August 21, 2016

“Wholesale” Diamonds

Wholesale Diamonds to the public- largely a marketing ploy.

Wholesale Diamonds to the public- largely a marketing ploy.

Wholesale
Noun: The selling of goods to merchants; usually in large quantities for resale to consumers.

Retail
Noun: The selling of goods to consumers; usually in small quantities and not for resale

Wholesale Diamonds are not sold singly, they are sold in parcels.

For starters, let’s assume that your interest in reading this article is because you are a consumer interested in buying a small number of diamonds and that they will not be for resale. That is to say, the potential transaction involving you is retail. It’s always possible that they occasionally also sell to other customers in large quantity for resale. Not that this has anything to do with you but it would allow them to accurately call themselves wholesalers, at least occasionally, so let’s move on.

Here’s how the wholesale diamond business really works:

There is a standard practice called memorandum or ‘memo’. This is a consignment arrangement between a wholesale diamond merchant and a retailer where the retailer can show you stones that are actually owned by someone else and that they have borrowed for the purpose of showing to you. If you buy a memoed stone, the store will then give the money to the wholesaler, less the store’s share and the entire deal goes through. If you don’t buy, they return the stone to the wholesaler who then tries to sell it somewhere else. This gets repeated for as long as it takes. Eventually,it will find a home.

This system has lasted for decades because it works to the benefit of both dealers. For the retailer, they have access to a virtual inventory that is enormous and this allows them to get exactly what the client wants without the expenses associated with carrying a large inventory. For the wholesaler, they get to share their inventory across many stores and many different markets. They can end up making sales to customers that are dispersed throughout the country, or even worldwide and who have a huge variety of different shopping preferences ranging from discount websites to pawn shops to exclusive designer stores. Because of the speed of selling they can afford to carry in inventory unusual items that may take an individual store years to sell but by sharing it between many stores they can get their money out in a reasonable amount of time. It’s a very synergistic arrangement.

No sensible dealer, storefront or otherwise, will knowingly buy from a ‘wholesaler’ who is directly competing with them for customers. It just doesn’t make sense. It costs them customers, it costs them money and there are way too many alternative sources available for them to need to put up with it. It’s downright self-destructive. This means that your self described ‘wholesaler’ probably isn’t doing much wholesale business, if any at all. Not that it even matters all that much. Pay attention the deal at hand

Claims of wholesale-to-the-public have become so common in the industry that even some high-quality jewelers are doing it. This is especially true of online vendors. It’s simply expected by the customers and the ones that avoid it are seen as somehow inferior. Don’t put much stake in it. Examine each stone on it’s own merits. If the dealer has added value to the deal with things like financing, guarantees,and convenience they will probably charge a little more. If they are a discount, stripped-down sort of operation, they may be a little cheaper. If you have a good idea of what you find important it’s easy to evaluate each deal for it’s own strengths and weaknesses no matter how the dealer chooses to describe themselves.

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