Recently on Facebook an old high school classmate asked a question about diamond grading. I posted a response and was surprised at the number of my friends in the jewelry business that wanted me to explain the diamond grading system in more detail. It was then I realized that not everyone has been doing this their whole life. So I promised everyone I’d go through the ABCs of diamond grading for them at the very basic level and explain how we do it. If you’ve been doing this for a while, you’re not going to learn anything today, so stop reading now. But if you’re new to the industry and just don’t understand the VS’s and SI’s and whatnots, this is for you.
We’ve all heard of the 4Cs… cut, color, clarity, and carat, so let’s take them one at a time and analyze how it affects value and how you can explain it to your customers.
Cut. This one has gotten tricky in the last 30 years or so. There used to only be 5 cuts – round, oval, marquise, pear, and emerald cut. But in the last two decades, advancements in cutting, computing, and laser technology mean diamonds no longer have to fit that mold. A diamond can now be cut into just about any shape your heart desires.
I’ll never forget in 1984 I saw a diamond cut into the shape of Texas and thought it was the coolest thing ever. Now they’re everywhere. If your pockets are deep enough, you can have any shape diamond you want. So… what’s the standard?
Since the early 1900s, most retailers used the Tolkowsky standard for a round brilliant. Now, with all of the custom cuts like the Leo Diamond and Hearts on Fire, I just don’t know anymore. As a retailer, it’s hard to keep up. Maybe we’ll get lucky and a gem lab or two will write in and tell us how they are dealing with all the newer cuts that are being invented every day.
One thing I can still say with all certainty, no two diamonds are the same. As a consumer, it comes down to personal choice. If they want a princess cut, sell them a princess cut. If they want a round, sell a round. If they want a marquise, well, I’ve got a bunch I’ll sell you, cheap. But, in the end, it all comes down to this; Does it knock their socks off?
Color. The diamond color scale ranges from D through Z. The reason I was taught to start at D was to separate the professionals from the amateurs when it came to color grading. If the scale started at A, you can bet that just about every diamond ever sold would have been an A or an A+.
But, what is the best color? Depends on who’s asking. D is colorless and according to every chart I’ve ever seen is considered the most desirable. But, it’s also the most expensive – by far. I only see a few D-color diamonds a year.
Most of the diamonds I see range from F through J with the J-color showing a noticeable yellow tint. On average I try to only sell diamonds in the G, H, I range. These are classified as near colorless and to the consumer have no visible traces of color. But, in the end, it all comes down to this; Does it knock their socks off?
Clarity. This is one of the biggies in determining the price of a diamond, and the most subjective. The clarity grade is simply a gemologist’s opinion about the size, number, and type of inclusions in the diamond. In the 30+ years I’ve been handling diamonds, I’ve probably only handled a dozen truly flawless diamonds. That being said, almost every diamond you’ll ever sell is included in some way or another. So what do those letters and numbers mean?
‘I’ stands for included, ‘SI’ stands for Slightly Included, ‘VSI’ stands for Very Slightly Included, ‘VVSI’ stands for Very, Very Slightly Included, and ‘F’ stands for Flawless.
Now, do I think consumers really need to get caught up in the 1s and 2s of the various grades? No. Only a trained diamond professional can determine whether it’s a 1 or 2 in the grading system. To the untrained naked eye, a VS1 and a VS2 are identical. The same holds true for an SI1 and an SI2. The 1 and 2 are for very minor differences that a consumer will never understand. For the most part I sell diamonds that fall between VS2 and SI2, which are very middle of the road diamonds with no inclusions visible to the naked eye. But once again, in the end, it all comes down to this; Does it knock their socks off?
Carat weight. Here’s where it gets confusing. How do the retailers put all of the above factors together to determine the price. Honestly, as retailers, we don’t. That price is set way above our pay grade. The only thing most retailers have control over is their profit margin.
Give or take, most retailers pay the same price for our diamonds. If you want to know what a diamond costs, do what I do, go to the Stuller website and pull up their diamond inventory and there you go, that’s what it costs.
Could you buy them cheaper if you’re buying for a 100 store retail chain? Sure. Can you get a better deal if you’ve got a guy you spend millions of dollars a year with? Sure. But, in the year 2011, with overnight shipping being the norm, most of us just call up our suppliers when we have a pending diamond sale and have the diamonds sent to us on memo.
So, what determines the final price for the diamond? As a retailer, the final wholesale price is determined by your diamond supplier… cut and dry. As a consumer, their final price is determined by the wholesale price plus the mark-up the retailer adds to it. Simple, huh?
And lastly, ‘price per carat’ is something I see the newer members of our industry struggle with. So let’s go over that briefly because this is how all diamonds are bought and sold. It is very rare to have a diamond that weighs exactly one carat, so first let me explain the point system. Points are simply a unit of weight. Just like 100 pennies equal a dollar, 100 points equals a carat. A half a dollar is 50 cents, a half a carat is 50 points. Most diamonds are odd weights such as .25 cts., or 1.12 cts.
So, if they’re not a carat, why are they priced by the carat? Simple. As diamond crystals increase in size, they also increase in rarity. There are way more 1 carat crystals unearthed than there are 10 carat crystals, thus, the price ‘per carat’ on the larger crystals goes up exponentially. So let’s put all of this together.
At wholesale, an SI1, H-color, .25 ct. diamond costs $1,285 per carat. Since you’re only buying a portion of a carat, the cost is not $1,285. It’s $1,285 x .25 (the portion you’re buying) for a cost of $321.25.
For a diamond larger than a carat the calculation is as follows. At wholesale, an SI1, H-color, 1.12 ct. diamond now costs $4,720 per carat (see how the cost jumped as the size of the crystal got larger?). Since now you’re buying more than a carat, the cost is not $4,720, it’s more than that. It’s $4,720 x 1.12 for a total cost of $5,286 for that diamond. Easy, huh? Now as a retail store, you then add your mark-up and sell the diamond.
So, now that you understand all the ABCs, how does that help you sell diamonds? It’s very rare these days for a customer to come in to purchase a large diamond without having already Googled it to death, and they think they already know everything there is to know about them. Honestly, all they know is what they cost. They haven’t learned anything except what two different online retailers sell ‘identical’ items for. Remember, no two diamonds are alike so I just don’t get the buying online thing. I tell all my customers to stop paying attention to the paperwork because in the short period of time they’re going to be in the market, they’ll never figure it out.
I can’t tell you how many times I’ve snatched the papers out of some guy’s hands and told him to quit reading about the shiny rocks in front of him and to just look at the shiny rocks and pick the one that’ll do the trick. You’re buying a diamond, not a piece of paper, so look at the diamond. Because in the end, we all know what it comes down too:
If it doesn’t knock her socks off…
Chuck is the owner of Anthony Jewelers in Nashville, TN. Chuck also owns CMK Co., a wholesale trade shop that specializes in custom jewelry and repair services to the jewelry industry nationwide.