Should I Buy a Diamond Online?
Two Pieces of General Advice
Most of my friends know about my longtime gemology obsession. So, several times every year I get phone calls for advice on purchasing engagement rings and diamonds. My friends know that I don’t deal, sell, or invest in diamonds. I don’t make any money by assisting them, either. As a result, they feel comfortable knowing they’re getting a truly unbiased and knowledgable opinion.
I’ve found that I start with the same two pieces of general advice every time.
Don’t Buy a Diamond
I try to explain to my friends that diamonds aren’t really rare. They don’t function as very good stores of value. Except in some very special circumstances, they don’t make good investments, either. On the other hand, many colored gem alternatives are far more unique and valuable.
That pitch only works 15% of the time. The rest of the time, the couple just wants a diamond.
Don’t Buy a Diamond Online
Once it’s clear they insist on buying a diamond, despite my efforts, I tell my friends (who are almost always first-time buyers) that they shouldn’t even consider buying a diamond online at websites like Blue Nile or eBay.
Here are the top three reasons NOT to buy a diamond online.
Reason #1: You Can’t Buy a Diamond Off of a Certificate Because it Isn’t a Commodity
In the 1950s, the Gemological Institute of America (GIA) created a standard, easy-to-understand system for communicating diamond quality. The Four Cs of diamond grading simplified an inherently complex subject. As a result, consumers could be comfortable they had enough knowledge to make an expensive purchase.
However, the Four Cs system is a dramatic over-simplification. Most consumers assume that diamonds with the same carat weight and cut, clarity, and color grades are the same. Therefore, they then just shop for the lowest price. Unfortunately, it doesn’t work that way, especially when it comes to cut. Most consumers make critical mistakes in this area when buying online
The Risk of “Buying Off The Numbers”
For example, two diamonds can have an identical cut grade of Excellent. However, they can differ dramatically in how they handle light, which is what makes a diamond beautiful. Round diamonds of the same cut grade can have huge price variations, as much as 20-30%, based on their “make.” That means the overall quality and character of the cut. Yet, their certificates look identical.
Distinguishing a great make from an average or above average make takes an expert, someone who truly understands diamond cutting and has examined thousands of diamonds. A lab report can’t capture the make, even if you know the optimal proportions and percentages for a specific cut and/or shape. In fact, in the trade, this is known as “buying off the numbers.” In my experience, consumers who buy off the numbers generally end up paying more than their less-educated counterparts for a diamond of comparable value. Due to overconfidence in their “research,” they pay for things that don’t matter or that they don’t truly understand.
The Numbers Don’t Always Add Value
Take another example. I just helped a friend who was convinced he got an “amazing” deal on a modified cushion. He bought it online for 20% cheaper than anything comparable. When I looked at the numbers on the GIA certificate, two issues jumped out at me. First, the “make” of the stone seemed fair, not excellent. The GIA certificate indicated that the girdle was “very thick.” (You can learn why that should raise concerns here). Second, based on the stone’s weight, 1.62 carats, the face-up size seemed small.
Indeed, when I saw the diamond in person, I learned why it was such a deal.
The gem cutter left at least 0.25 carats of weight in the girdle to preserve weight. Thus, the diamond weighed 1.62 cts “face-up” but looked and measured like a diamond around 1.30 cts. The cutter did that because there’s an inflection point in price above 1.50 cts. If he left the girdle thick, eventually, someone like my friend would pay more for that stone than for a better cut cushion of the same face-up size that weighed 1.35 cts. A dealer, betting on that fact, stocked the stone. He then sold it to my friend at a “big discount” to comparable stones that he saw online.
My friend paid for 0.25 carats of weight that he literally can’t see. It adds no value to the face-up size of the stone. In fact, that weight negatively impacts the stone’s optical performance. It still got a cut grade of Excellent from GIA. However, by the time my friend talked to me, he already owned the stone.
I recommended having the stone recut. Now, my friend owns a fantastic make. He learned two very valuable lessons: a little bit of knowledge is a very dangerous thing, and…
Reason #2: You Aren’t Going to Get a Better Deal Buying a Diamond Online
Most of my friends are convinced they can get a “better deal” or a “great deal” by buying online.
Look, I buy everything online, from diapers to clothes to groceries. While I think being value-oriented in everything you purchase is reasonable, for the most part, there really is no such thing as a great deal in diamonds.
Dealers, including Blue Nile, buy diamonds from primary sources. Cutters will often rework older diamonds to maximize their value, usually on behalf of dealers or jewelers but sometimes on their own. Jewelers often buy diamonds “over the counter” from their customers. They make money by holding them for resale to other customers at a profit or simply flipping them.
These people are in the business of buying diamonds. Generally, they don’t have any specific requirements. Their objective is to make money from people like you when you’re looking to make a purchase. Why would they sell something of value to you for less than they could get elsewhere in the marketplace? They won’t and they don’t. An old saying goes, “There’s no such thing as a friend in the diamond business.” This is precisely why.
Keep in mind that your objective differs qualitatively from a dealer’s objective. You aren’t trying to get a great deal to make money. Instead, you want to acquire a diamond for a specific purpose. Your objective should be to get the best value. You’re buying something when you need to. You do have specific requirements. Dealers are buying something to make money.
Reason #3: Dealers Don’t Buy Diamonds Sight Unseen (and You Shouldn’t Either)
When people who buy diamonds to make money won’t buy online, it’s not reasonable to assume that you should. I know dealers who’ve been in the business for 30+ years. They won’t touch a diamond without seeing it.
Diamond Buying Recommendations
What to do?
- Work with a jeweler you trust. You can find jewelers recommended by IGS here.
- Don’t focus on a “great deal.” Focus on value and, specifically, cut, which is the real driver of value.
- If a deal is too good to be true, it almost always is.
- Consider getting a sapphire or spinel for your engagement ring, instead. 🙂