Ramble On Ron

Diamonds, Music and other Facets of Life

Message To Retailers: Buy Diamonds For Stock!

Posted on | January 28, 2012 | 4 Comments

In today’s economic climate, jewelry retailers need to find new ways to increase margins, while still competing with e-tailers and everyone else in their market. Buying gold has become a necessity for a lot of traditional retailers in order to keep cash flow positive. However, the gold buying train won’t last forever. Even the popular website/company Cash4Gold seems to have run it’s course.  Don’t get me wrong, there is still money in gold buying, but the frenzy that went on for the past ten years is over.

Round Diamond with Baguettes

Round Diamond with Baguettes

So what else can retailers do to increase profitability? BUY DIAMONDS FOR STOCK! Most jewelry stores do not do this – they either have diamond companies leave stones with them and pay when they are sold, or they call a dealer when they have a specific need. This practice is old and antiquated and in my opinion; those days will be over soon. Twenty or thirty years ago, jewelers could get items on consignment and make DOUBLE their money on it. Not anymore! Consumers are too educated for that. The internet has leveled the playing field in a big way.

In my business, we’re kind of a hybrid between a retailer and diamond dealer. We buy a lot of diamonds from the public, at auction, from dealers, from other jewelers, or any place where we can find good deals. So we OWN all of our diamond inventory. We sell to retail customers and to the trade on a regular basis. It gives us a huge advantage in the diamond world because we know where diamond dealers will buy (because we sell to them) and we know what their prices are. Any savvy jeweler can buy diamonds from dealers at a better price than their “list” or “consignment” prices. How? Pay cash up front. It’s that simple – just buy for stock.

How much can you save? That all depends on the stones you are buying. In my estimation, you can save anywhere from 10-30%. Think about it, diamond dealers/manufacturers are GIVING you inventory and WAITING to get paid. Don’t you think there is a HUGE premium on those stones for that reason? Well there is! Everyone wants to get paid right away these days.

If you were in your diamond inventory for 20% less, not only would you be increasing your margins, but you could also give your customers better deals, and these days, that’s important. Go try to tell Rolex, Cartier or Tacori that you want to pay them right away but want to get 20% off – hell, they won’t even give you 5% off!

Now, the argument against this is that jewelry stores have to pay for their high end jewelry lines and watches, so their cash flow doesn’t allow them to buy diamonds. This doesn’t make sense to me. If you buy into a bridal, jewelry or almost any watch line, (expect a few that hold value) you are usually buying a name brand. If you get stuck with items that you can’t sell, you have to take pennies on the dollar when you liquidate. Diamonds, on the other hand, are very liquid and if you buy right, you won’t lose a nickel when you have to sell. Doesn’t that make sense? It’s important to own something of value and pay a good price for it.

I would love to hear some thoughts from retailers on this subject.

P.S. I own a lot of diamonds and can sell to you for less than any dealer! 🙂