Hi Annabel,
I’d like to add something to what Rasesh said, earlier. When you
assume that dealers are paying “1/10th to 1/20th of the price”, you
are only part right, but the value of that part dwindles,
substantially, when held up to the broad light of business expenses.
For example, let’s just say for a moment that you’re right – that
the dealers may are paying somewhere near 5% of what they’re charging
you for their. The way that this happens is if they’re buying these
gems in_the_rough, and then cutting them! So let’s look at that
scenario, and put a realistic “face” on it: a piece of rough
Rhodolite Garnet. The dealer buys a 10ct. chunk of Rhodolite as part
of a parcel, and pays, let’s say, $1.50/ct for it. He then takes it
to his friend, the lapidary, who grinds off all protrusions, bits of
matrix (the garnet’s original bedrock), major internal flaws and
cracks, and shapes it into what’s called a “preform”, which now has
an outline of approximately 9.6x7.7mm and an oval shape. The stone is
then dopped and faceted into an eye-clean, calibrated 9x7 mm oval,
which weighs a little over 2 carats. If the finished gem was be cut
in Asia or Brasil, the labor for this task has cost less than two
dollars, but if it has been cut in the United States or Europe, you
can multiply that figure by anywhere from 20 to 30, to adjust for the
vastly better make and costs of production.
Okay, now let’s look at those markup assumptions again, as well as
your comments about “fair pricing”… The stone “only” cost your
dealer $1.50/ct, when he first bought it. But does that mean that the
finished stone cost him $1.50/ct.? No, not by a long shot! It also
cost him the labor to have it cut, the 7.5-8 cts of material lost in
the cutting process (times the same $1.50/ct.), the interest he had
to pay on the financing needed to buy the large parcel of rough from
which that piece came, in the first place, the costs of postage (or
other courier fees) to and from the lapidary shop, and the overhead
– including insurance, salaries, a percentage of the rent or
mortgage of the building in which it was housed, the utility bills
for that building, and dozens of other incidental expenses that come
with operating a business, which you may also have overlooked. Add to
this that the costs of gem roughs have been skyrocketinging –
sometimes increasing 60-100% in just a year, as Malaya and Mint
Garnets recently did – such that dealers have had to adjust their
prices upwards with market trends, if they are to afford to replace
their raw materials inventories, following each finished gem’s sale.
(That is, if the materials in question are even available, as gem
mines are unknown quantities, and many of them have recently emptied,
never to produce another gem!) In the end, that $1.50/ct investment
has cost him or her a minimum of $15 for the untouched stone, plus
anywhere from $2-60 for the labor of cutting it, etc., etc., etc.
And, at the end of all this, as Rasesh has already pointed out, the
gem dealer’s met with you, a buyer who only wants to buy two of these
and a couple of those, and wants both “bargain basement” prices and
the ability to pay for it with a credit card, which eats another
2.5-4% of his gross (and thus, a substantially greater percentage of
his bottom line profits.
So, with all due respect Annabel, now that you have a slightly more
global view of the gem market, about what price would you say is
"fair", given all of that? And, just as importantly, “fair” to whom?
Best regards,
Doug
Douglas Turet, G.J.,
Turet Design, LLC
P.O. Box 242
Avon, MA 02322-0242