The Intricacies of Gemstone Pricing

Gemstone pricing can seem to be all over the place. Quotes on the same stone fluctuate depending on the seller, the buyer, and even the context: Internet sales vs gem shows, U.S. vs overseas. But despite appearances, there is logic to gemstone pricing, and making the right quote - the quote that yields a transaction – can be considered an art.

To start with, there are a number of different pricing levels that are below retail.

1. Rough bought on location. This is the cheapest way to buy but even rough is pre-sorted and you have to understand what you are looking at. After cutting, rough loses an average of 80% in weight.  Gemstone cutting can be $1 or $5 per carat, finished goods. Cutting grade rough for fine gems like sapphire is quoted per gram, and for cheap stuff like amethyst it is quoted per kilo.
2. Cut gems bought on location. In place like Tanzania or Sri Lanka many gems are cut before they leave the country (in Sri Lanka this is the law). But strangers are not likely to get good prices.  Buyers and sellers have established relationships and introductions are needed. New buyers can be tested for their knowledge of prices. If a buyer haggles when a low quote is made, the seller may refuse to work with that buyer in the future.
3. Dealer pricing.  Finished goods make their way to the U.S. (mostly New York) via a middle man who sell only to gemstone dealers at a markup.  Some U.S. dealers also traveled directly to India, or they are connected to gem dealers in other places in the world, or they travel to buy on location. They buy at dealer prices, and if they sell to each other, they sell at dealer prices with a small markup.  Markups at this level average 30%, or less if it’s dealer to dealer.
4. Wholesale pricing. Gem dealers then sell their wares to independent designers and jewelers or jewelry chains. A wholesale buyer has to have a business license or a tax ID so they can be exempt from sales tax. The markup here is also around 30%, but quotes can be higher or lower, depending on the relationship.  Repeat business is often rewarded with reasonable markups.

What about retail pricing?  There are several levels of retail as well. A gem lab calculates a retail value at 30% above the most recent wholesale pricing tables - these tables average out wholesale prices across locations in the U.S.(with N.Y. being one of the cheapest locations). This is not related to store retail which is usually higher. It is also not related to the retail price of finished jewelry: material cost plus cost of labor x4 (x2 for wholesale and x8 for high end stores).

Against these basic standards, several additional factors can affect pricing.

Mandarin Garnet Parcel, with Two Unheated Zircons Thrown in for Contrast

1. Urgency. Some people need their goods right away. They have a custom order that is already paid for, they have an impatient buyer, or they have an impatient personality. When several dealers on 47th street get "calls" for the same stone (i.e. a 4 carat sapphire for an engagement ring), it's considered a "strong call". Then everyone smells money and the prices go up. So even of one really needs to buy, it is best to proceed in a relaxed manner.

2. Time spent with the seller.  Some buyers spend hours at a gem dealer’s booth or office, and that ties the seller up.  Many sellers need to move material quickly (they too need to calculate their pay by the hour).  Their booth or office may be small and so they cannot help several people at once.  The same thing happens on the internet.  If a buyer needs a lot of photos and has a million questions, it can take hours to negotiate a deal.  Price levels have to reflect this, and they are one reason why many gem dealers won’t – or simply can’t – deal with the general public.
3. Trustworthiness. You wouldn't believe how many buyers on 47^th Street memo out stones and don't pay, or don't pay on time, don't return the merchandise, and string along sellers. "Check's in the mail." Uh uh.  Checks do bounce. Even certified checks! Credit card purchases are disputed after the buyer has made off with the goods.  If you are a “serious buyer” – ready to pay, and people know your checks go through, and on time, you will get far better quotes.
4. Haggling. You may get away with it the first time, but when, after seriously haggling down a price, you return to the same gem dealer for more, you'll find that all the prices have suddenly increased: If the dealer expects you to haggle, he has to start with a higher base price.

Tsavorite and Mahenge Spinel Cabochon Parcel

Of course now you are wondering price level I buy at.  Most of the time, I get dealer

prices.  When I first started buying on 47^th Street, I knew nothing whatsoever about gemstone pricing, but I discovered after a while that everyone offered me good deals (this really wasn’t obvious to me at first).  When I asked a gem dealer friend about this, he said “it’s because you pay.” I thought that was a ludicrous suggestion.  Don’t people usually pay when they buy things?  Now, a few years later, I realize he was right.  Gem dealers must have thought I was from Mars.  Owing money, wasting someone’s time, and haggling all make me extremely uncomfortable.  Dishonesty doesn’t come easy to me – I can never think of a good lie fast enough, not even white lies like: that dress doesn’t look bad on you – so on occasion I get into trouble, even with my friends.  But as it turns out, Martians can do very well among gem dealers.