Why You Will Lose Money Selling Your Diamond

Bottom Line Recommendation: There is virtually no chance you will turn a profit or even break-even selling a diamond you’ve bought in the last decade.

If, however, you need to sell your diamond, then we might have the best possible solution for you. After a year of data, we have found that Abe Mor consistently offered the highest cash offer for jewelry and had the best customer service in terms of communication and ease of dealing with them. 

We vetted the buyers of diamonds in the world and have found whom we believe to offer the most money and the most security for our readers.

Click here to send us information about your diamond that we will pass on to the buyer.

In Response to One of Our Readers’ FAQ

Occasionally, as an editor of this site, you have the pleasure of writing an article that’s a direct response to our readers’ most common questions.

With the high volume of email questions we receive, it’s always helpful to have an already prepared article that addresses a reader’s question or at the very least enriches his or her understanding of the topic at hand.

The Simple Q&A

A common question we receive is often along the lines of, “I have a diamond a few years old that I need to sell. How can I get the best price possible? Is there any way I can turn a profit?”

Of course, the answer is almost always an emphatic “no,” and this article will address why.

Buying in a Bricks & Mortar Store

Lets start with the most likely scenario. Unfortunately, most people out there are still buying their diamonds in bricks & mortar jewelry stores.

Lets also assume the best case scenario within the subset of physical jewelry stores – the small independent (not part of a chain) jeweler that only sells GIA certified diamonds.

In this case, the best (ie, the lowest) profit percentage you’re likely to encounter is 25%.  In other scenarios (ie, large chain jeweler, high-end luxury, EGL certified diamonds, etc.), you’re likely to face much higher profit margins.

A Technical Example

Please excuse me now while I get a bit technical. Lets assume for the purposes of this exercise that the diamond cost the jewelry store 100 (currency isn’t relevant here – only relative values matter).

With a 25% profit percentage, that means the price you paid was 125.  Lets be generous and assume that diamond prices have risen 10% since the diamond was purchased.

So in theory, at this point, you’re only losing 12%.  125 (price you paid) less 110 (price you get for the stone) = 15 total loss divided by original price paid = 12%.

Who Do You Sell to?

But here’s where the painful realizations begin to descend upon people who are looking to sell diamonds – whom do you turn to to sell a diamond at the current “market price?”

The answer is unfortunately nobody.

Jewelry Stores

Let’s say you walk into a similar type of jewelry store to the one you bought the diamond.  When they originally paid 100 for that stone, they most likely had that diamond on consignment (ie, they borrowed it from a wholesaler, so it cost them nothing).

This means that the true cost of that diamond was significantly less than the 100 they paid for it on paper.

If They Buy Your Diamond, They Buy It Cheap

For the store to actually make an investment in a diamond, and not just borrow one, it will have to justify it by buying at a very cheap price. Furthermore, relationships between suppliers and buyers in this business are extremely important.

For a jewelry store to use its capital to buy a diamond from you instead of using it as an opportunity to deepen a relationship with a supplier means that they need to justify that decision through buying your diamond on the cheap.

Additionally, just about anybody in the business who is faced with a private seller knows that this is a great opportunity to buy well below the market price.

Overall, It’s Very Unlikely

Unless the diamond being offered is extremely rare for whatever reason (a situation I have yet to encounter), there’s simply no reason why a jeweler would be compelled to buy your diamond at the market price when he could buy an identical diamond at the same price from any one of hundreds of wholesalers (with better payment terms).

Pawnshops and Direct Consumers

If you try to take it to a pawn shop, you’ll be hit even worse because their selling prices are already expected to be well below the market, so their costs must likewise be very low to justify their low prices.

You could always try to go direct to the consumer.  Craig’s List has its own risks.  You could try selling it on eBay or other peer to peer selling sites, but no consumer is going to be motivated to pay you the same price you paid when they could just go and buy the same thing from a store that will offer warranties, etc.

Your Best Case Scenario

In my opinion, in a best case scenario, after diamond prices have appreciated by 10%, you could maybe find someone to buy your diamond for 90, leaving you with a loss of 28% (125-90=35 total loss  35/125 = 28% loss).

If you try and sell your diamond immediately after purchasing it, then your best case would be selling your diamond for 80 or a loss of 36%. Again, this is in an absolute best-case scenario buying bricks & mortar.

Buying Online

What if you bought the same stone online?  Well, as we explain here, that means you received far better value buying that diamond in the first place. This will help you mitigate your losses.

Take these diamonds for example. Here is a beautiful diamond from James Allen for $5,580 and a fantastic alternative from Blue Nile for $5,637. Both of these diamonds are phenomenal choices that would have cost you about $6,500 in a local store.

We reached out to some of our contacts and the best offer for those two diamonds were $3,600 and $3,900 respectively.

Online Vendors Provide Return Windows and Upgrade Policies

 

One major advantage for these online vendors are their policies. Both James Allen and Blue Nile offer full refunds for 30 days. They also offer a lifetime upgrade policy.

Buying online obviously makes selling a diamond much easier. Your cost basis is lower (so it will be easier to recoup your money if you need to sell on the open market) and the retailers give you options for returning and upgrading (so you retain full value for the ring).

What is a Diamond’s “Market Price?”

I’ve used this term a few times in this article, but the truth is, there really is no clear definition of what this means. Already in this article you can see that there’s a difference between a consignment price, a cash price, or a price with generous payment terms.

There are also “call prices” (the price a store will pay when they “call” a dealer with a specific request to sell to a customer who is ready to buy this particular item) and “business prices” (a lower price negotiated when many diamonds are bought together).

Different Market Prices and Risks

So you see, in reality a diamond has many different “market prices.”  The lowest of these is of course the “cash price” – the price a store will be willing to pay immediately to acquire a diamond without a customer presently requesting this diamond.

The reason this price is the lowest is because it requires an immediate outlay of capital in exchange for only the hope of a future sale. This involves taking on risk, and risk needs to be rewarded with a higher potential profit – otherwise, it’s not worth the cost of taking the risk.

So if your diamond is a less popular cut, or has an ugly inclusion, or is a difficult item for a store to sell for whatever reason, expect to take a much bigger hit when trying to sell it.

The Higher the Risk, the Cheaper the Buying Price

Cash prices are all about the risk of having your diamond sit in the store shelves for years ahead – the more likely that is to happen, the less a store is going to be willing to pay for it.

If you have a diamond that you need to sell, please use the form below to send us the details of your item which we will then pass on to our contact in the diamond district.
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