Do you want to know how much money diamond retailers make in profit yearly? If YES, here is an analysis of the income & profit margin for diamond stores.
The United States is one of the biggest retailers of diamond in the world today, sometimes going head to head with China. Diamond is known as one of the most precious metals in the world, and to date, it is the hardest you can find. The global diamond market size was valued at USD 87.31 billion in 2018 and is predicted to grow at a CAGR of 3.0% from 2019 to 2030.
The growth of the industry can be mainly attributed to the rising demand from jewelry application especially in emerging economies in Asia Pacific like india and China. With all the hype, secrecy and beauty behind this sparkly jewel, you will sometimes be tempted to wonder what retailers make from the sale of diamonds, more especially as these stones are quite expensive.
Though diamond retailers do swear that their markups are generally not impressive, and that the business does not make as much as people think, but we would find out through this articles if they are to be taken by their words.
How Much Money Do Diamond Retailers Make?
When it comes to the retail of diamonds, one thing that should come to mind is that the profit that can be made from the business varies from the manufacturer to retail store owners. A lot of people along the production line have a cut of each and every diamond that passes through the system. The manufacturer has to cut out the diamond and polish it.
He would then later to pass it on to the next stage of wholesale brokers, who then ship out to retailers. Manufacturers usually mark up their gross margin as big as 100% to recover their expenses made on polishing the diamonds. In this way, they make a net profit of 30% to 40%.
Upon reception, wholesale brokers then passes on the diamonds to retail stores while marking up with an average profit margin of 20%. If he could not manage to pass on to a retail store, he would end up selling the diamonds to his fellow brokers on an average profit margin of a meagre 5%.
The retail stores make the most profit out of all the diamond industry associates. They usually sell the diamonds at the profit margin on an average of 180%.
Internet diamond retailers seem to get a blunt side of the trade as they tend to sell the diamonds with slimmer markups. The usual margin at which they sell is 20%. This is because they do not need or have a physical store and they are no employees to worry about paying a wage.
Although only the internet retailers tend to sell their products at lower margins, there are physical retail stores like SD Jewels in Chennai who sell their diamonds and jewels at par with the internet retailers’ price. This is because they are already established as a business with a comfortable customer base.
What is the Profit Margin for Diamond retailers?
One of the general rules used in diamond markup is the keystone rule. This means that the cost of the stone is multiplied by two. So, a diamond that costs $200 will roughly sell for $400 (minus commissions and overhead). This of course doesn’t go for all types of diamonds.
Yet another unwritten rule to note when trying to estimate the profit of diamond retailers is that the bigger the diamond, the less money jewelers will make (on a $5,000 diamond sale, profits may be as little as $1,000).
The more expensive a diamond is, the less profit jewelers will make. This is because larger diamonds (1.00 carats and bigger) are expensive to begin with. The costs on large diamonds are extreme. The market pretty much dictates the price range and margin to work with.
A 1.00 carat diamond, SI1 clarity, G color, GIA certified, will usually only be around 10% price difference from store to store. There’s just too much competition to overprice diamonds and be greedy. If a jeweler tried marking the retail prices up really high, it can backfire, with the result being that they would never sell any.
So diamond retailers have to keep their prices and markups within acceptable limits. Plus, the market for really large diamonds is slim. How many people really buy large diamonds? Which means, a jeweler can’t overcharge. And jewelers don’t like keeping large diamonds tied up in inventory either.
It locks up their cash flow and keeps them from buying new merchandise, or marketing. So jewelers are more apt to make very minimal profits on larger stones.
So just because diamonds are expensive and cost lots of money, doesn’t mean the jewelers are making fortunes on them. More like a couple dollars here and there. Just enough to keep paying the bills, make a decent living, and buy new diamond rings.
Things That Can Help Increase Profit For a Diamond Retailer
The only surefire way to earn more money as a diamond retailer is to try and offer your jewelry online. By reaching out to potential customers around the world, your chances of achieving success will improve dramatically.
Currently the average diamond retailer earns between $35,000-50,000 per year. But with the right amount of marketing there is no telling how much money they could earn, the more they work at it the more they are going to earn.