Kiplinger Today


Clicks and Stones

Lisa Reed knew just what she wanted in an engagement ring, so she took the search out of her fianceacute;'s hands. Lisa says several local stores in Honolulu were asking about $7,900 for a nearly flawless, just-shy-of-a-carat diamond ring. But Lisa, who's a cop, knew better than to stop her investigation there. She hit the Web and found a similar ring from online retailer Blue Nile for only $4,263 (and her fianceacute;, Peter Bracknell, paid the piper). "It looks absolutely brilliant," says Lisa. "It blinds you."

In an industry famous for high markups and perpetual closeout sales, diamond e-tailers have brought clarity and competition to pricing jewelry. Says Scott Devitt, a senior analyst at Legg Mason: "They expose diamonds for the commodities they are."

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E-tailers' costs are lower than for local jewelers because they spend less on labor and leases, and they keep their inventories lean. Compare Blue Nile with Zale Corp., which runs Zales stores, Bailey Banks Biddle and other brick-and-mortar chains. For every dollar that Blue Nile pays suppliers for stones and settings, it sells finished baubles for $1.30. But for every dollar Zale hands suppliers, it sells items for $2. Zale also stocks its merchandise for months before it sees a dime from customers, while Blue Nile orders merchandise only after customers pay. As a result, it has to keep items in inventory for only a matter of days.

The minute Lisa placed her order, Blue Nile bought her rock from a New York cutter, who shipped it overnight to Blue Nile's 13,000-square-foot warehouse in Seattle. There, a bench jeweler, peering through a magnifying visor and using files, pliers and hammers at a small desk packed with tool-laden drawers, married the diamond to its setting. Other workers bathed the finished ring in a tiny hot tub, blasted it with steam and packed it in a wooden box, inside a blue-and-silver box, inside a cardboard shipping box. It was then ferried on a rackety conveyor belt to FedEx for overnight delivery. The whole process took just three days.


The procedure is similar at other e-tailers, which as a group rang up about $340 million in engagement-ring sales in 2005. Most of those sales were to men, who, in general, love the Web way of jewelry-shopping more than women do.

The new C

Skittish about buying baubles without seeing them in advance? That's an understandable hang-up. But this winter many of the best grading reports -- a cross between spec sheets and report cards for diamonds -- have added a measure that sums up a diamond's brilliance and sparkle and allows for easy comparisons among stones.

This cut grade differs from the cut -- one of the famous four c's that also include carat weight, clarity and color. Cut has long been listed on reports, and it speaks to a stone's shape and style, such as round or square, plus a few other measures. But, says Reneacute;e Newman, author of the Diamond Handbook, "cut doesn't tell you if you'll see brilliance and sparkle across the stone when you look at it face up."

Cut grade does. Stones with similar characteristics should be priced similarly, says Robert Hensley, a former diamond dealer who is co-owner of, a jeweler-rating service. If you find a stone priced less than like-rated stones, it's a bargain.


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