Wholesalers A Better Option?

Wholesalers are a better option if you want to buy large quantities tax-free. But, if you only need one small diamond, you probably won’t get it from a wholesaler.

Wholesalers usually have a markup on diamonds from 1%-30%. Jewelry stores buy directly from wholesalers. So, this option falls off unless you have a store or personal connections to the wholesaler.

In recent years, many retailers started using the term ‘wholesale’ to attract customers. So, be careful when buying. Many scammers claim their diamonds have wholesale prices when, in fact, you pay what you would in any retail store.

Because of this term’s misuse, many US states have banned the illegal use of the word ‘wholesale’ in marketing campaigns. A wholesale price is only the price without tax.

What About Online Stores?

The expansion of the internet has brought us beautiful diamonds at affordable prices. Online retail stores usually have a markup of only 20%. The markup varies between stores and the setting that comes with the diamond.

Internet retail stores have much slimmer markups because they have fewer expenses than traditional stores. They don’t need a physical store or as much staff to carry all the jewelry. All they need to do is order the diamonds from the supplier, who then ships the product directly to the customers.

Because of the relatively low markup online stores have, they’re slowly starting to put the physical stores out of business. To continue competing in the market, many traditional retail stores had to drop their huge diamond markup and open their online stores.

If you don’t need the in-store shopping experience and want to cut your expenses, buying diamonds from an online store is the best choice.

Related Read: Which Brand Is The Best For A Diamond Ring?

Conclusion

The markup on diamonds is relatively high. Most retailers will sell you diamonds with a 300% markup, while prominent retailers will go as high as a whopping 1000%.

The ridiculously high markup is thanks to the popularity of diamonds and settings like engagement rings. Retailers know what type of jewelry you won’t spare a penny for and use it to their advantage. They can profit considerably by understanding the most popular diamond shape, setting, and color.

The best alternative is to shop for diamonds in online stores because they have a much lower markup than physical stores.

We hope you learned everything about the markup on diamonds, why the markup is so high, and where to look for the cheapest options.