Buying online will save you 15-20% compared to buying in-store. A GIA certified diamond is a GIA certified diamond, no matter where you buy it. Buying online will maximize the bang for your buck.
Financials
Let’s examine some financial statements to understand why buying online will save you money. The sources for the data below are:
- Blue Nile’s 2015 Annual Report – Blue Nile is an online jewelry store that was publicly traded before it was taken private.
- Signet Jeweler’s 2016 Annual Report – Signet Jewelers is a publicly traded company that owns the Kay, Zales, and Jared jewelry chains.
- Jeweler’s Association of America 2015 Cost of Doing Business Report – The Jeweler’s Association of America membership consists of local jewelers.
- Tiffany& Co. 2015 Annual Report – Tiffany is a luxury brand jeweler.
Defining some terms used below:
- Gross Profit Margin: The amount of money left after subtracting the cost of the goods sold (COGS) from total sales. It represents the average markup applied to all of their merchandise
- Operating Expenses: Costs that occur during the daily operations of a company. It represents the overhead necessary to keep the company in business (stores, employees, etc.)
- Operating Profit: Gross Profit Margin – Operating Expenses
| Online | In-store | |||
|---|---|---|---|---|
| Blue Nile | Signet (Kay, Zales, Jared) | Jeweler's Association | Tiffany & Co. | |
| Gross Profit Margin | 19.2% | 37.3% | 48.2% | 60.7% |
| Operating Expenses | 15.9% | 30.4% | 42.5% | 42.2% |
| Operating Profit | 3.3% | 6.9% | 5.7% | 18.5% |
Translating into words, let’s say a wholesale diamond costs $4,000. Based on the gross profit margin:
- Blue Nile would sell this diamond for $4,678
- Kay, Zales, or Jared would sell this diamond for $5,492
- Local in-store jewelers would sell this diamond for $5,928
- Tiffany would sell this diamond for $6,428
The average markup is 20-40% less if you buy online. Converting that to actual prices, buying online would save you 13% compared to Kay, Zales, or Jared; 19.6% compared to a typical local jeweler, and 25.8% compared to Tiffany.
The reason why an online store has lower markup is because their operating expenses are lower. They do not have to hold inventory, employ salespeople, or lease physical store fronts. Additionally, online stores have lower operating profit, so they are not taking as big of a cut as an in-store jeweler. All of these savings are passed on to the consumer in the form of a lower price, which means you get more diamond for your dollar when buying online.