Buying jewelry, part one: The components of value

My GF Linda peered at a 9ct lemon quartz cocktail ring in a jewelry shop case. Surrounded by small green garnets and accented with diamond micro on the shoulders, it carried a $3,800 price tag. She wondered, "Worth it or not?

Throw on your pearls and read on.

Today, A few tips on assessing value, and paying the right price. On Tuesday, Feb. 2, a discussion of what is 'overpriced'.

Price includes...

The asking price reflects tangible factors (materials, production costs, the vendor's business expenses) and intangibles or variables: reputation (individual or brand), historical value or provenance, supply, desirability (especially whether the style is in), condition of the piece, and the economic environment ("the market").

Sometimes you can negotiate price, sometimes not. Either way, you need information to make a prudent decision.


Materials, production and quality from a jeweler's perspective

Jewelry designer and blogger WendyB (Wendy Brandes) has written two informative, consecutive posts, Get Smart (about manufacturing) and Get Smart (about quality).

These posts are must-reads. They will not only make you a more informed buyer, they can save you from pissing off Wendy by asking why her pieces cost so much.


What do materials cost?

It helps to know the approximate cost of materials in a piece, for example the current price of gold, and the carat price of the stones that interest you.

You also should know the basics of gem grading and the characteristics of the stones you're looking at. For example, knowing that even a very fine emerald is typically included, and that the inclusions or "garden" is part of an emerald's character (rather than assuming that they must look as clear as a diamond), will save you thousands.

You only need to know the range, not the exact prices. As Wendy points out, the cost of precious metals can fluctuate dramatically. That's why (as Belle de Ville of Beladora commented on Wendy's posts) she may sell a vintage piece for less than the production costs if it were made today.

Some jewelers will provide certified appraisals for gems or the finished piece. This is useful information (though shady ones will give you inflated appraisals). If you are buying an important piece, you can request an independent appraisal from your choice of appraiser.


Books and a tutorial

A good place to start is "Gem Identification Made Easy (Third Edition)" by Antoinette Leonard Matlins or, if you can find it, "Jewelry & Gems the Buying Guide: How to Buy Diamonds, Pearls, Colored Gemstones, Gold & Jewelry With Confidence And Knowledge" by the same author.

For the basics, The Gemological Institute of America (GIA) has a concise, basic tutorial, "How to Buy a Gemstone" here.


Unset stone prices

Diamond prices are easy to get, go to Blue Nile, Ice or other vendors and search away. One site that has coloured stones is carat-online.net. Once you have some knowledge about materials–stones and metals–you will not be captivated by sheer size like Linda was for that 9ct lemon quartz.

Of course these will be retail prices, but you will not be paying wholesale, so you might as well be equipped with competitive retail prices. And remember, you are paying for more than materials.


When jewelers set their price

Retail jewelers use the term keystone within the trade to indicate the markup of the item. Keystone is defined as double the wholesale price, "triple key" means the wholesale price is 1/3 of what the customer pays. Triple or quadruple keystone is the standard markup for 'everyday' brand jewelry such as Stuller or Ross-Simons.

You should be highly suspicious of offers of "wholesale" prices. A jeweler simply can't survive on less than double to triple keystone. I have on occasion cringed when hearing customers trying to beat a price way down. I want retailers and their suppliers to make a living and have their skills rewarded.

You can easily pay far more than these multiples for designer, rare or historical jewelry. A cameo owned by Garbo will carry a much higher price than a similar vintage piece, but the vendor should be able to prove provenance if the price reflects it.

At auction, the market will decide price. Going to auctions is a good way to learn more about value. Crazy things can happen– bidding wars that leave pros shaking their heads– but go and watch.

In a shop, the vendor sets the price.

A good jeweler will educate you about the quality of stones, fabrication and design, among other topics. What you thought was shockingly expensive may adjust to "worth it" as you learn more. Read on your own, though, as vendors will naturally present a purchase in its best light.

Few jewelers I've met give deceptive information, but as a guideline, if you are in a place where you will never see the vendor again, the more information you should have.

Back to Linda's lemon quartz cocktail ring. Materials cost: less than $550 wholesale on a good day. Made in Asia, where manufacturing costs are low. Lively but inexpensive stone, rather light weight mount, okay workmanship. My verdict: overpriced.

I agree with Wendy that many customers don't know the costs that contribute to her price– and assert that even factoring in these costs, some jewelry is still overpriced.
Part Two, What is 'overpriced'? appears on Tuesday, Feb. 2, 2010.
And I name names.