File 2015-10-01, 4 23 48 PM

PART 2: THE DIAMOND BUYING PROCESS

One of the most common questions I am asked at Cavalier is “why are two diamonds a different price when they have a similar GIA report?”. This is a multi faceted-question – pun intended for the 2.3% of you who appreciate gemstone related humour – which essentially boils down to one explanation: because a GIA report does not include a price (be it wholesale, retail, fixed or recommended), each diamond’s price is borne out of a negotiation between the dealer in New York (or wherever) and myself.

 

To put these negotiations in a more familiar context, imagine you’re in the market for a new car. You go to the dealership and all the specifications (except price) are listed on the car; year, model, make, km’s, Bluetooth, GPS, etc. Based on yours and the dealer’s knowledge of vehicles and relevant market trends, you’ll figure out a ballpark price and eventually settle on something within shouting distance of that number. Here, the car itself is the diamond and the specs would represent the GIA report.

 

Put another way, we can use professional sports as they are surprisingly comparable to the process we are taking about. In the NHL, there is no set salary for a player if he reaches certain statistical benchmarks. For example, if Player A reaches 40 goals and 80 points in a contract year it doesn’t automatically get him exactly 8m per year in his new deal. However, much like the market is somewhat established for diamonds of a certain quality, we can safely assume Player A – depending on age, position, marketability, comparable contracts etc. – will probably earn between 7.5 – 9m per year on his next contract. The fluctuation will depend some on the desires of the player but more on the negotiating skill of the team’s General Manager and the Player Agent.

 

Essentially, like the specs of a new car or the statistics of a professional athlete, the qualities identified within a GIA report are used by those in the business to establish a starting point in negotiations; where those negotiations go is up to the people involved.

 

Now that we are on the same page (I think), let’s look at physically buying diamonds first hand. This comes down to comparing and evaluating; that is, comparing each diamond to similarly graded stones – in our hockey analogy this would be comparing Sidney Crosby to Jonathan Toews and Steven Stamkos instead of Brandon Dubinsky and Taylor Hall. Then, when evaluating, you are haggling over how much more (or less) Crosby is worth than Tavares and Toews.

 

No matter how you look at it, buying is one of the most challenging and draining exercises those in the trade get to experience. Sitting at a desk for 10 hours “playing” with diamonds (as some of my friends call it) is so much more demanding than one thinks.

 

It’s all fun and games until 3 hours into a buying session your neck seizes up, you’ve got a dozen missed work related calls from home, and your exhausted from the previous night out with old friends and colleagues. And yah, just when you’re about to add up the real cost of your negotiations, you remember the Canadian dollar is getting clocked worse than whoever Ronda Rousey is fighting that night.

 

Eventually, after I’ve set aside some selections to negotiate on – and been assured we’d ordered lunch from “Bombay Palace” – I ask myself four critical questions and one moderately important one:

 

  • What would I grade the 4 c’s?
  • How much do I think I can sell it for?
  • What am I willing to pay for it?
  • Do I truly believe it will speak to a potential client alongside my current inventory?
  • I wonder what time lunch is finally going to arrive? (this is the moderately important one)

 

If a diamond or gemstone meets all of these criteria off the bat, the deal is done in 10 seconds. Other times, you need to slow play it depending on the dealer. Some dealers allow negotiation, others don’t.

 

The toughest dealers know someone else will come down and, because a stone is so beautiful, give them what they want no matter what the GIA report says. This is a main reason for price fluctuation and it can be frustrating.

 

It only takes one person to fall in love with a stone and skew the market, rendering the GIA paper (your supposed starting point and negotiating guideline) irrelevant. This is why, unless I am under direct instruction from a client to get a specific diamond, I try to stay within a justifiable range of the GIA report. If I significantly overpay for a diamond, I could be stuck with a stone nobody wants at the price necessary for me to make my money back. Wow, that sentence was convoluted. Basically, overpaying does not benefit me or you and that diamond becomes the retail jewellery store version of the untradeable contract.

 

So, now you know. And knowing is half the battle.