Heart-shaped Diamonds – why is my quote so low?

This diamond is being sold for almost $1900 (plus tax and a setting). My offer on just the diamond would be about $250 to $300 according to my diamond price calculator. Why is the difference so great?

The short answer is easy. First, you paid too much. Sorry to be blunt and hurtful to those who consider themselves good shoppers. Second, the limited size market for heart shaped diamonds means reselling it is difficult.

Lets delve further. Heart shaped diamonds are a fancy shape. A fancy shaped diamond is any and all non-round diamonds. Other fancy shaped diamonds include princess cuts, ovals, emeralds, pears or teardrops, Asschers, and more.

The market for fancy cut diamonds is smaller than that for round diamonds. Engagement rings and wedding bands use more round diamonds. The most common cut now is the ideal American cut round brilliant. Each fancy shaped diamond has a different size market too. For example, the market for princess cut diamonds is much larger than that of Asscher cut diamonds. I will have forthcoming research on the size of different diamond markets and how that affects prices. In the interim, take my word for it. Heart shaped diamonds have the smallest market out of any of the most 10 common shapes.

How does the market size affect reselling price? If the market is larger, it is also more liquid meaning there are more transactions for that particular item. As a market gets smaller, there are less transactions for that item meaning it is more difficult to sell. When I go to buy a heart-shaped diamond, I take this market size into account. We sell a lot of diamonds – very few of which are heart shaped. I will end up holding a heart shaped diamond longer (on average) and account for that in the price I pay you for it.

Now, this point brings us back to the first part. Retailers selling heart shaped diamonds have higher margins on items they stock for longer so that they cover the cost of holding that merchandise. The higher retail margin means they are charging a higher price relative to the market. The retailer also knows a customer is most likely intent on buying that particular shape and willing to pay that higher price. You, the consumer, compensated the retailer for carrying that diamond.

Now, there are some silver linings. First, heart shaped diamonds are less expensive than rounds all else equal. I am not sure why, but the data backs that up. Second, the fancy market changes frequently. Heart-shape diamonds can become very popular at some future time, in which case the resale value would go up while that trend is occurring.