Jewellery - what you pay and what it's worth

Jewellery valuations are a grey area.

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SHOPPERS WHO rely on retailers' jewellery valuations in the run-up to Christmas could be in for a shock if they ever get their buys independently valued.

Insurers, independent valuers, jewellers' associations and the Commerce Commission say shoppers should treat valuations with suspicion.

The commission warns that because valuing jewellery is such an inexact science, using them to support sales prices could mean retailers are breaking the Fair Trading Act.

The Jewellery Appraisers Society and the Jewellery Valuers Society ban members from providing valuations to be used as sales tools for retailers.

But despite these concerns the use of valuations by retailers is widespread, and has been shown to be misleading shoppers.

In a case just settled by the commission, an unhappy shopper complained after buying a ring just before last Christmas that was advertised at "50% below the valuation".

The emerald and diamond ring, bought from The Goldsmith Jewellery Design House in Tauranga for $7100, was sold with a $14,200 valuation, done by Goldsmith's directors. A subsequent independent valuation indicated a replacement value of $12,760.

Late last year, Australian jewellery retailer Carrera-Benz admitted offences under the Fair Trading Act of using unrealistic valuations to sell jewellery to New Zealand shoppers.

If a retailer was claiming to be selling at a discount, he or she had to be able to prove the discount was real, the commission said.

Differences of 10-20% on the same item are possible from properly-qualified, independent valuers, says Alan Woods, chairman of the Jewellery Valuers Society.

But although the difference between valuations can be wide, they are nothing compared to how wide the difference between "insurance" valuations and the real world values can be.

This year the commission warned an auction house for advertising a diamond ring with an "insurance valuation" of $171,000 that sold for $70,000.

An "insurance" valuation is an estimate of what it would cost to have an item remade, as opposed to an "indemnity" valuation, which is supposed to reflect its current market price.

Insurance valuations are typically the ones retailers quote, because they are higher than indemnity valuations, but quoting them as being the "worth" of an item is misleading, said Gemlab jewellery valuer Paul Nilsson.

Online jewellery dealers were the worst at this, he said. There, the "buy now" option offers prices that are well below insurance valuations.

A spokesman for Cash Converters told the Sunday Star-Times the firm set its "buy now" lower than the indemnity value because "we wouldn't sell anything, if we didn't".

Last week, for example, a nine carat gold necklace Cash Converters said had a $3300 indemnity value, was being advertised with a "buy now" price of $2000.

Ian Walker from Vero Insurance said purchase valuations rarely provided accurate values for insurance purposes or an adequate description of the item, including the design and weight, cut, colour, clarity and carat of each gem stone.

If a buyer made an insurance claim, a new valuation often came in with a lower figure.

Woods echoes the warning, but says reputable high-end jewellers do provide valuation and jewellery descriptions as an after-sales service, which was useful in arranging insurance, and proving ownership and quality after a burglary or loss.

Terry Jordan from the Insurance Council says all insurers are sceptical of retailer-provided valuations. He recently bought earrings for his wife for $199, "discounted" from the valuation of $599 by the jeweller. "I have a good friend who is a valuer, and he said you can guarantee that they aren't worth $599."

Jordan said jewellers' margins were high, so the public needed to treat claims of discounts with scepticism. "Wholesale prices are half the value of retail prices," he said.

- © Fairfax NZ News