Natural Color Diamond Jewelry: An Affordable Solution to Low Margins

By: Michael Hakimian

I had the honor of speaking about Natural Color Diamonds at the Jewelers of America (JA) New York Summer Jewelry Show. The topic was “Natural Color Diamond Jewelry: An Affordable Solution to Low Margins.” After Barbara Wheat spoke about the benefits of joining NCDIA, I spoke about main topic, along with advice on how jewelry retailers can get involved and grow their Natural Color Diamond Business, and also covered was some Natural Color Diamond Basics.

Currently, the jewelry industry is plagued with the problem of low margins, especially when it comes to white diamonds. There are many factors at play that can explain why there are such low margins in white diamonds. I decided to cover some of the most important ones, such as a pricing structure that is already in place to value them, the familiarity with White Diamonds due to their wide use in the industry, diamond trading websites inside the trade and websites outside of the trade, and dumping by diamond dealers struggling for liquidity.

At the same time that the industry is struggling for margins in white diamonds, in the Natural Color Diamond Business there is High Margins, Customer Excitement, and Affordable Selections.

There is a variety of reasons why there is higher margins in Natural Color Diamonds than in White Diamonds. These include: No industry accepted pricing structure for natural color diamonds, Lack of market familiarity with Natural Color Diamond pricing and value, Rarity of Natural Color diamonds (Supply), Customer Excitement that is powered by Hollywood Stars, Auctions, and heavy advertising by important jewelry companies (Demand), the One-of-a-kind feel of each Natural Color Diamond, and the Allure of Luxury that Natural Color Diamond Jewelry provides. Together, these factors along with others, have laid a foundation for higher margins in Natural Color Diamonds than in White Diamonds.

Though jewelry retailers are showing increased interest in Natural Color Diamond Jewelry, some believe that affordability is a barrier to entry. Some of this is due to the record auction sales of Natural Color Diamonds, and extravagant celebrity color diamond purchases. However, there are jewelry manufacturers that only manufacture Natural Color Diamond Jewelry or have large selections of Natural Color Diamond Jewelry, and they do carry pieces at affordable price points.

NCDIA research indicates that the “Sweet Spot” for jewelry retailers is the Retail Price of $2,500-$50,000. Pictures of pieces from NCDIA Wholesale Members were shown at the affordable retail price points of $5,000, $10,000, $25,000, and $50,000. The fact that there are affordable selections within the Natural Color Diamond Market, allows jewelry retailers to purchase a selection for their store without breaking their budget, and lays a foundation for selling higher end pieces in the future. Consequently, Natural Color Diamond Jewelry is an affordable solution to low margins.

For retailers interested in getting started and/or growing their Natural Color Diamond Business, some advice was to Join the NCDIA as a Retail Member which will help with education, advertising, and sourcing; educating yourself and your staff, promoting it constantly and in visible places, building a respectable inventory (Variety of Colors, Price Points, Sources), do trunk shows, and stress to employees to show the new Natural Color Diamond Inventory to all your customers.