How to Buy Wholesale Diamonds?
Is it possible to buy wholesale diamonds online, and/or, as a first-time buyer, is it possible to buy wholesale loose diamonds at all?
The quick and simple answer is "no." As explained below in detail, simplify the reason being how the diamond industry is set up. However, there are ways to get a diamond at close to wholesale price if you follow the tips in this article.
The purpose of this article is not to sell or advertise, but rather to educate. As a company, Petra Gems is dedicated to the transparent trade of diamonds and precious gemstones. The more transparent the industry, the better it is for the industry's growth and credibility in the long term.
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This article will attempt to answer the following questions:
- How does the diamond industry work, especially in the e-commerce world?
- Who are the miners, wholesalers, and retailers?
- Why does everything work on a markup basis?
- How can a consumer maximize their budget?
- Bonus: what are the most important factors that affect the price of a diamond?
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The setup of the diamond industry: the online commerce of diamonds
For the diamond industry to function as a machine, there are four broad categories of players that are highly interdependent on the input of each other. These include the miners, the dealers (who are also often the buyers of the rough diamonds to cut them into final products), the designers of jewelry, and the retailers. After explaining how each one depends on the other, you will understand why it is unlikely as a consumer to buy a diamond at wholesale price.
Let's begin with the Miners. In the formal diamond industry that only deals in conflict-free diamonds and ones that are verified by the Kimberly process, only large multinational diamond corporations like Dee Beers or Al Rosa can be successful as miners as it requires a massive upfront cost to run a mine and manage the associated risks that come with it (many mines also fail after massive investments in them). Once these miners mine the stones, they often sell them as rough uncut diamonds in large quantities to established diamond dealers – for example, to buy from Dee Beers, you need to be a sightholder (Global Sightholder Sales), and that alone could cost millions. One prominent sightholder is Kiran Gems in India, one of the leaders in polished diamonds, but they wo not sell to consumers, and I will explain below why.
Kiran Gems would be an example of a dealer. In the next phase of this supply chain, the Dealers cut/polishes the diamonds for resale to retailers. Around 90%+ of all diamonds are cut and polished in Surat, a small-town Gujrat, India. Once the stones are cut, they are often taken to one of the regional trading hubs – namely Mumbai, Honk Kong, Antwerp, Tel Aviv, and New York City.
For the diamonds to be sold, a comprehensive marketing and sales funnel needs to be set up that can sell diamonds in volume to sustain the cost of the dealers – advertising needs to happen, shops need to be open, customer support needs to be provided, and for all that, dealers just do not have the means or expertise. Therefore, dealers depend on the expertise of three sets of Retailers: the designers of jewelry, brick and mother stores retailers, and online retailers.
In terms of the Designers, there are two types of jewelry designers that only design for other retailers that should be considered dealers/wholesalers (a vast majority of designers fall under this category) and others that design customized jewelry for consumers/end users. The designers that work directly with end users often have sophisticated fine jewelry and have high markups on their products. Stuller, for example, is a designer that only works with retailers while does not sell to end users, and Tiffany & Co, on the other hand, would be considered a designer that sells to end users directly (but has unreasonable markups). Without designers, the industry would not have the diversity of products to sell diamonds in large quantities in rings, bracelets, necklaces, etc.
In this play of interdependence, by now, I hope you have understood that your chances of buying a diamond from anyone else other than the Retailers are very slim (they might call themselves wholesalers, but, it really is not true). The question now is; how should you find a trusted retailer that will give you the best possible price? between retailers that have physical stores and online retailers, your best bet is to focus on online retailers for maximizing your budget because they have lower overhead costs for running their businesses and can therefore provide you with a more competitive price.
The most important catch a must know – why you might find the same diamond on many websites?
Here is the most important catch, unless they are very small. Almost all online and local retailers have access to all diamonds available in the diamond market through RapNet – an online marketplace for all dealers to list their diamonds for retailers to sell. A consumer cannot access it, and you need to be an established business with a track record to qualify for membership. In other words, the stones that the retailers show you or display on their websites are not actually owned by them but are provided by the dealers through a central mechanism (RapNet) to be shown to you. Here is how it works:
- Online: the retailer will publish all stones available on RapNet on their websites, and once you buy a particular stone, the retailer will contact the dealer to send them the stone, and then the retailer will send it to you and, in the process, will take his/her cut.
- In local store: once you visit them and tell them what you are looking for, they will make a shortlist of 3-5 options and request the owners of the diamonds (dealers) to “memo” the stone to them – the memo is temporary borrowing of the stone. If the diamond is sold, the retailer will send the dealer a payment for the stone, and if it is not, he/she will just return the stone to the dealer.
Because all retailers have access to all dealers' stones, it is very common for a stone listed on one website to be listed on the other – the only place it might not be the case is on prominent websites like James Allen and the Blue Nile. They are big companies with many volumes and use that power to their advantage. They basically demand the dealers they work with not allow other retailers to list the stones publicly on other websites if they want it listed on the Blue Nile or James Allen (all retailers can still buy or access them on RapNet, but ca not list them publicly on their websites).
For example, we can get any stone listed on the and and can sell it to you for 10% or less. Still, we will not be able to display that particular diamond on our website publicly – all you will have to do is provide us with the GIA report number of the stone, and we will get it for you for much less!
Now it all comes down to this – who will sell the diamond to you with the lowest markup?
Based on our experience, here is what we think the markup range is now:
- Online Regular Retailers – 10-30% markup (see the below examples)
- Online Established Luxury Brands such as Tiffany/Cartier – 100-200% markup, which we think is ridiculous because they sell the same diamonds as we do or anyone else with the same certification (GIA), cut etc. You will just be paying more for the sake of the name, quality-wise. Their diamonds are the same as anyone else’s diamonds).
- Local brick and mortar stores: 20-100% markup. More than not, they will first assess your knowledge of diamonds and the diamond market in general to determine whether to sell you a high quality diamond or a junk diamond and with how much markup. They like to sell junk diamonds because they can get a much higher cut in them than in a proper GIA graded high quality diamond - they cannot mislead you in terms of grading in a GIA grading diamond. All sorts of unethical practices happen in the local stores.
Example of markups among most competitive online retailers (this is our best guess):
Now that you are familiar with the operating structure of the diamond industry, how can you buy a diamond with the least markup possible?
Our strong recommendation would be to buy a diamond online because they naturally have lower overhead costs and can afford to sell you a diamond for a much lower markup. Companies like James Allen especially are more competitive because they have high volume and low overhead cost.
The best approach is to compare the prices of at least 4-6 competitive online vendors, which will give you a clear sense of how low you can get a particular diamond, but before you do that, it is imperative that you have some degree of knowledge about the 4Cs of a diamond and other important factors that affect the price of a diamond - explained below.
The seven most important factors that affect the price of a diamond and that you should be familiar with include:
The shape of a diamond – for example, to cut a round diamond, you need a bigger rough diamond to cut a 1ct. round than you do to cut a 1ct. princess cut diamond – the diameter of the round is roughly 6.4mm whereas the diameter of a 1ct princess cut is 5.5mm on average.
The carat weight of the diamond – the larger the diamond, the higher the price. For example, 2 carat diamond would be 3 times the price of a 1 carat because bigger diamonds are scarcer than small diamonds and are therefore much more expensive. However, please note that scarcity plays a big role in this.
The cut of a diamond – a well-cut diamond will have the best brilliance and fire, so the price will be affected.
The color of a diamond – the less color a diamond has in white diamonds, the more expenses. Color range is from D-Z and D-F are considered colorless diamonds. G-J are near colorless and are very good options for people with budget constraints.
The clarity of the diamond – the fewer the inclusions or impurities in a diamond, the more expensive the stone. Flawless to Very Slight Included (VVS and VS) range diamonds are high diamonds, but Slightly Included (SI1/SI1) are great options for budget-conscious people.
Fluorescence also affects the price of a diamond – it is an invisible glow that diamonds might emit under ultraviolet rays such as the sun and certain UV lights. They range from no blue to a very strong blue.
Finally, the seventh important factor in a diamond that affects the stone's price is the certification/grading of the stone. Labs such as the Gemological Institute of America are very reliable and consistent in their grading, and therefore, stones graded by them will reflect that factor in their prices. On the other hand, there are many shady labs that you should avoid. Our advice would always be to buy a stone that comes with a high-quality grading report like GIA or AGSL (the American Gems Society Laboratories).
Please do not hesitate to contact us if you have questions or to compare diamond prices on our diamond filter page. We published hundreds of thousands of diamonds from thousands of dealers in one central location.