I am often asked if retail values on appraisals are “realistic” or “overinflated”.

I have people ask me all the time to explain exactly what a “retail replacement value” or “appraisal value” is, so I will try to make this short and to the point.

Most importantly, the majority of appraisals are for insurance replacement value, or an “on demand” price. An example of "on demand” would be someone who has lost a unique piece and walks into their local jewellery store to replace it with something very similar. In this type of situation, a new wax mould must be designed, all gems must be sourced, and the piece must be made in a timely manner. Therefore, taking the time to hunt for a great price usually isn’t an option.

“On demand” jewellery generally has a 200% to 800% markup at the retail level, and sometimes even more. This partly depends on the supply chain of an item. For example, gold, platinum, silver, and diamonds are controlled commodities. This means that there are large companies that do the mining and then have sub-contractor companies buy the metals or rough gemstones from them and turn them into sellable pieces. These companies then sell to wholesalers who in turn sell to retailers, so the difference is quite small between Appraised Value and Fair Market Value because the materials are easily accessible by your average independent retailer.

However, gems like ruby, emerald, sapphire, and most other coloured stones have historically had a very long supply chain. They can pass through literally dozens of hands before they end up with a retail jeweler. Often, gemstone rough will pass through five or more people before it even gets cut, and all along the way everyone is taking some profit.

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So what does this mean for your Appraised Value? It boils down to this: an item that has an insurance or “on demand” appraisal value of $1,000 starts anywhere from about $42 to $200 when a jeweler is buying the item outright from a wholesaler like Skyjems. This price then jumps to about $100-$500 when the item is taken on approval for the client to see (often called “Memo” in the trade).

Fair Market Value is the cash retail selling price and is generally about 50-65% of the “on demand” retail. The term "Fair Market Value" generally refers to the amount that a typical buyer would pay for a given product in a competitive marketplace.