1. Diamonds are not rare. We still can get huge markups, well beyond what we paid for them .
All gems are valued based on their rarity (as are most things in life). But diamonds are abundant. Extraordinarily abundant. The De Beers cartel has enormous vaults where they keep most of the world's supply of diamonds. If these ever got released into the market, the monopoly would be over, and diamonds would be worth next to nothing. Diamonds are artificially high and can be purchased in most African countries for as low as $15 per carat (rough cut).They are literally a pretty rock.
Retail jewelers mark up diamond engagement rings by an average of 300% up to a staggering 1000%. The estimates on markups are broad, but most of the reliable sources we've seen indicate that 300% is the usual markup. Your acquaintance who says he bought a $10,000 ring for $1,000 might be on the level. While a 1000% markup is not typical, it's not unheard-of.
Diamonds also have no resale value. The reason a "diamond is forever" is because you're basically stuck with it. You'll never be able to resell it except to a pawn shop. Even a jeweler (the few who would be willing to buy it) would offer a fraction of what you paid.
2. Exceptional high-end lab diamonds and diamond-cut gemstones are flooding the market
Lab-created or man-made diamonds and gemstones are already in the market and with new diamond cutting technology, no one will be able to tell the difference unless under a special microscope. These are the closest thing to real diamonds--the only difference is that they're better. They have fewer flaws and cost a fraction of the going rate. They are the most affordable option for those who still want a nice setting in which they can upgrade to a diamond later in life. Want a 2 carat man-made diamond or gemstone in a top of the line gold setting? That'll be under a thousand dollars.
3. Your 'perfect' diamond has had a face-lift . . .
Thanks to science and technology, the brilliant-looking diamonds in your jeweler's case aren't all necessarily what they appear to be. In some cases, they could be "fracture-filled" for instance, referring to a treatment in which visible cracks are filled with a glasslike substance, making a stone appear more expensive than it is.
We don't know what to think of this. If the value of a diamond exists only because of its scarcity, then why would jewelers produce a watered down version? Would that not drive down demand (and price) due to increasing the supply of desirable diamonds? Beyond the macro economics view, we are baffled at how diamonds rocks are so falsely expensive and glamorized.
4. We all generally purchase our gold and platinum settings from the manufacturer
Many jewelry stores (including Tiffany & Co.), purchase their settings from a handful of main suppliers-or even only one main national or worldwide supplier. These same suppliers sell to online stores, enabling people to get the exact same setting and quality online as they would in a bricks and mortar store, for a significantly lesser price.
5. There's blood on this stone.
The diamond industry has tried to clean up its act in recent years, after human-rights advocates publicized the growth of "conflict" stones in the diamond jewelry business. Conflict stones come from a country where the diamond trade used slave labor or funded warlords who routinely killed innocent civilians. Unfortunately, most stores still sell some sort of blood diamond or unethical diamond, whether they know it or not.
The Kimberley Process is just PR. It's an agreement that is supposed to prevent conflict diamonds from getting into the market but ended up being more of a PR stunt since it's based on a system of self-policing. The UN reported in October that due to poor self-enforcement of the Kimberley Process, $23 million of conflict diamonds from Cote d'lvoire alone entered the legitimate market. Sure De Beers won't buy diamonds coming out of Cote d'lvoire, but they'll turn a blind eye to the smuggling of diamonds from there through Ghana and Mali where they are certified as being conflict-free.
We can't imagine that this flaw doesn't pertain to other industries too. Most of us have friends who love coffee--where do those beans come from?
6. We don't want you to buy your engagement ring online.
Nowadays, everything including luxury goods, can be purchased online for a fraction of the cost. You buy cars online, luxury electronics on Amazon, and your airline tickets on Orbitz, so why not purchase an engagement ring or other jewelry on the web?
But jewelry stores don't want you to know you can purchase the exact same ring online for a significantly lesser cost. Understandably, when you go into their stores sales people will go to great lengths to put doubt in your mind about purchasing online. Why? It's obvious: they want to keep your sale in their store. In addition, the economic slowdown is affecting a broad swath of jewelry stores in your city. But the U.S. jewelry industry suffers from a more fundamental challenge than a sharp, if ultimately temporary, economic downturn - stiff competition from the Internet.
Given the importance and enduring nature of the purchase, it is perhaps surprising that consumers are more than happy to buy wedding rings online. But this has all changed.
Young shoppers - precisely the ones most likely to be getting married - understand online shopping perfectly well and place great confidence in their reliability. Technologically savvy and accustomed to making major purchases online, young people also tend to place a higher value on price than the kind of expertise and personal service touted by white-haired family jewelers. And they are turning to online stores in droves. Indeed, with the industry facing a rash of bankruptcies and store closings in recent months, the Internet's effect on the sector is somewhat analogous to what sites like Amazon.com did to Tower Records and neighborhood record stores.
Many of us have had wonderful experiences with buying an engagement ring online and they have saved us a chunk of change. This was verified by our ability to feel satisfied in their customer service, warranty and no reason to cover up any conspiracy.
7. Yes and the sales goal are walking in now.
Jewelry salesmen have rigorous sales goals that change about every month. A jewelry salesman might have a sales goal of 15,000 dollars for that month. That's maybe a month with a holiday in it like Valentines Day, but a goal of three to four thousand is not rare for a jewelry salesman just starting out in the business. So when he sees you walk in, he is ready and waiting to sell you anything he's got on hand. You think he cares about you as a person? Think again. Sam Maynard, a salesman for a popular jewelry store chain agrees. "The customer may come in and want the small one, but if I talk to him more, I can get him to buy the bigger one by up selling using confusing but highly persuasive diamond terminology," he says.
Do you think that salesman actually cares about what your sweetheart will think? Nope. A bigger purchase means less work trying to get to the sales goal. Not to mention the sales person will look great in the eyes of his boss.
8. I switched your diamond with a synthetic.
Stone switching doesn't happen every day, but some experts say you're not paranoid to wonder what goes on in the jeweler's back room.
Alexandre Jonas says that antique pieces featuring stones in high demand - such as late-18th-century Old Mine or 19th-century European cuts - have been particularly targeted. "People often didn't know what they had, and they brought it in to be fixed," Jonas says. "The man-made stones look so good, you didn't know the difference. They are awfully pretty." Does the fact that they are man-made bother him?
"If you go into a florist and buy a beautiful orchid, it's not grown in some steamy hot jungle in Central America," he says. "It's grown in a hothouse somewhere in California. But that doesn't change the fact that it's a beautiful orchid. Nobody cares if it's from De Beers. My clients just want a nice looking ring."
If you are struggling to afford a ring and are ready to get engaged, we would completely encourage you to buy a setting with a high end man-made stone. As long as your lady is ok with it, we think it is a fair plan. You can replace the man-made stone with a real stone with your budget permits. We certainly wouldn't hold up a marriage due to a diamond. What do you ladies think about this?
9. Your warranty is pretty wobbly.
Many jewelry stores sell warranties for their merchandise - typically, from a few dollars to a few hundred - to cover defects and damages for a year or two, or even the great sounding "lifetime warranty" on the diamond. Sounds great, right? Think again. They will offer lifetime guarantees on their diamond rings mainly in college towns and cities where they know the women aren't going to be around or remember to get their ring checked precisely every 6 months. This way, they can provide a lifetime diamond warranty that only a small percentage of their customers will use and make a heck of a lot of money doing so. The catch? College students move in and out of an area within a few years and by that time, the warranty is null and void. Other issues also arise. "Consumers often leave the store thinking they have full coverage and are protected if anything happens to their jewelry," says Mike Maley, a vice president at Neenah, Wis.-based Jewelers Mutual Insurance Company. "In reality these warranties usually cover only a "partial loss" - like when a stone gets wobbly in its setting - but not a total loss."
Forget the jewelers warranty policy. Have your jewelry added to your renters or homeowners insurance. They provide very good protection, even if you lose it.
10. The 50% Off Sale & Huge Sales at Jewelry Stores are not really sales.
If you see a sale price in the newspaper, don't fall for it. You will probably pay much more than the regular price. We know of some major stores in the mall that prior to a sale, marked up diamond rings double or triple the normal selling price, then marked them half-price during a sale. That means the customer paid even more for their ring, thinking it was a great price! Liquidation and "going out of business" sales are usually no different. We heard of one store in New York City that has been going out of business for 15 years.
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Updated and adapted from the book "1,001 Things They Won't Tell You: An Insider's Guide to Spending, Saving, and Living Wisely," by Jonathan Dahl and the editors of SmartMoney, Wisebread, and Free Family Finance.