Realize you will not even break even.
Avoid pawn shops or traditional jewellery shops.
Try doing it yourself, but prepare to wait.
Let's start with the most likely scenario. Most people out there are still buying their diamond rings in bricks & mortar jewellery shops. Let's also assume the best case scenario within the subset of physical jewellery shops - the small independent (not part of a chain) jeweller that only sells GIA certified diamonds.
Ring selling.
In this case, the best (ie, the lowest) profit percentage you're likely to encounter is 25%. In other scenarios (ie, large chain jeweller, high end luxury, etc.), you're likely to face much higher profit margins.
Let's assume for the purposes of this exercise that the diamond ring cost the jewellery shop 100 (currency isn't relevant here, only relative values matter).
With a 25% profit percentage, that means the price you paid was 125. Let's be generous and assume that diamond prices have risen 10% since the diamond was purchased.
So in theory, at this point, you're only losing 12%. 125 (price you paid) less 110 (price you get for the stone) = 15 total loss divided by original price paid = 12%.
But here's where the painful realizations begin to descend upon people who are looking to sell diamonds, whom do you turn to to sell a diamond at the current "market price?" The answer is unfortunately, nobody.
Follow our expert guide for finding the best value for your diamond:
Let's say you walk into a similar type of jewellery shop to the one you bought the diamond. When they originally paid 100 for that stone, they most likely had that diamond on consignment (ie, they borrowed it from a wholesaler, so it cost them nothing).
This means that the true cost of that diamond was significantly less than the 100 they paid for it on paper. If they buy your diamond, they buy it cheap.
For the shop to actually make an investment in a diamond, and not just borrow one, it will have to justify it by buying at a very cheap price. Furthermore, relationships between suppliers and buyers in this business are extremely important.
For a jewellery shop to use its capital to buy a diamond from you instead of using it as an opportunity to deepen a relationship with a supplier means that they need to justify that decision through buying your diamond on the cheap.
Additionally, just about anybody in the business who is faced with a private seller knows that this is a great opportunity to buy well below the market price. Overall, it's very unlikely.
Unless the diamond being offered is extremely rare for whatever reason, there's simply no reason why a jeweller would be compelled to buy your diamond at the market price when he could buy an identical diamond at the same price from any one of hundreds of wholesalers (with better payment terms).
If you try to take it to a pawn shop, you'll be hit even worse because their selling prices are already expected to be well below the market, so their costs must likewise be very low to justify their low prices.
You could always try to go direct to the consumer. Craigslist has its own risks. You could try selling it on eBay or other peer to peer selling sites, but no consumer is going to be motivated to pay you the same price you paid when they could just go and buy the same thing from a shop that will offer warranties, packaging, etc.
In my opinion, in a best case scenario, after diamond prices have appreciated by 10%, you could maybe find someone to buy your diamond for 90, leaving you with a loss of 28% (125-90=35 total loss 35/125 = 28% loss).
If you try and sell your diamond immediately after purchasing it, then your best case would be selling your diamond for 80 or a loss of 36%. Again, this is in an absolute best case scenario buying from bricks & mortar.
Below are the benefits of selling a diamond purchased online:
One major advantage for online retailers are their policies. They offer full refunds for 30 days. They also offer a lifetime upgrade policy. Buying online obviously makes selling a diamond much easier. Your cost basis is lower (so it will be easier to recoup your money if you need to sell on the open market) and the retailers give you options for returning and upgrading (so you retain full value for the ring). Upgrading your diamond through a typical retailer usually does not give you the value you would expect.
We have used this term a few times, but the truth is, there really is no clear definition of what this means. Already in this guide, you can see that there's a difference between a consignment price, a cash price, or a price with generous payment terms.
There are also "call prices" (the price a shop will pay when they "call" a dealer with a specific request to sell to a customer who is ready to buy this particular item) and "business prices" (a lower price negotiated when many diamonds are bought together).
So you see, in reality, a diamond has many different "market prices." The lowest of these is, of course, the "cash price," the price a shop will be willing to pay immediately to acquire a diamond without a customer presently requesting this diamond.
The reason this price is the lowest is because it requires an immediate outlay of capital in exchange for only the hope of a future sale. This involves taking on risk, and risk needs to be rewarded with a higher potential profit, otherwise, it's not worth the cost of taking the risk.
So if your diamond is a less popular cut, or has an nasty inclusion, or is a difficult item for a shop to sell for whatever reason, expect to take a much bigger hit when trying to sell it.
You can sell your diamond and your setting. If you go to most reputable retailers, they'll handle the resale of your diamond and setting. Remember that your setting will be worth the scrap gold price. So, even if you paid $2,500 for a unique setting, it will still be melted down to scrap gold. Why is that? Well, almost everyone wants a specific, custom design. Rather than reusing your ring, a buyer would prefer to have their own design created.
While it is a financial loss to sell your ring for scrap gold, at least you are able to recuperate some of the cost. Most jewellery shops and pawn shops pay approximately 50 cents for every dollar of scrap gold value. If the value is $1,000, for example, a shop will offer to buy the ring for approximately $500. Some retailers, however, offer 75 cents for every dollar of scrap value. So, you'd receive $750 for the $1,000 scrap gold value, instead of $500.
Cash prices are all about the risk of having your diamond sit in the shop shelves for years ahead, the more likely that is to happen, the less a shop is going to be willing to pay for it.
