After a tremendously successful 2016 where we saw the amount of transactions we closed in the 2ct diamond engagement ring market skyrocket we actively started doing market research to check the levels of service and prices other jewellers were offering to the public and overseas buyers (tourists and international inquiries). We have an incredibly high conversion rate… but you can’t possibly land every single transaction in a specific range, can you? And if you do… why?
I logged into an alias inbox and requested quotes for a GIA certified diamond;
2ct+ I-colour, VS1 and better clarity.
The quotes trickled in and we were an average of R167 800 (37%) lower priced than the jewellers surveyed. Please note we either met or surpassed the diamond specification offered by a competitor. None of the diamonds offered by us are unicorns. These are our everyday prices. You can view current diamond offers here.
Who are the jewellers we’re benchmarking against?
We selected reputable jewellers to gather quotes from. As with every market research effort we do have a few set rules to qualify. They're easy to find and I'd encourage you to reach out and test my findings;
- Jewellers must rank on the first 3 pages of google's results for “engagement rings South Africa” and/or a few similar searches. This excludes adverts. Anyone can run adverts on Google. Those listings can be useful - but don’t let the position up top inspire confidence. I didn't reach out to every single jeweller on the search results...
- Jewellers must have a studio/store/showroom where diamonds can be viewed before the purchase. A stone might seem fine on the certificate but the inclusion is clearly visible when you inspect the diamond. In this price range you ideally want to see the diamond in person unless you trust the jeweller's judgement and integrity.
- Jewellers who are under cautionary notices from the Diamond Dealers Club have been excluded. If someone's running a dodgy business I'm not interested in their pricing.
I’ve been benchmarking engagement ring prices for years and every time we test the market prices are closer in range. I was expecting the quotes to all be within 20% of the average price. I have never been more wrong. One quote was R600 000 higher than our asking price (R345 000)...for the exact same diamond. I excluded this quote from the table above. It’s ridiculous.
Should you stick to GIA (Gemological Institute of America) certified diamonds?
In a price range were a single jump in colour can easily cost R50 000, I think it’s a great idea to be 100% sure you’re getting what you paid for. The GIA isn’t the only accurate grading laboratory in the world but they are the backbone on which the international polished diamond trade runs. Massive quantities of diamonds are traded daily based solely on the details provided by the GIA.
They also laser inscribe the certificate number microscopically on the girdle of the diamond which offers a sound check to ensure the diamond lines up with the certificate. GIA diamonds can easily be verified by their offices worldwide, which offers great peace of mind.
Further reading on certification; Not So Independent Diamond Grading Reports.
The 4C’s of 2 Carat Diamonds.
Clarity is the C that is mostly affected by size of a diamond. Regardless of the size of a diamond every shape has a set number of facets. A round brilliant cut has 58 facets. Smaller diamonds can easily hide imperfections in this sparkly and condensed facet layout. As a diamond increases in size the facets stick to 58 - they just become larger and wider spaced apart. If you scale a diamond to the size of an SUV you’ll have facets the size of a door, and you’ll very easily see all imperfections in the diamond. To ensure your diamond of choice is eye-clean without any magnification stick to VS1 and higher clarities when you’re considering 2,00ct diamond options. At this size SI1 and SI2 options will have visible inclusions.
The Whale Business Model
In poker, a "whale" is a wealthy person who is pretty much detached from what he loses at the Poker table. If he had fun - good enough, no major financial dent. These players usually aren’t seasoned players and can easily be dominated by strong and experienced players. Easy money.
I haven’t played poker in years, but as these quotes tricked in I just knew whale spotting is alive and well in South African jewellery stores.
Go to any mall during busier times of day and take a good look into the higher end jewellery stores. They’re empty.
As we’re winning more and more marketshare by the day we see a few interesting job applications per month. Management level employees have seen the stores run dry and wish to jump ship, and board ours. If we opt in for an interview with the candidate one of my first questions is always;
“How on earth does (Jeweller’s Name) stay afloat”?
a.) Tourist groups (Whales)
Every tourist destination has their thing. When you’re in Italy shop for leather goods. When you’re in turkey shop for carpets. South Africa will always be the land of gold and diamonds. Jewellery stores are a popular stop for richer touring groups (predominantly Chinese). Jewellers that participate in this scene usually (probably always), give generous kickbacks to tour operators.
Let’s take the crazy R900 000 quote mentioned earlier. Say they buy the diamond from us for R345 000 and then add their R555 000 profit they can easily offer 10% kickbacks to tour operators and still make great money. If a tour operator knows his groups buy around R1 000 000 per month (easily) and he makes a nice R100 000 where do you think he’ll take the next group?
Same lavish curio shop.
b.) A handful of loyal locals who pop in for birthdays, anniversaries and the like.
Awesome. I’ve never had a new consultant reach out to customers they helped while at a previous jeweller - even if they offer to do so. Some people are in their comfort zone with a particular jeweller and I respect that.
c.) One or two visitors per month that are price insensitive and do impulse buys of very expensive items. The second wave of whales.
We’ll never take a R555 000 profit on any transaction. Sure, that one deal pays the bills for the month, but I’d much rather do 200 transactions, make a fair profit, and wait for the stream of referrals.
As the business has grown its impossible for me to be involved with the majority of transactions. When it comes to the 2ct market - you have my full attention. I know the value we offer can't be rivalled.
Pretoria - 012 111 0525
Rosebank - 010 020 6811
Thank you for taking the time to read.