Understanding Buying Diamonds Online

Two Pieces of General Advice

Most of my friends know about my longtime gemology obsession. So, several times every year I get phone calls for advice on purchasing engagement rings and diamonds. My friends also know that I'm a bit unique — I'm not a huge fan of diamonds, especially when compared to the many amazing alternative options available. So they know I am giving them an honest and blunt assessment.

I've found that I start with the same two pieces of general advice every time.

Don't Buy a Diamond

I try to explain to my friends that diamonds aren't really rare. They don't function as very good stores of value. Except in some very special circumstances, they don't make good investments, either. On the other hand, many colored gem alternatives are far more unique and valuable.

That pitch only works 15% of the time. The rest of the time, the couple just wants a diamond. So I move on to my second piece of advice.

Don't Buy a Diamond WITHOUT getting the help of an expert

Once it's clear they insist on buying a diamond, despite my efforts, I tell my friends (who are almost always first-time buyers) that they shouldn't even consider buying a diamond if they can't obtain the assistance of an expert.

A diamond's beauty comes from its sparkle, and this is impossible to judge exclusively from a grade report. That means either the buyer or the buyer's trusted agent (generally their jeweler) must actually see the diamond in person or utilize a very high-resolution 3D video in order to evaluate it. Some people will tell you to look at a diamond in person, and I personally don't agree with that. Unless you look at diamonds all day, are you really well equipped to evaluate a stone you see in person? As someone who has looked at thousands of gemstones, I can tell you unequivocally. There is no way a one-time or first-time buyer of any gemstone can do it well.

Evaluating gems is a skill, and like any other trade, you want someone who does it all the time to help you. Will you pay a little more for that expertise? I would suggest that should be willing to, yes!  But in reality… I actually think you pay less.

If I compare first time buyers who thought they knew a ton about what they are buying vs. the people who just trusted someone to help them (ideally the person who is making the setting for the stone), the people who trusted the jeweler always do better. Sometimes, in round diamonds, it is less significant. In fancy shapes — anything other than round — you have to know the "makes" and you absolutely MUST have competent assistance.

Now… can you use a grade report to narrow down the field of diamonds you might be interested in? Sure. But grades never tell the whole story.

The great deal is not so much in where you buy — online or in a store — but in how you select a stone. For example, finding a perfectly eye clean SI1 instead of the more expensive (and equally eye clean) VVS1, or choosing a J color stone for a yellow gold setting that will mask the color difference from a much more expensive E or F color. This is where expert advice can make all the difference. And when that advice comes from an online source, it can avoid the bias of selling a specific store's inventory.

Con: You Can't Just Buy a Diamond Off of a Grade Report Because it Isn't a Commodity

In the 1950s, the Gemological Institute of America (GIA) created a standard, easy-to-understand system for communicating diamond quality. The Four Cs of diamond grading simplified an inherently complex subject. As a result, consumers could be comfortable they had enough knowledge to make an expensive purchase.

However, the Four Cs system is a dramatic over-simplification. Most consumers assume that diamonds with the same carat weight and cut, clarity, and color grades are the same. Therefore, they then just shop for the lowest price. Unfortunately, it doesn't work that way, especially when it comes to the specifics of cut and the nuances of clarity. Most consumers make critical mistakes in these areas when buying exclusively online.

The Risk of "Buying Off The Numbers"

For example, two diamonds can have an identical cut grade of Excellent. However, they can differ dramatically in how they handle light, which is what makes a diamond beautiful. Round diamonds of the same cut grade can have huge price variations, as much as 20-30%, based on their "make." That means the overall quality and character of the cut. Yet, their grade reports look identical.

Distinguishing a great make from an average or above-average make takes an expert, someone who truly understands diamond cutting and has examined thousands of diamonds. A lab report can't capture the make, even if you know the optimal proportions and percentages for a specific cut and/or shape. In fact, in the trade, this is known as "buying off the numbers." In my experience, consumers who buy off the numbers generally end up paying more than their less-educated counterparts for a diamond of comparable value. Due to overconfidence in their "research," they pay for things that don't matter or that they don't truly understand.

The Numbers Don't Always Add Value

Take another example. I just helped a friend make an engagement ring using a stone he provided. He was totally convinced he got an "amazing" deal on a modified cushion. He bought it online for 20% cheaper than anything comparable. When I looked at the numbers on the GIA grade report, two issues jumped out at me. First, the "make" of the stone seemed fair, not excellent. The GIA document indicated that the girdle was "very thick." (You can learn why that should raise concerns here). Second, based on the stone's weight, 1.62 carats, the face-up size seemed small.

Indeed, when I saw the diamond in person, I learned why it was such a deal.

Hiding Weight in the Girdle

The gem cutter left at least 0.25 carats of weight in the girdle to preserve weight. Thus, the diamond weighed 1.62 cts "face-up" but looked and measured like a diamond around 1.30 cts. The cutter did that because there's an inflection point in price above 1.50 cts. If he left the girdle thick, eventually, someone like my friend would pay more for that stone than for a better cut cushion of the same face-up size that weighed 1.35 cts. A dealer, betting on that fact, stocked the stone. He then sold it to my friend at a "big discount" to comparable stones that he saw online.

My friend paid for 0.25 carats of weight that he literally can't see. It adds no value to the face-up size of the stone. In fact, that weight negatively impacts the stone's optical performance. It still got a cut grade of Excellent from GIA. However, by the time my friend talked to me, he already owned the stone.

I recommended having the stone recut. Now, my friend owns a fantastic make. He learned two very valuable lessons: a little bit of knowledge is a very dangerous thing, and…

Con: You Can't Get a Great Deal Buying a Diamond Online

Most of my friends are convinced they can get a "great deal" by buying online.

Look, I buy everything online, from diapers to clothes to groceries. While I think being value-oriented in everything you purchase is reasonable, for the most part, there really is no such thing as a great deal in diamonds.

Dealers, including Blue Nile, buy diamonds from primary sources. Cutters will often rework older diamonds to maximize their value, usually on behalf of dealers or jewelers but sometimes on their own. Jewelers often buy diamonds "over the counter" from their customers. They make money by holding them for resale to other customers at a profit or simply flipping them.

These people are in the business of buying diamonds. Generally, they don't have any specific requirements. Their objective is to make money from people like you when you're looking to make a purchase. Why would they sell something of value to you for less than they could get elsewhere in the marketplace? They won't and they don't. An old saying goes, "There's no such thing as a friend in the diamond business." This is precisely why.

Keep in mind that your objective differs qualitatively from a dealer's objective. You aren't trying to get a great deal to make money. Instead, you want to acquire a diamond for a specific purpose. Your objective should be to get the best value. You're buying something when you need to. You do have specific requirements. Dealers are buying something to make money.

Pro: You Can Get a Good Deal Buying a Diamond Online

That said, online dealers don't have the same costs as a brick-and-mortar store. Online retailers don't have to pay the overhead costs of lighting, storefront rent, and employees to run the store whether or not there are any customers.

So, while there are no great deals in diamonds, online retailers and online custom jewelers like CustomMade can offer lower prices compared to a brick-and-mortar store, and comparable prices to places like Blue Nile or James Allen.

Con: Dealers Don't Buy Diamonds Sight Unseen (and You Shouldn't Either)

When people who buy diamonds to make money won't buy online, it's unreasonable to assume that you should. I know dealers who've been in the business for 30+ years. They won't touch a diamond without seeing it. That doesn't mean you, the buyer, needs to see the diamond. It does mean someone with your best interests in mind — your jeweler — needs to see the diamond. A great jeweler will NOT set a crappy diamond, because they care about the work they do.

Pro: You Can See Magnified Videos of a Diamond

Thanks to improvements in internet speed and video compression, some online retailers, including James Allen and Blue Nile, and actual custom jewelers like CustomMade, provide magnified 360° videos of their diamonds. While it's not the same as seeing it in person, it's certainly the next-best thing!

These videos allow you to see clarity imperfections up close, better than what you'd see with your eyes or even a jeweler's loupe. Most importantly, they'll give you a good idea of the diamond's performance and how it will sparkle in your engagement ring.

Pro: You Can Choose From Thousands of Diamonds

If you go to a store, you're limited to the diamonds they have on hand. Online retailers offer hundreds of thousands of diamonds, letting you choose the best one for your style and budget.

While the options can be overwhelming if you're searching for a round brilliant diamond, having options is essential when shopping for fancy shapes. Especially since fancy shapes don't receive the same cut grades, finding the one with the best sparkle takes some searching. Brick-and-mortar stores may not carry enough fancy shapes to give you a great selection, especially if you're searching for a more unusual shape like a marquise or an especially large size.

Diamond Buying Recommendations

What to do?

• Don't focus on finding a "great deal." Focus on value and, specifically, cut, which is a primary driver of diamond value.
• Buy a beautiful stone! This isn't an investment, contrary to what many people may tell you, so the best deal may very well not be the right deal for you. If you aren't a dealer, don't try to make money or save money buying a diamond. Find a good, fair deal that works for your need.
• If a deal is too good to be true, it almost always is.
• If you're buying a diamond online, take a look at our recommendations for searching for a diamond online and our four-part guide to the four Cs: Carat, Color, Cut, and Clarity.
• Does it all seem too complicated? Consider working with an expert. CustomMade is a well-reviewed online custom jeweler that specializes in guiding customers through the process of creating an engagement ring. Their gem specialists do a great job of guiding customers through the diamond selection process, finding and thoroughly explaining diamond options, and showing detailed photos and videos of the diamonds to help with the decision. Their philosophy on diamond sourcing goes beyond the grading of a diamond to optimize for a diamond that will look perfect to the naked eye while offering great value.
• Consider getting a sapphire or spinel for your engagement ring, instead. 🙂

International Gem Society

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