RAP prices + internet vendors...

[Newbie333]

Just a question to the retailers on the PS board...


How is it possible for you to sell diamonds so cheap? Doing a PS search, I see excellent quality stones (clarity + cut + color) going for like 20% under RAP...
(I have access to the current RAP sheets so I've compared)


Now, don't get me wrong... you're doing a great job, and my hat is off to you for providing such great prices to the consumer... but if you're selling so much below RAP I can't even imagine what you picked them up at wholesale, and 'still' are able to make a profit.


Obviously it's a business, and like any other you wouldn't be 'in' business unless you can make some sort of profit... So, either your margins are 'razor' thin, or your getting incredibly great deals from your suppliers.


If you 'are' able to buy say at 40% back, that still gives you a 20% margin, which I guess is 'okay'... but that's nowhere near what the mall stores are making off the general public with their inflated prices.


This inquiry was instigated by the fact that I have recently made a purchase (engagement ring), and eventhough I have been on this board for a while and learned plenty... I had to go with a big name 'Mall Store' because the return policy was 90 days vs. the 10 days most online retailers allow. (I needed the 90 days is because we have geographical location issues that I am hoping we can resolve (east coast/west coast), but we need time, more than 10 days, to figure all that out.)


So the stone I got was a 2.10 ct Princess, F, SI1...
(wanted the 2ct size in a good color, so I decided to save money by allowing inclusions that I can't see without a loupe) (She 'really' wanted a 2 ct...)


It's a beautiful stone, but of course they wanted a fortune for it at the Mall store... After I pulled out my PScope printouts of all similar stones for sale online, and pulled out my PScope Princess quality cut chart, and the RAP sheets, they nearly fell over...


So the VP / district manager had to come out to renegotiate the price and close the deal... but not before knocking $4K off their original price. (I still can't believe people actually pay those rediculous prices)


Now I settled for the RAP price, knowing I still could have saved another few thousand on-line, but like I said, I didn't mind paying more knowing I had a few extra months to work on our geographical issues.


So in conclusion... thanks to Pricescope for being here... great job to the vendors... but, back to my original point... how do you guys do it for so cheap?


NB333

 

[Stephan]

I never saw a superidealcut on the net at -20% RAP, only if it has fluorescence...

 

[Newbie333]

Let's say not an AGS000 at 20% back, but I mean I've seen those types of excellent stones on here 'at' RAP prices...

and maybe other stones with great color, clarity, and a 'good' cut for 20% back...

 

[Stephan]

I can find good cuts at -35-40% RAP in Antwerp... but not superideals...

 

[pqcollectibles]

Forget the RAP sheet. It is a highly techical pricing index with sooooo many nuances that only the pros can effectively use it.

The 10 return period is actually plenty of time to evaluate a diamond. You arrange in advance with an appraiser. Either ship direct to a PS approved appraiser (without paying in advance in many cases) or make an appointment with someone in your area. You have until the 10th day after you receive the diamond to notify the Vendor in writing (email) that you will return the diamond.

Maul stores have huge overhead. Maul store slots are not cheap. Neither is national advertising on TV. Many, many employees and huge inventories add a lot of cost.

Local B&M's have more moderate overhead. Less pricey locals usually means lower rent. Local ads placed sparingly are not a huge part of the operating budget. Typically, fewer employees working on an hourly basis, without benefits and buying discounts. But many local B&M's have heavily leveraged inventory. They may actually own only a fraction of the jewelry in the cases and none of the loose diamonds they show customers. Interest adds a lot of overhead to their costs.

 

[Newbie333]

Thanks pq and stephan for your replies...

pq: I know the 10 day policy would be okay under most normal circumstances... like I said in my original post, I need the 90 days to work out personal relationship issues, to make sure we can work them out and not have to return the ring.

stephan + pq: I guess my question still remains unanswered... how do the vendors who advertise on PS sell decent stones for 20%-30% under RAP and still make money? is it because they get them for 40% under RAP... or more? are the margins that thin?

 

[aljdewey]

Do you really know how the rap sheet works? are you aware that rap is only a baseline, and the price per carat in any category can scale up or down in relationship to the make of the stone?




The nuances of that make it a marginally useful tool at best. Jewelers who use this tool all day long are pretty adept at it, but I'd hesitate as a consumer to take that thing as gospel.

 

[niceice]

Don't fall into The Rap Trap it's not designed to be user friendly for the public. The proportions of a diamond and the type, extent and location of the inclusions play a major role in the discount applied to each diamond.

One thing that people seem to have missed thus far on your thread is that the diamond you are referring to is a princess cut diamond and not a round brilliant ideal cut diamond... Fancy shape diamonds tend to cost less than round brilliant cut diamonds because there is less precision in the cutting of the stone on average and a different type of diamond rough is used... In other words, the diamond rough used to cut a princess cut diamond is not the same type of diamond rough that would be suitable to cut a round brilliant cut diamond from...

But to answer your question, most of the internet diamond dealers are able to sell diamonds at prices less than traditional brick and mortar stores because they have very little overhead... They don't house a physical inventory, they list diamonds for sale by copying the inventory of their suppliers and then when somebody purchases a diamond, they have the diamond drop shipped to their customer from the supplier without ever touching it... Pure profit once the script has been paid for. We don't think that this is a good way to do business, it certainly isn't a good way for people to buy a diamond... There are a few of us who actually purchase diamonds for inventory and we generally get better prices than the dealers who do not purchase for inventory because our annual volume is not spread out across fifty dealers who list diamonds, but rather five or six who we purchase from... Since most jewelry stores do not purchase diamonds for inventory, but rather borrow them on what the industry calls 'memo' those of us who purchase for inventory get better discounts in the form of a reduction of points that the cutters charge stores that memo as a form of finance charges for carrying their paper... Add to this the fact that most retail stores have a monthly overhead that would choke a horse and it's easy to see where the difference in price is made up... And then there is the matter of profit, once the cost of overhead and marketing is considered, profit still needs to exist for a company to stay in business, most retail jewelry stores make it a practice of doubling or tripling the cost of each product to determine the selling price where most internet dealers are working on only a couple of percent... The internet is based upon the premise of low profits and volume sales, the retail market is based on a few sales per month with each sale being a killing.

 

[Choon]

Yes i do agree with niceice....most of the internet vendors do not stock them thus albe to sell at a low price. Sometimes its just frustrating to see a walk in customer start comparing prices in my retail outlets and start saying i am over charging them. As for the Rap price sheets, no all diamonds are equal thus discount are different as well. There is usually a standard price you pay for something good. Price also varies from the kind of certification as well.

i shall not say anymore. thanks

 

[Colored Gemstone Nut]

Choon,

Welcome to Pricescope and hope you stick around a while...

How would you compare the retail market overseas in Singapore vs. the US retail market in diamond sales?

 

[niceice]

Welcome to PS Choon, it's nice to see a traditional Brick & Mortar retailer wandering about on the forum... Your presence will bring an interesting perspective to the forum which is rarely seen because most of the internet dealers do not maintain a physical presence as has been discussed. We maintain both an internet site and a retail store front as does Jonathan at GoodOldGold.com but we don't believe any of the other more prominent sites here on PS do, but we could be wrong... Some maintain office space. We maintain the same prices in our store that we do on the internet because we just couldn't justify charging somebody more to buy a product simply because they are standing in our store... Could you picture us trying to explain to somebody at the grocery store why we charged them 100% more simply because they didn't buy their diamond on-line? We'd get pummelled

 

[mdx]

Hi Niceice

I think we must accept that the dynamics of the diamond marketing on the Internet will embrace a number of different models. Pure internet sales where the consumer does not have the option of a store visit is always going to be the cheapest, Ultimately the success of these ventures will be determined by, reputation, credibility, expertise and the all important “return policy”

Our model is similar to your own except that we don’t run traditional retail stores but a number of strategic downtown offices with well equipped labs. We offer a two tire pricing policy, in other words if you arrange a visit to our office to view our in house stock you pay price X, If however you are prepared to buy on the net you pay price Y (discounted) for a similar diamond.

What is of interest is most visitors to the offices will shyly elect to go home and order on the net to enjoy the better price. Perhaps once they see we actually exist and see the quality they feel more comfortable. Who knows.

Perhaps a few other vendors would like to discuss their models as an aid to consumers obviously not abusing the no-advertising rule

Johan
Melbourne Diamond Exchange ltd.

 

[Choon]

Thanks for he warm welcome here....i hope i can bring some help. Well jewellery business in singapore compared to the US i would say there are heaps of difference. MArket now is a bit slow due to the economic situation but its improving. However goods are still moving from overseas clients. Local are not spending too much due to the market situation further more there seems to be a price warm between jewellery chain stores. Jewellery using very low quality diamonds had been mass produce in china and offered at a huge discount to our locals.

Well most of us tends to be attracted to the price first instead of the quality.

However Singaporeans are also a picky bunch which they want the best but not willing to spent more. But i would say its normal as everyone wants a good deal. But i am very amazed that over in states proposal ring start from 1 carat and up and two carat sizes move fast enough. Thats a thing i hope to see in singapore.

Well in terms of pricing in the store and online, i usually charge them the resonable price as in the market price. For me it depends on individual diamonds and price varies from there. i would say some customer do not know about the beauty of diamonds as in their angles and table but just compare using just colour and size. Sorry if i had offended any of my own country men. Not all are the same espically those who frequent PS.

B&M stores like us tends to think its a bit unfare when online diamonds merchant sell the same diamond that i am sell at price X and i am selling price Y. Thats worse when i purchase and stock inventory for the same kind of Branded H &A from the same cutting house whom they had allowed online merchants to list the whole inventory without purchasing any stone at all. sometimes its true the small always loose out to the bigger brother. However i always think good service and warranty will help me overcome this.

sorry for so long winded.....anyway i hope i can contribute more to help others.

 

[Colored Gemstone Nut]

Interesting Response Choon,




Thank You !

 

[niceice]

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On 12/27/2003 4:48:14 PM mdx wrote:

Hi Niceice

What is of interest is most visitors to the offices will shyly elect to go home and order on the net to enjoy the better price.----------------

This is the other thing we figured would happen if we used a two tier pricing structure... If we're going to sit down with somebody from our local market, we'd rather just have them purchase the diamond right there than have them play games in order to obtain the lower price... After all, time is money and we'd rather spend the time once as opposed to going through the motions of doing it all over again on the net in order for the buyer to re-create a legitimate buying scenario / shipping address and all that...

Besides if you really think about it, most of the people we sell to on-line ask a series of questions that takes about the same amount of time to answer as the questions posed by people who visit the store to purchase a similar item... So we're going to spend the (approximate) same amount of time with each person regardless of the sales medium employed to complete the transaction... All the internet has done is change the manner in which we conduct our business, so we decided that the price should be the same.

 

[tomatoe]

----------------
Well in terms of pricing in the store and online, i usually charge them the resonable price as in the market price. For me it depends on individual diamonds and price varies from there. i would say some customer do not know about the beauty of diamonds as in their angles and table but just compare using just colour and size. Sorry if i had offended any of my own country men. Not all are the same espically those who frequent PS. ----------------

choon, welcome to ps.

i am a consumer from singapore. where is/r ur shop/s located? maybe i can go drop by one of these days.

the average s'porean consumers often compare diamonds using just colour/clarity, size and price because that is all they know. i've gathered from being on here that even the average american consumer that doesnt come on ps, buys diamonds based on those four only. and no, i am not offended, cos i think it is very sad but true

 

[Colored Gemstone Nut]

----------------
On 12/28/2003 3:50:27 AM tomatoe wrote:





the average s'porean consumers often compare diamonds using just colour/clarity, size and price because that is all they know. i've gathered from being on here that even the average american consumer that doesnt come on ps, buys diamonds based on those four only. and no, i am not offended, cos i think it is very sad but true

----------------

Good Point Tomatoe:

I think in general the average US consumer thinks SIZE (carat weight) and than looks at how much he/she has in their pocketbook...

Than we figure out how we can over extend ourselves in getting a big diamond with not even looking any further into the purchase

 

[tomatoe]

josh, its so easy to 4get that not every1 out there is like us on PS and researches our diamonds to death. its a big amount of money to me and i wanna know that i am getting the best that my money can get me. not something that some1 wants to fob off on me just so he/she can get their commission for that mth or some marketing gimmick thats full of hype and ending up with a frozen swop of spit or worst paying through ur nose and getting a rock that is good enough but not fantastic...

 

[oldminer]

Rap Prices on the Rap sheet are a fiction and not technical in some mysterious way. While these numbers relate to diamonds of the particular color and clarity there are several other factors which greatly affect the value of any individual diamond which Rap only vaguely mentions or does not address at all. Regardless, these factors are quite complex, and they lead to a huge actual range of values for any given stone of a specific color, clarity, weight and shape.

For consumers the Rap Sheet prices are way more misleading than useful. Reliance upon those numbers without a whole lot more knowledge is going to burn anyone, dealer or consumer, who buys or sells based solely on them.

Martin Rapaport helped to bring a needed and useful degree of order to the diamond market in a time of rapid price change 25 years ago. Over time the Rap sheet has proven worthwhile to diamond dealers and has become highly misused and misunderstood by many, including consumers. I still subscribe to Rapaport and make use of the Rap sheet, but in a careful way, not blindly. I almost never tell consumers what it says about their choice of diamond because it means so little about any single stone. It is a market monitor, not a value calculator.

 

[Nicrez]

Question: If Rap sheets are a market indicator, and I have not heard of ONE retailer or person who sells at Rap, then what market is it indicating? Everyone buys at a discount, even with a premium stone, and a branded cut there is a discount and then a premium, which balances...




Who made Rappaport the "price guy" and who is he to be "predicting" prices, as most jewelers follow his sheets with the new price increases and use those sheets to calculate prices as they are told (with discounts, etc.)




I know people talk about a Rap Trap, but is there any other reliable way of determining a "good Price" or using a stable indicator as a way to determine marketability and cost of a certain type of stone? Isn't there a WDC (World Diamond Council) and others that try to create a uniformity in laws and standards within the diamond industry. Why don't THEY (independant sources) come out with a pricing sheet for various levels of buying. Like a main sheet for rough purchases, cut stone purchases, and then retail purchases? Again the Rap Sheet method can be used, but where there are discounts, and premiums, since all consumers of various stages have different buying power and different discounts. Any ideas?

 

[pricescope]

Nicrez:

----------------
Question: If Rap sheets are a market indicator, and I have not heard of ONE retailer or person who sells at Rap, then what market is it indicating?
----------------

People say Rap shows high cash asking prices for well cut GIA graded diamonds in NYC.

 

[StevL]

Just to set the record straight I along with many others I'm sure can buy AGS000 at more than 20 back, even a brand or two I know of. The better cuts without a AGS or GIA report for more than 40 back.

I will not disclose exact pricing but unless your a buyer in the market place, your just guessing at how low you can go.

Several months ago I bought a few AGS Ideals at more than 20 back, the very next day was offered the same quality ideals for another 10% back. No importing just the shipping cost to get them. Go figure, jewelers don't even make the best buy every time.

Good thread...

 

[mike04456]

----------------
On 2/17/2004 12:12:25 PM Nicrez wrote:







Who made Rappaport the 'price guy' and who is he to be 'predicting' prices, as most jewelers follow his sheets with the new price increases and use those sheets to calculate prices as they are told (with discounts, etc.)



----------------

He's a self-made man.

He was the first to publish consistent, reliable price lists, and because his lists were useful, people began using them.

Rapaport prices are best understood as a tool diamond dealers use to communicate with each other. Everyone else should forget they exist--consumers will just get in trouble trying to use them.

 

[Nicrez]

LG, I agree that it's not useful to the consumer, but consumers need some sort of basis to compare and understand even the most obvious price shifts from carat, color and clarity levels. If anyone comes up with a more accurate way to do that in a changing economy, PLEASE POST IT!

Leonid mentioned that, "People say Rap shows high cash asking prices for well cut GIA graded diamonds in NYC."




Sadly, I have done the whole NYC circuit. I have sought nothing but the quality stones, and even then merchants and vendors have mistaken me for a merchant myself at times, and still wanted to know how much off of Rap I wanted for my specs on a stone. I don't think ANY merchant pays RAP, even for a flawlessly cut stone. Perhaps it's meant as a market tool for retail prices?




I don't mean to be a pain, and I understand it's use, but don't aprreciate it's inefficiency. I just think there could be a better indicator, and I suppose I am playing devil's advocate /idealbb/images/smilies/11.gif to get some smart economist/trend studier out there to be "self-made" and make a more precise Rap Sheet for the industry...anyone? Anyone? /idealbb/images/smilies/naughty.gif

 

[StevL]

Nicrez,

I can promise you there are branded diamonds that dealers pay more than Rap for, and this is for more than one or two brands. Some are very close and then they add the shipping cost, cost of the report, etc. and they end up over Rap. Others are simply over Rap.

 

[Nicrez]

Thanks for the response Steve! If they indeed do pay over Rap, I would assume these are the exception and not the rule, and the Rap sheet prices reflecting these may increase mainly in the larger & higher quality stones?




I assume these stones are rare indeed or warrant that sort of price plus a hefty premium on top of Rap, that would translate to a higher premium in retail. Like Harry Winston bauble of 3 Cts or over, or a stone that either had a history or a name, which warrants higher prices. Anything sold at Christie's or Sotheby's would probably command an above Rap price, but these are anomalous I would believe. Do these count towards Rap Prices?

 

[StevL]

Nicrez,

I'm speaking of entire brands pricing above rap. Doesn't matter the size color or clarity but the branding (and cut as those brands see it). They may be more than you think above rap. Some not much but others it may scare you how high.

I was not speaking of any brand name stores.