Wholesale diamonds? Am I being fooled?!
- Thread starter Lovefaith
- Start date
It's easier for wholesalers to sell to retailers to avoid dealing with customers (eg questions on diamonds, settings, return/exchange policies etc). If they were to sell direct to consumers at the same price they sell to retailers, they are taking on more work with no tangible benefits. So I suppose they would charge higher when selling direct to consumers. They are turning into retailers themselves. So don't expect them to give you wholesale price. But their price might be lower than other retailers due to no middleman. But there are also many online retailers with slim margins and would most probably be selling at the same price as this wholesaler-turned-retailer. It's up to you to do your due diligence.
Just to clear, I'm not recommending the vendor. Just stating that it's possible for wholesaler to turn into retailer. And their price won't be wholesale to you. There can also be cases where retailers just like to use the term "wholesale" to attract customers though their price is anything but wholesale.
- Joined
- Dec 7, 2004
- Messages
- 1,533
This posts reminds me of when I walk down 47th Street in NYC and one of the diamond hawkers approaches and tells me that his store and the store across the street which he points to are wholesale prices to the public and all the other shops are retail prices. I get my daily laugh.
OP, I have said it many times on this forum, but I will say it again: You get what you pay for, there are no deals with diamonds.
Best of luck.
OP, I have said it many times on this forum, but I will say it again: You get what you pay for, there are no deals with diamonds.
Best of luck.
- Joined
- Jul 21, 2004
- Messages
- 9,159
There are a couple of dangerous assumptions inherent to your question.
1) Diamonds are sold to jewelers at lower prices called 'wholesale'. Jewelers mark up these prices and pass the product on to consumers at prices called 'retail'. This markup can be avoided by buying directly.
2) The chain has discrete layers of people called cutters, importers, wholesalers, manufacturers and so on. The closer you get to the bottom of this pile, the better the prices will be.
3) Pricing is based on some bottom line 'wholesale' value from which everyone in the chain applies a markup for their own participation.
These are not correct. Not to worry, I”m not picking on you. A lot of people make these assumptions because that's the way it works with a lot of other products. Most actually. Somebody has a factory that makes widgets. They sell them in bulk to customers who have regional warehouses who, in turn, sell them to stores in local communities. The stores sell them on to the consumers. All of these people get paid.
This is not the way diamonds work.
In the usual case, you'll go into a store and let on that you're looking for something special. A sales pitch ensues. It's possible they have it, but usually not. Inventory is terribly expensive in this business and the variety of things you might want is enormous. It would cost a fortune to keep on hand a few of each. The solution is to figure out what you want and schedule an appointment for later. After you leave, they talk to their suppliers, we'll call them wholesalers, and see who's got it. They'll consign in a few stones to show you and make the sales presentation a few days later. If you buy they take a cut and pay off their supplier, you get your goods and everyone goes home happy. If you don't buy they'll send the stone(s) back their sources and try again later. Wholesalers do a lot of this, and in jewelry lingo it's known as memo. It's what they do. For every stone they actually sell they write a half a dozen memos or more.
Memo is basically a financial service rather than the shipping and warehousing service described above. This system benefits both dealers and wholesalers. The wholesalers get to have their goods presented at a big variety of stores, not just one, and the costs of the presentation are borne by someone else (the retailer). The retailers benefit by increasing their available inventory without tying up literally millions of dollars. That saves money on both sides and it actually benefits the consumers because of it. You get better selection and possibly better prices.
So what happens when a wholesaler is also retailing? Nothing different really. The 'real' costs remain the same. That's everything from cutting to taxes to interest to sales commissions. You can't cut out the middleman because they're ALL middlemen. We're talking about the difference between one giant one and a whole chain of little ones. Anyone who wants to can fill either or both roles. They can charge whatever they want, they can sell whatever they want, and they can sell to whoever they want. In both cases it's driven by a competitive marketplace. The fact that they used to be working with dealers, or even if they're STILL work with dealers, doesn't change a thing. In particular, the assumption that this will result in better prices is simply false. They might be a great store, or not, but this decision doesn't have anything to do with it. The only deal that counts is yours, and the way to evaluate that is to compare it to other offers out there. That's easy to do, and it's the heart of what Pricescope does.
As another general observation, wholesalers as described above are having a rough time these days. Dealers are tough customers and margins are razor thin. Again, this is fundamentally a financial service where they are assuming inventory and credit risk in exchange for their profit margin. They're dropping like flies, and one of the directions they're dropping is that they're turning into retailers. What else can they do? If you had a million bucks tied up in diamonds and your business model was collapsing, what would YOU do?
As a consumer, none of this really matters. What they used to do doesn't matter. Who their other clients are doesn't matter. What they call themselves on their business card doesn't matter. Keep you eyes on the price. What are they offering, what are they charging, and why should be buying from them instead of they're myriad of competitors?
1) Diamonds are sold to jewelers at lower prices called 'wholesale'. Jewelers mark up these prices and pass the product on to consumers at prices called 'retail'. This markup can be avoided by buying directly.
2) The chain has discrete layers of people called cutters, importers, wholesalers, manufacturers and so on. The closer you get to the bottom of this pile, the better the prices will be.
3) Pricing is based on some bottom line 'wholesale' value from which everyone in the chain applies a markup for their own participation.
These are not correct. Not to worry, I”m not picking on you. A lot of people make these assumptions because that's the way it works with a lot of other products. Most actually. Somebody has a factory that makes widgets. They sell them in bulk to customers who have regional warehouses who, in turn, sell them to stores in local communities. The stores sell them on to the consumers. All of these people get paid.
This is not the way diamonds work.
In the usual case, you'll go into a store and let on that you're looking for something special. A sales pitch ensues. It's possible they have it, but usually not. Inventory is terribly expensive in this business and the variety of things you might want is enormous. It would cost a fortune to keep on hand a few of each. The solution is to figure out what you want and schedule an appointment for later. After you leave, they talk to their suppliers, we'll call them wholesalers, and see who's got it. They'll consign in a few stones to show you and make the sales presentation a few days later. If you buy they take a cut and pay off their supplier, you get your goods and everyone goes home happy. If you don't buy they'll send the stone(s) back their sources and try again later. Wholesalers do a lot of this, and in jewelry lingo it's known as memo. It's what they do. For every stone they actually sell they write a half a dozen memos or more.
Memo is basically a financial service rather than the shipping and warehousing service described above. This system benefits both dealers and wholesalers. The wholesalers get to have their goods presented at a big variety of stores, not just one, and the costs of the presentation are borne by someone else (the retailer). The retailers benefit by increasing their available inventory without tying up literally millions of dollars. That saves money on both sides and it actually benefits the consumers because of it. You get better selection and possibly better prices.
So what happens when a wholesaler is also retailing? Nothing different really. The 'real' costs remain the same. That's everything from cutting to taxes to interest to sales commissions. You can't cut out the middleman because they're ALL middlemen. We're talking about the difference between one giant one and a whole chain of little ones. Anyone who wants to can fill either or both roles. They can charge whatever they want, they can sell whatever they want, and they can sell to whoever they want. In both cases it's driven by a competitive marketplace. The fact that they used to be working with dealers, or even if they're STILL work with dealers, doesn't change a thing. In particular, the assumption that this will result in better prices is simply false. They might be a great store, or not, but this decision doesn't have anything to do with it. The only deal that counts is yours, and the way to evaluate that is to compare it to other offers out there. That's easy to do, and it's the heart of what Pricescope does.
As another general observation, wholesalers as described above are having a rough time these days. Dealers are tough customers and margins are razor thin. Again, this is fundamentally a financial service where they are assuming inventory and credit risk in exchange for their profit margin. They're dropping like flies, and one of the directions they're dropping is that they're turning into retailers. What else can they do? If you had a million bucks tied up in diamonds and your business model was collapsing, what would YOU do?
As a consumer, none of this really matters. What they used to do doesn't matter. Who their other clients are doesn't matter. What they call themselves on their business card doesn't matter. Keep you eyes on the price. What are they offering, what are they charging, and why should be buying from them instead of they're myriad of competitors?
- Joined
- Jul 27, 2009
- Messages
- 3,962
The information and advice from Denver Appraiser above is outstanding. It should be pinned for all consumers to see.
A large proportion of the retailers call themselves wholesalers in order to create an impression of preferential pricing. And as Neil explained many businesses who have in the past dealt primarily on the business to business side are having a very hard time as many stores are closing and some of those just hanging on have trouble paying their bills. A business that is having to radically change their model may themselves be having financial trouble.
By the way, just because a company is located in an office building does not tell you much. In every large metropolitan area there are many "upstairs jewelers".
The bottom line is always the complete value proposition. Reputation, credentials, selection, information, competitive pricing, assurance package, service after the sale, etc. With a diamond purchase it pays to do your due diligence on the company you choose as well as on the product you purchase.
A large proportion of the retailers call themselves wholesalers in order to create an impression of preferential pricing. And as Neil explained many businesses who have in the past dealt primarily on the business to business side are having a very hard time as many stores are closing and some of those just hanging on have trouble paying their bills. A business that is having to radically change their model may themselves be having financial trouble.
By the way, just because a company is located in an office building does not tell you much. In every large metropolitan area there are many "upstairs jewelers".
The bottom line is always the complete value proposition. Reputation, credentials, selection, information, competitive pricing, assurance package, service after the sale, etc. With a diamond purchase it pays to do your due diligence on the company you choose as well as on the product you purchase.
- Joined
- Jan 11, 2006
- Messages
- 58,578
You've been given great advice already, but I will be blunt. I consider that somewhat deceptive and would NOT consider buying from them.
Please spend more time here on PriceScope before shopping. Many of us who first came here in the same circumstance found thousands of recommendations for reputable diamond companies on the forum. More importantly, we learned how to identify well cut diamonds and how to save a lot of money. Best of luck in your search!
Please spend more time here on PriceScope before shopping. Many of us who first came here in the same circumstance found thousands of recommendations for reputable diamond companies on the forum. More importantly, we learned how to identify well cut diamonds and how to save a lot of money. Best of luck in your search!
Thank you so much for explaining all that! The company did tell me the truth that they have been slow on selling with the retails and not much are buying much as it was before so I do think that is the problem. I'm so unsure what to so still.. I had already put down a down payment on a diamond but had changed my mind on that diamond, so he will show me more diamonds
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