Internally, we like to boast about monthly net gross margins. For example, in February, they were about 15%, meaning gross margins (selling price minus the actual cost of raw materials) would be about 20%.
However, every so often someone sees a diamond from our international selection and offers us a price 40-50% off what is listed. Of course, we can’t accept, because we don’t operate on retail margins. On the flipside, we don’t maintain retail overheads either.
So, how big are our margins?
Let’s take a typical $6000 (ex GST) diamond from our international selection and break it down:
$5000 – Price paid to wholesaler or cutter.
$240 – 4% online, cash discount.
$200 – Shipping, customs fees, valuation or certificate confirmation and bank fees.
That means that the total cost to us of the diamond is $5200, and our sell price is $5760, leaving us with $560 of gross margin or 10.8%.
Now assuming our overheads are between 5-10%, that leaves very little in the way of net profit for the company to grow. Of course, we and others wouldn’t be here if we solely sold diamonds from wholesalers over the internet. The truth is, we make the majority of our profits from customers buying in person from stones in our inventory – something that some online merchants don’t have.
AUD 