Chapter 20 Flashcards
What is the estimated value range of the global diamond jewelry market over the last decade?
75 to 80 billion U.S. dollars
What relationship affects how diamonds are priced in the marketplace?
The relationship between the 4Cs, rarity, and value
What significant market changes can affect the diamond industry?
Mines opening and closing, changes in demand, market shifts, world events
What happened to the price of a 1.00-ct. D-Flawless diamond in the late 1970s due to speculation?
It rose from $10,000 to over $60,000 in less than two years
What trend did diamond prices follow after the investment boom ended in the late 1970s?
Prices fell to a more reasonable level and stabilized
What has been the trend of diamond prices since 2012?
They have gradually trended downward
What factors, aside from the Four Cs, can influence a polished diamond’s retail price?
- Brand recognition
- Provenance
- Design
- Manufacturing costs
- Unique inclusions
What does ‘provenance’ refer to in the jewelry industry?
The origin and history of ownership of a gemstone or piece of jewelry
How does provenance affect the price of diamond jewelry?
Jewelry with significant provenance typically commands a higher price
What happens to a diamond’s price as it moves through different stages before reaching the consumer?
Its price rises at each stage
What is the profit margin range for midstream companies in the diamond industry?
1 to 3 percent
What are some costs associated with a three-stone diamond ring?
- Mining
- Refining
- Alloying the metal
- Designing
- Manufacturing
- Branding
- Labor for buying and setting the stone
- Shipping
How does the recognition of a designer affect the value of a diamond ring?
The value rises if it is from a recognized designer
What additional factor increases the value of a three-stone diamond ring?
If the center stone is a branded cut and the side stones are well cut and matched
What factors can affect the retail price of a polished diamond besides the 4Cs?
Provenance
Provenance, such as historical significance or ownership, can significantly influence diamond prices.
What was the sale price of the Elizabeth Taylor Diamond?
US$8,818,500
This price was against a presale estimate of $2.5–3.5 million, setting a record for colorless diamonds.
What do diamond wholesalers typically do to finance their purchases?
Borrow money from banks or private lenders
This borrowing is necessary to maintain liquidity when purchasing inventory.
How does immediate payment affect the price a buyer receives from a wholesaler?
Buyers who pay immediately and in full usually receive the best price
This is because wholesalers incur interest costs when buyers delay payment.
What are ‘terms’ in the context of diamond purchasing?
Terms of payment, often including specific payment schedules
For example, payments may be made 30, 60, and 90 days after purchase.
What is a potential benefit for buyers purchasing diamonds on terms?
The opportunity to have goods in hand immediately
This allows buyers to sell the diamonds quickly while managing cash flow.
What is a benefit for wholesalers when buyers purchase on terms?
Ability to charge a higher price
Higher prices can lead to better net profits and a steady revenue stream.
True or False: Establishing trust is not important in the diamond market.
False
Trust is crucial for flexible terms and successful transactions between wholesalers and retailers.
What is the relationship between a retailer’s relationship with a wholesaler and the flexibility of payment terms?
Stronger relationships lead to more flexible terms
Retailers with good rapport may receive better payment options from wholesalers.
