How to Buy Wholesale Diamonds online 2021

How to Buy Wholesale Diamonds online 2021

How to Buy Wholesale Diamonds online 2021

Posted by Sharif Khan on 21st Mar 2021

Is it Possible to Buy Diamonds at Wholesale Price as a Consumer?

If you are shopping for a diamond and looking to maximize your budget, this article will be the best thing you have read as I will try to share the best insights of the industry with you based off my 10+ years of experience.

Diamonds Online

This article will cover the following topics:

  • How the diamond industry works, especially the ecommerce world
  • Who are the miners, the wholesalers, and the retailers
  • Why everything works on a markup system
  • How can you as a consumer maximize your budget
  • And a bonus: the seven factors that affect the price of a diamond

I want to clarify, this article is not written with intent to sell you something or advertise to you, but it is purely for the purpose of education. 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 us and the credibility of the industry in the long-term.

Before I attempt to answer your question and provide some insights, I think the best question to ask is this – Can I buy wholesale diamonds online or is it possible as a consumer to buy wholesale loose diamonds at all?

The short and simple answer is: No, or mostly like not. Why? Because of the way the diamond industry is setup. Below is a detailed explanation, but also tips for how you can get a deal that would be just 6-10% more than the actual wholesale price of a diamond.

Pay attention to the next paragraph carefully as it contains the most relevant information to your question.

The setup of the diamond industry, especially the online commerce of diamonds:

There are four broad categories of players that are highly interdependent on the input of each player for the diamond industry to function as a machine. 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. Let me explain how each one depends on the other so you understand why it is unlikely for you as a consumer to buy a diamond wholesale.

Wholesale Diamonds

Let me 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 massive upfront cost to run a mine and manage the associated risks that comes 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, in order 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 for example who is one of the leaders of polished diamonds, but they won’t sell to consumers, and I will explain below why.

James Allen

In the next phase of this supply chain, the Dealers cuts/polishes the diamonds for resale to retailers. Kiran Gems would be an example of a dealer. Around 90%+ of all diamonds are cut and polished in Surat - a small city in Gujrat, India. Once the stones are cut, they are often then taken to one of the regional trading hubs – namely Mumbai, Honk Kong, Antwerp, Tel Aviv, and New York City, among others.

Now for the diamonds to be sold, a comprehensive marketing and sales funnel needs be set up that can actually sell diamonds in volume to sustain the cost of the dealers – advertising needs to happen, shops needs to be open, customer support needs to be provided, and for all that, dealers just don’t have the means or expertise. Therefore, dealers depend on the expertise of three set of Retailers such as the designers of jewelry, brick and mother stores retailers, and online retailers.

In terms of the Designers, there are two type jewelry designers – ones that only deign for other retailers which should be considered as dealers/wholesalers (a vast majority of designers fall under this category) and others that design customized jewelry for consumers/end users. Without designers, the industry won’t have the diversity of products to sell diamonds in large quantities in rings, bracelets, necklaces etc. 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 and do not sell to end users, and Tiffany & Co on the hand would be considered as a designer that sells to end users directly (but have unreasonable mark ups).

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 is very slim (they might call themselves wholesalers, but in reality it really isn’t true). The question now is how should you find a trusted retailer that would give you the best possible price? I think 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 cost for running their businesses and can therefore provide you 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 that are available in the diamond market through RapNet – which is an online marketplace for all dealers to list their diamonds for retailers to sell. Consumer can not access it and you need to be an established business with a track record in order 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 in 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 will request owners of the diamonds (dealers) to memo the stone to them – memo is basically 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 that is listed on one website to be also listed on other – the only place it might not be the case is on big websites like James Allen and Blue Nile. They are big companies with a lot of volume and they use that power to their advantage. They basically demand the dealers they work with to not allow other retailers to list the stones publicly on other websites if they want it listed on Blue Nile or James Allen (all retailers can still buy or access them on RapNet, but can’t list them publicly on their websites).

For example, we can get any stone that is listed on Blue Nile and James Allen and can sell it you for 10% or more less, but we won’t be able to publicly display that particular diamond on our website – all you will have to do is provide us the GIA report number of the stone and we will get it for you for much less!

Now it all comes to 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:

  • 1.Online Regular Retailers – 6-30% markup (see the below examples)
  • 2.Online Established Luxury Brands such as Tiffany/Cartier – 100-200% markup which we think is ridicules because they sell the same diamonds as we 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 exactly the same as anyone else’s diamonds).
  • 3.Local brick and mortar stores – 20-100% markup. Basically, all sorts of unethical practices happen in the local stores. More than often 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 say in a proper GIA graded high quality diamond - they can't mislead you in terms of grading in a GIA grading diamond. 

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 that you buy a diamond online because they naturally have lower overhead cost and can afford to sell you a diamond for a much lower markup. Companies like  Petra Gems especially are more competitive because we have a very lean operation and do not advertise as heavily as say Blue Nile and James Allen so we can afford to make our markup as low as 5-6% with a wire transaction (it is  slightly higher with a credit transaction because 2-3% of the total payment goes to the credit card company).

So what you should do is to compare the prices of at least 4-6 online competitive 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 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:

Round Cut Diamond

The shape of a diamond – for example, in order 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. However, please not that scarcity plays a big role in this as well. 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.

The cut of a diamond – a well cut diamond will have optimal brilliance and fire and therefore will have a significant effect on the price.

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 in high diamond, but Slightly Included (SI1/SI1) are great options for people with budget constraints.

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 none to very strong blue.

Finally, the seventh important factor in a diamond that affect the price of the stone 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 be to always buy a stone that comes with a high quality grading report like that of GIA or AGSL (the American Gems Society Laboratories). 

Please to do not hesitate to contact us if you have questions and make sure to compare diamond prices in our diamond filter page. We published hundreds of thousands of diamonds from thousands of dealers in one central location.