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Which Diamond is Overpriced?

09/12/2023 | Kennon Young

A recent infographic circulating on social media highlights the price disparities between lab-grown and natural diamonds. This informative graphic, titled "Which Diamond is Overpriced?" was released by Martin Rapaport and shared publicly. Upon careful analysis, it appears to convey a message of skepticism toward those selling laboratory-grown diamonds, suggesting they might be driven by profit motives.

"Which Diamond is Overpriced?" Infographic available at www.rapaport.com

Which Diamond is Overpriced? Infographic by www.rapaport.com

Why Now and Not Then?

Imagine if a similar infographic had surfaced 15 years ago when the diamond market was thriving, and lab-grown diamonds were not as prevalent. It would likely have provoked significant reactions, especially considering the credibility of its source, one of the most renowned figures in the diamond industry.

With 25 years of experience in the jewelry sector, I still lack insights into the pricing dynamics within the diamond supply chain. I remain unaware of the costs at which diamond wholesalers acquire their inventory or the margins added by site holders, mining companies, or diamond manufacturers. This raises the question: Why is it now deemed appropriate to disclose retail markups openly, whether pertaining to lab-grown or natural diamonds? If transparency is the goal, perhaps we should extend it to include pricing and markups for wholesalers.

Historical Perspective

Reflecting on my own experiences as a young retailer in the late 2000s, operating out of a modest 350-square-foot space within an outdoor mall in an economically challenged area, times were undeniably challenging. Despite my extensive education from institutions like the Revere Academy of Jewelry Arts in San Francisco, GIA in Carlsbad, and courses through the American Society of Appraisers, I faced significant financial burdens, including approximately $34,000 in student loans. Despite being educated and well-diversified compared to local competitors, even the larger retail chains with established resources struggled due to online retailers offering diamonds at significantly lower prices.

I vividly recall contacting diamond wholesalers with whom I had established relationships, only to receive quotes closely mirroring what online retailers were charging. The critical difference was that I had to factor in a 7% tax while online retailers did not. In some cases, I found myself selling diamonds at retail prices lower than my purchase costs, resulting in negative profitability.

The Significance of the Shift

During this challenging period, I didn't witness any prominent figures from the diamond industry stepping in to support the multitude of family-run brick-and-mortar stores facing diminishing returns. Instead, there was a prevailing sentiment of "adapt to modern times." That wasn’t much of a comfort while I paid heating bills in my studio through the cold Vermont winters.

Similarly, I observed that brick-and-mortar stores did not attempt to undermine or sabotage online retailers that were causing a substantial dent in their business.

Today, it appears that some individuals within the manufacturing sector of the industry are willing to publicly criticize retailers and disclose sensitive information that could potentially harm their financial interests and reputations. The significant difference, however, lies in the fact that the manufacturers now bear a greater risk of disruption from market changes.

In conclusion, the evolving landscape of the diamond industry raises important questions about transparency, fairness, and cooperation among its various stakeholders. As we continue to witness shifts in consumer preferences and the emergence of innovative technologies, it's crucial for the industry to engage in constructive dialogues that benefit everyone involved. Instead of perpetuating division, collaboration among manufacturers, wholesalers, retailers, and consumers can lead to a more equitable and sustainable future for the diamond market. By working together and addressing challenges with an open mind, we can build a diamond industry that thrives while upholding the highest standards of integrity and fairness.

 

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