Reuven Kaufman, who is president of the New York based Diamond Dealers Club said, “When you buy a diamond at a retail level, especially from an elegant, high-end retailer, you’re not just paying for the diamond… You’re paying for the whole ambiance that surrounds the diamond – the rent for the store, the marketing, the glitz.”
Another large factor that you pay the extra cash for is the security of legitimacy in what you are buying. The wholesale diamond market might not be able to match the style of the commercial market, but you cannot argue with the prices.
Martin Rapaport, chairman of Rapaport Group stated, “you can’t buy an investment in retail and sell it in wholesale… Who are you going to resell the diamond to? You’re not going to open up your own store to sell it back… You’re going to sell it wholesale, and that’s a different market.” In 2011, Bain & Co published a report that found the difference in markup between prices of diamonds from the manufacturer and the retailer was 25.2%. The Rapaport Group sells around 50,000 carats worth of used diamonds at auction monthly.
There are 2,600 companies in New York’s diamond district alone that deal in wholesale. Diamonds can be a solid investment and it’s not that hard to get into. The fact diamonds can be artificially created means there is a whole host of diamond grades to choose from.
Kaufman says, “An investment diamond is what’s called ‘gem quality… You put it in a safe and you know you can trade it for money later on.” The other end of the spectrum is not worth the hassle though. The lower end of the industry isn’t considered a good investment decision. Kaufman added, “It’s slightly imperfect. Near-white and completely eye-clean”. This means the diamonds may initially look of good quality, but they aren’t.
Over the last few years the popularity of medium priced diamonds has sky rocketed. Rapaport says, “There are major macro-economic forces that affect diamond prices”. He and Kaufman put this down to a growth in the middles classes in India, China and other Asian countries. Kaufman stated, “They’re beginning to buy the American diamond… so the bridal stone has risen in value quicker than ever before, because the whole world is chasing the same diamond.”
So, how much would you lose if you guys split up?
When asked how much you would lose if you and your fiancée/ wife split up, Rapaport replied “Hard to say. If you tried to resell a diamond after one year, you’d probably lose 10% to 20% of what you paid, but if you held on to it for a longer period of time, you might have better luck.”
Selling back to the retailer themselves is your best bet according to Kaufman: “The jeweler has an interest in keeping you as a client”.