Tastes, traditions and trends change, but the diamond engagement ring market is a category that wholesalers depend on for a substantial part of their business. Here’s a look at how that plays out by carat size.
Under 1 carat to 1.99 carats
“Anything above 80 to 90 pointers is healthy,” noted Tony Ayvazian, owner of wholesaler Ayvazian Co. in Los Angeles, California. However, 0.50- to 0.75-carat diamonds are not selling well due to a combined lack of demand and an “abundance of goods.”
There has been some movement over the past year in 30 to 40 pointers, according to Ayvazian. The market had been saturated, but with production down, it has picked up.
Triple Ex is still “king,” he said. Rounds account for most sales. Ovals have been a “little bit slow” in 1 carat and up, and emeralds have been “up and down but steady,” he added. While pear shapes are “a little sleepy,” Ayvazian has been getting more calls for them in 1.50 to 2.50 carats.
Demand centers around I1, SI1 and SI2 in K color and up. “People don’t want to touch lower colors even if the prices are low,” reported Ayvazian. While there is a wide range of prices, eye-clean stones, which “everyone wants,” push the wholesale price for a 1-carat diamond to between $3,000 and $4,000.
“Wholesalers are caught between two walls. One option is to have nice goods, sellable goods, but no margin; the other alternative is to have the goods with margin, but they won’t be sellable or [will be] difficult to sell,” said Ayvazian, noting that retailers were also not buying for inventory. To broaden his options, he buys secondhand goods, then recuts and submits the stones for Gemological Institute of America (GIA) certification. “Prices [for these stones] are 10% to 15% cheaper than manufactured goods, but [there are] still not many buyers,” he commented.
2 to 3 carats
“We’re doing well with engagement rings,” said Eric Mor, president of New York-based wholesaler Abe Mor Diamond Cutters, noting the “world of difference” in cost between a 1-carat and a 2-carat diamond.
As always, rounds are doing well, but cushions have slowed down, according to Mor, who described ovals as “getting hotter and hotter.” Eye-clean tops the criteria in the 2-carat-plus category across all colors and clarities. I and J are strong — if they are face-up white — in SI1 and S12, he said. The fastest-selling 2-carat stones go for $10,000 to $15,000 wholesale — again, if they’re eye-clean and face-up white.
One difference Mor has observed over the past six months to a year is a greater acceptance of fluorescence. “People are learning that there are no physical differences to the naked eye with medium fluorescence. They realize they can get better value.” He also cited increased sales of GIA-certified I1s as an example of people seeking value. “They are going for something that looks great to the eye,” he said. These stones are trading at discounts of 15% to 25% to the Rapaport Price List.
Negotiating is an option in the very expensive categories, but for G, H and I in SI1 or SI2, there is little flexibility, since “everyone is looking for the same stone,” Mor said.
3 carats and up
“I believe the engagement market is growing and solid, and it’s really the most stable segment,” said Praveen Dukkipati, vice president of operations and sales at Atlantic Diamond Company, a wholesaler based in Chicago, Illinois. “Now the spotlight is on alternative rings — colored gemstones or even lab-grown — but there will always be people who want that natural-diamond ring.”
Dukkipati is getting “a lot” of requests for cushions, radiants, rounds and ovals, in that order. In this 3-carat-plus category, H and I are the most popular colors, and SI the most popular clarity; wholesale costs range from $30,000 to $35,000.
For well-made and eye-clean goods, emerald cuts are 30% below Rap List, ovals are 25% below, and cushions are selling at a 35% to 40% discount.
Given the shortages, there is not much opportunity for price negotiation, and margins are a topic “not even discussed,” according to Dukkipati. However, he has had “tremendous success” with American Gem Society (AGS)-certified goods. “Furthermore, you don’t have to compromise on the integrity of the certificate. A 4-carat, AGS triple-zero, G, SI2 will go for 41% below [Rap List], which is fantastic for the retailer because AGS certs are a solid, reputable and honest option for the end consumer.”
While engagement sales haven’t dipped, Dukkipati voiced concern about the realities of today’s market. “It worries me that many retailers’ habit of not buying, especially bread and butter, is resulting in missing a lot of sales. On the flipside, the stores that own the stock and can show a great selection have the opportunity to make that sale when customers walk in. Customers don’t want to wait anymore; they want to purchase and move on.”
Article from the Rapaport Magazine - October 2019. To subscribe click here.