A retailer goes to great lengths to match an
online diamond price, but at what cost?

Jeff Lee was barely out of medical school when he and Anna got married, and she had just started her first job as an accountant. An engagement ring had been totally out of the question back then, with rent, groceries and student loan payments consuming their entire budget. Fortunately for Jeff, Anna was perfectly happy with her plain gold band. Jeff didn’t know how he’d gotten so lucky — or what he ever did to deserve such an amazing partner.

ABOUT REAL DEAL

Real Deal is a fictional scenario designed to read like real-life business events. The businesses and people mentioned in this story should not be confused with actual jewelry businesses and people.

ABOUT THE AUTHOR

Kate Peterson is president and CEO of Performance Concepts, a management consultancy for jewelers. Email her at This email address is being protected from spambots. You need JavaScript enabled to view it..

He did know though, exactly what he wanted in an anniversary diamond for his wife. Anna had waited over 20 years for a ring to go with her wedding band, and Jeff had done his homework. Nothing but the very best would do. After a great deal of research, Jeff decided that he wanted a D, Flawless, round diamond with a GIA report, triple excellent cut and no fluorescence. He thought anything bigger than 1.5 carats would look too ostentatious on Anna’s tiny hand, so his target was something in the 1.3-1.4-carat range.

After carefully comparing grading reports and prices, Jeff had already determined that he would buy the diamond from a well-known online seller, but decided that he would have the ring that would hold it made by Forrest Jewelers. A colleague referred him to Nick Forrest when he wanted to buy a watch for Anna’s birthday shortly after they moved to town more than ten years ago, and the store had been his regular “gift go-to” place ever since. Though Nick’s daughter Laura had been taking great care of him since Nick’s retirement, Jeff was certain that with the overhead of running the store, there was no way Laura would be able to match the prices he’d been able to find online. Since the diamonds he was considering all came with verifiable GIA reports (and since he realized that all of the sites he was shopping had the same diamonds because the GIA report numbers matched), he felt safe and confident in his purchase decision.

Jeff contacted Laura to discuss custom design and setting options for the ring. When Laura asked about the diamond, Jeff was up front in telling her about his planned purchase. Laura said that while she couldn’t make any promises, she would certainly do her best to match any online price and asked Jeff to give her an opportunity to try. Jeff agreed — but when Laura began contacting her regular suppliers in search of diamonds that matched the specs from the list Jeff sent her, she quickly learned that Jeff was right. He could buy the diamond for less from a major online retailer than she could from any of her vendors.

Determined to make sense of the whole situation (and to make the sale!), Laura began digging deeper into the diamonds that were available through the online seller. In addition to the ones Jeff had selected, she found another diamond in a different cut category on the site (interesting since both were GIA XXX), and noticed to her amazement that while it appeared virtually identical on paper, it was priced 68 percent higher than the one Jeff was leaning toward. Raising the question about the discrepancy seemed to shake Jeff’s confidence in the online shopping experience just enough.

Ultimately, Laura’s full commitment to service and willingness to match the price convinced Jeff to buy his diamond at Forrest rather than from the online seller. Once he’d settled on the diamond he wanted, Laura was able to work through an industry trading site and using the GIA report number to find the supplier who owned that exact diamond. The diamond was shipped to Forrest from India, but not before Laura agreed to pay the vendor in advance. She was able to negotiate the price of the diamond down to a cost that was several thousand dollars less than the least expensive one she was able to find in the US, and after matching the online price, was able to net about $1,300 in profit. Fortunately, she was able to do a lot better on the setting.

Reflecting on the experience, Laura couldn’t help but feel sickened. Owning a well-established store with a superior credit rating, she had never before had to pay for a diamond before shipping — nor had she ever gone to such great lengths to take care of a client while making a sale for so little profit. It saddened her to realize that she was willing to settle for something rather than nothing, and she wondered if her hope that Jeff would at least become an advocate for Forrest was even sensible. Worse, the whole experience made her wonder how much longer Forrest — or any other full service jeweler — would be able to survive in today’s consumer market. 

The Big Questions
  • Was Laura right to go to extraordinary lengths to make the diamond sale, or should she have just settled for her profit on the setting?
  • What is the impact on the industry when wholesalers make the same diamonds that are available to retailers available to the consumer through online sellers as well?
  • Looking at two virtually identical diamonds on the same website, what could make one 68 percent more expensive than the other? Is there any validity to the discussion of a fifth quality characteristic (transparency) that’s been mentioned in the industry recently?

 

Expanded Retailer Responses

Dominick R.
Bridgeton, MO

She did what needed to be done. I don’t like it either, but you’ve got to compete. I like to keep my customers confident that they have no need to go anywhere else.

Marcus M.
Midland, TX

I won’t play this game with customers. A $1,300 profit is a joke for a diamond of this caliber and will not help you contain or grow your business. Laura should have kept her integrity and just sold the mounting. As much as I dislike just selling the mounting, if it means me not stooping down to online sellers’ levels, then I’ll do that. Wholesalers that let any and every Joe Schmo list their diamonds without having them in their possession are jack wagons. I refuse to buy from these vendors and any respectable jeweler should, too. This type of situation is what gives consumers distrust in our industry. There’s no transparency and it’s ridiculous. There are several factors that can lead to a price difference between two similar diamonds but 68 percent? Crazy. This is more than likely a trick by the supplier and I think it’s shady.

Shannon M.
Tyler, TX

I totally applaud Laura in going to such extraordinary lengths to do what it took to make $1,300 profit on the GIA-certed diamond. Hopefully, Jeff will keep Forrest Jewelers top-of-mind when in the market for jewelry because of Laura’s efforts. The impact on the industry is to greatly reduce “brick-and-mortar” jewelry stores from being able to compete at all when searching for larger diamonds for clients. The only reason I can possibly understand two virtually identical diamonds being 68 percent different in price is if the lesser-priced one was sourced from an estate where an individual was in desperate need for money. I don’t think the idea of a fifth quality characteristic (transparency) would have much weight in swaying a client against trusting online diamond dealers.

Stew B.
Natick, MA

Hmmmmmmmm. I’m very leery of pay in advance.

To answer the second part of the question, as long as the client has been loyal in the past and (she hopes) remains loyal in the future, bending over backwards and making a few points on this sale will kind of balance out. Also, sounds like a great source for referrals.

Cathy G.
Frankfort, IN

$1,300 is better than nothing; she also has the profit on the mounting. I just lost two sales to the Internet because I add 10 percent to the cost of a 1.5-carat and a 2.0-carat. I guess it doesn’t pay to get greedy.

Bernie S.
Ephrata, PA

My customer purchased a certed stone from us and returned to the store the next day in a huff — he had found “the same” stone on a huge online diamond retailer for $1,000 less. I had given him a very good price because of our long-standing relationship, so I was aghast. I asked him to show me the one he saw. We went online and found it, and it was graded the same as ours (VS1) but the stone map showed inclusions suitable for an SI2 stone. When I showed him that, he then thanked me and asked how it was possible for the online store to sell obviously improperly graded stones. I had no good answer. Since then, they have removed the stone maps from their site.

Kenn K.
Syracuse, NY

I think the discrepancy in price had to do with the difference in the stones. My guess would be in the refractive index. Any of us who has worked regularly with diamonds knows that you can have two identically-rated stones and yet one of them will appear brighter. My theory is that the stone that is brighter has a denser crystal structure.

Sell your experience in choosing stones. The day of beating online prices is gone.

Saro A.
Chevy Chase, MD

After 38 years on bench and 32 years in jewelry retail, I've asked this question numerous times and many times in INSTORE's surveys where they're asking us "What would you like the magazine to write about in next issue?" THE DIAMOND SELLING DILEMMA!!! How could a retailer sell diamonds to public? When practically all diamond wholesalers sell online at the same price as they sell to retailers. Laura went to great lengths to make this sale. I wouldn't have done it, so more power to her. Nowadays these sites are even into custom made rings too, so what's left for a brick & mortar business? Oh, sorry, I forgot, we're there to assure customers they've got what they have ordered — and, of course, for free! Something must be done about this whole mess. BTW, I'm going to tell my daughter's boyfriend to buy the diamond from Bluenile. It'll be cheaper!

Lance M
Lubbock, TX

Make what you can make and go down the road. Plus, you have a new customer that trusts you and will probably continue to do business with you. It is much much better than making nothing. A returning customer is worth a great deal and a satisified customer even more!

Allan A.
Dallas, GA

No two diamonds are alike. I would look at what not a small profit that was made but future purchases from that customer as well as referrals. This industry has definitely changed and we as an industry can benefit from these learning experiences. Educating ourselves as well as the customer will benefit all of us in the long run. Success is making the sale and moving on. In the industry it is known as "passion with a purpose".

William U.
Fayetteville, AR

On the surface, there seems to be no logical answer, other than a much lower profit for the seller. But not necessarily so. While color, clarity and carat weight are pretty well defined, and if graded professionally, there is not much latitude for error. But light performance, a factor primarily of cut, is far less precise, and affects values dramatically. Fortunately, there is a brand new invention that actually measures light return and beauty from a diamond. It is called the Beauty Grade Machine and is a direct measurement of light return and beauty on a scale of 1 to 100.

Dianna H.
Lafayette, LA

Laura was right to go to such lengths to make the sale. Its this type of relationship building that sets us apart from the online sellers. In doing so she created a customer who will come back to her for the wedding bands and tell their friends. And if she offers custom design, she can make a larger profit on the ring.
Selling diamonds to retailers and to the consumer with easily seen report numbers has a negative impact on the retailers. These dealers are not the type that you want to partner with to help you make your store successful and profitable.  

I always tell my customer that I don't buy my diamonds without seeing them first, and they shouldn't either. You can go to any large online seller, type in the same specs for a diamond and get a variety of prices. The grading reports don't tell the whole story. Bottom line, the more expensive ones will be prettier.


Stacey S.
Edson, AB, Canada

Disgusted that wholesalers have become retailers! One day, they will be begging for retailers as they are not going to want to deal with all those customer issues. By then, there will be fewer and fewer retailers around.  

And for the customer who only shops price = online? Hmm. All the donations that are given back to communities from the independent retailers will disappear and then the consumer will wonder why their kids' local all events cost so much. Our poor world!

Kevin Z.
Manhattan, NY

Yes, she did the right thing. I have settled for the profit on the setting alone because I have dealt with clients who purchased a stone from a third party dealer willing to make as little as $300 on a 10k stone. A dealer can ask what he wants, maybe he paid too much when diamonds were higher and the other dealer recut an old miner he purchased for far less money, recut and is happy with the profit making the price available at a higher % off Rap.

I deal with origin all day long with colored stones and I can't even use the GIA! On color, I sometimes need multiple certificates sometimes from New York and Switzerland. I think it would just confuse clients to no end. I would be more concerned with the man made/created diamonds.

I am a third-generation jeweler and this business has changed a little every of our 90 years.

Tracy W.
San Gabriel, CA

She bent over backwards for a good customer. It's ok, we all do i — it just can't be the norm to make that little. Make sure the customer knows she made 0 on the diamond for his sake. (And I hope she said no credit card!) Diamonds have lost a lot of their romance in favor of commodity. But $1300 and a happy customer are better than 0. He's likely to trust you now for price and quality. We try to make our profit more on customer service, beautiful color and custom settings.

Wholesalers competing with retailers; a bad side effect of a still nasty economical reality. If wholesalers would give us a price break so we could still sell the stones it would be nice. Paying up front was ridiculous — what's the point of a great JBT rating?

I'd love to hear why those prices differed so much.


This article originally appeared in the September 2017 edition of INSTORE.