How Diamond Dealers and Retailers Buy Diamonds

There are three ways that someone selling a diamond, whether it be a retailer or diamond dealer can buy diamonds. Ultimately, the method used affects both the quality and the price of the diamond.

Firstly, a dealer can buy diamonds in parcels. This involves the dealer specifying the size of the individual stones, colour, clarity and make, along with the total quantity needed. Buying diamonds in this fashion allows for huge cost savings. However, the drawback is that within the parcel, whilst there will be a few good stones (above the quality that was ordered), there will also be bad stones (below the quality that was ordered). Add to this the fact that these stones are never independently certified, nor do they have cut information, and it’s easy to see why buying larger stones in this fashion never produces the best quality. That said, melee (small diamonds under 20 points) is almost exclusively sold in this fashion.

The second method is to buy stones in individual lots. Certified or uncertfied, this method usually lends itself to better disclosure of the colour, clarity and cut quality of the diamond. Therefore, buying high quality stones using this method is a must, and therefore more expensive than buying in parcels.

Note that both these methods involve transactions, either cash or credit between the buyer and seller. However, the third method is called buying stones “on memo” or “on approval”. This involves a wholesaler sending one or more diamonds to a retailer to either display in their shop window or show to an individual client. This allows the retailer to display what is seemingly their own stock to clients without any capital outlay. However, because of the extra service, and the fact that the wholesaler is funding the retailer’s stock, this is usually the most expensive way that a retailer can purchase diamonds. Add to that the fact the retailer is at the whim of the wholesaler, quality and availability may be very volatile. However, it does allow retailers to offer their clients a wider choice, especially if they have unusual requests.

This entry was written by Nikhil Jogia and was posted on on Wednesday, October 10th, 2007 at 11:13 am and is filed under Diamond Industry. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.