Loose Wholesale Diamonds: How to Buy?

Before we address the question and offer insights, let's first pose the fundamental query: Can you acquire wholesale diamonds, or is it feasible for a consumer to purchase wholesale loose diamonds?

The concise and straightforward response is "No." Why, you might ask? The diamond industry inherently fosters collaboration among miners, wholesalers, jewelry designers, and retailers to ensure its sustainability.

Outlined below is an elaborate explanation, along with some pointers for securing a deal that would merely be 10-20% higher than the actual wholesale price of a diamond.

Pay close attention to the subsequent section as it encompasses the most pertinent information.

To maintain the diamond industry's seamless operation, it relies on the collaboration of four primary categories of participants, each intricately reliant on the contributions of the others. These categories encompass the miners, the dealers (who frequently purchase rough diamonds that are subsequently shaped into finished products), the jewelry designers, and the retailers.

Here is how each depends on the other so that you understand why you are unlikely to buy a diamond at wholesale price as a consumer.

Beginning with the miners, in the formal diamond industry that only deals in conflict-free diamonds and ones verified by the Kimberly process, only sizeable multinational diamond corporations, such as De Beers or Al Rosa, can be successful miners. Running a mine and managing its risks require a massive upfront cost (many mines fail after huge 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 De Beers, you must be a sightholder (Global Sightholder Sales), which alone could cost millions. A prominent sightholder is Kiran Gems in India, one of the leaders in polished diamonds, but they do not sell to consumers. We will explain below why.

In the next phase of this supply chain, dealers cut/polish 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 Gujarat, India. Once the stones are cut, they are often taken to one of the regional trading hubs, Mumbai, Honk Kong, Antwerp, Tel Aviv, and New York City.

For the diamonds to be sold, a comprehensive marketing and sales funnel must be set up to sell diamonds in volume to sustain the dealers' costs. Advertising needs to happen, shops need to be open, and customer support needs to be provided, but dealers need the means or expertise. Therefore, dealers depend on the expertise of three sets of retailers: designers of jewelry, brick and mother store retailers, and online retailers.

There are two types of jewelry designers, including those who only design for other retailers, considered dealers/wholesalers (a vast majority of designers fall under this category), and others who create customized jewelry for consumers/end users. The designers who work directly with end-users often have sophisticated fine jewelry and high product markups. Stuller, for example, is a designer who only works with retailers and does not sell to end users. At the same time, Tiffany & Co would be considered a designer dealing directly (but with unreasonable markups). With designers, the industry would have diverse products to sell diamonds in large quantities in rings, bracelets, necklaces, etc.

In this play of interdependence, we hope you understand that your chances of buying a diamond from anyone but a retailer are slim (they might call themselves wholesalers, but it is never confirmed). Hence, the question is; how do you find a trusted retailer to give you the best possible price? Between retailers with physical stores and online retailers, your best bet is to focus on the latter to maximize your budget. They have lower overhead costs for running their businesses and can provide a more competitive price.

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; you must 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 owned by them; instead, they 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. Once you buy a particular stone, the retailer will contact the dealer to send them the stone, which will then be sent to you. The retailer will, in the process, take their cut.

In local stores: 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 pay the dealer; if it is not, they will return the stone to the dealer.

Since retailers have access to dealers' stones, it is common for a stone listed on one website to be listed on the other. It might not be true only on prominent websites like James Allen and Blue Nile. They are big companies with many volumes and use that power to their advantage. They demand that the dealers they work with not allow other retailers to list the stones publicly on other websites if they want them listed on theirs (all retailers can still buy or access them on RapNet but cannot display them on their websites).

Based on our experience, here is what we think the markup range is now:

• Online Regular Retailers – 6-30% markup (see the examples below)
• Online Established Luxury Brands, such as Tiffany/Cartier– 100-200% markup, are ridiculous because they sell identical diamonds as anyone else with the same certification (GIA) and cut. You will pay more for the name's sake; quality-wise, their diamonds are the same as anyone else's).
• Local brick-and-mortar stores: 20-100% markup. More often than not, they will first assess your knowledge of diamonds and the market, in general, to determine whether to sell you a high-quality diamond or junk 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 one—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):

• James Allen – 15-20% markup
• Blue Nile – 15-25% markup
• Brilliant Earth – 20-30% markup

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 your 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 are especially competitive because we have incredibly lean operations and high purchasing power.

Therefore, you should 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.

The seven most important factors that influence the price of a diamond and that you should be familiar with include:

1. Shape: You need a bigger rough diamond to cut a 1ct. round diamond than you do to cut a 1ct. princess-cut diamond. The diameter of the round is roughly 6.4mm, whereas that of a 1ct princess cut is 5.5mm on average.
2. Carat: The larger the diamond, the higher the price. For example, a 2-carat diamond would be three times the price of a 1-carat because bigger diamonds are scarcer than smaller ones and are much more expensive.
3. Cut: A well-cut diamond will have the best brilliance and fire; it is the most important C to prioritize.
4. Color: The less color a diamond has, the more expensive it will be. Color ranges from D-Z, and D-F are considered colorless. G-J are near colorless and are excellent options for people with budget constraints.
5. Clarity: The fewer the inclusions or impurities in a diamond, the more expensive its price. Flawless to Very Slightly Included (VVS and VS) range diamonds are highly demanded, though Slightly Included (SI1/SI1) can be great options for budget-conscious people.
6. Fluorescence: an invisible glow that diamonds might emit under ultraviolet rays, such as the sun and certain UV lights. They range from no blue to very strong blue.
7. Certification: The seventh important factor in a diamond that affects its price is certification/grading. Labs like the Gemological Institute of America are reliable and consistent in grading; therefore, their graded stones will reflect that factor in their prices. On the other, there are many shady labs that you should avoid. We always advise buying a stone with a high-quality grading report from GIA or AGSL (the American Gem Society Laboratories).

Please do not hesitate to contact us if you have questions and compare our diamond prices.