Guide to Buying a Diamond Ring at Costco (COST, TIF)

Costco (NASDAQ: COST) may not be the first store that comes to mind when you think about shopping for a diamond ring. But the sparkly jewelry case often positioned near the entrance of the wholesale club store is enough to make many shoppers curious about the wisdom of buying fine jewelry there.

Here are some things you should know before you buy a diamond ring from Costco or anywhere else.

Most jewelry retailers use the Gemological Institute of America (GIA) color, clarity, cut, and carat weight standards, also known as the 4Cs, to set the prices of stones. The quality of a diamond is determined by its rating for these characteristics. Cut is a matter of personal taste, but the quality of the cut matters to its brilliance.

Clarity is a measure of the purity of the stone, with designations like VVS1, or very, very slightly included, and VS1, for very slightly included. Color is rated on a scale of D to Z, with D being the best, or colorless, quality.

Costco guarantees that the diamonds it sells are at least VS2 in clarity and grade I in color. Its diamond rings with a center stone that is 1.25-carat or larger come with a GIA Diamond Grading Report. Diamonds over one carat come with an International Gemological Institute (IGI) appraisal that can be used to ensure the fine jewelry investment.

Shoppers who go to Tiffany & Co. (NYSE: TIF) don't have to make sense of technical reports on their own. Tiffany offers consultations during the shopping process with diamond experts in store, by phone, or by email.

A one-carat diamond ring can sell for anywhere between $3,500 and $27,000, depending on those 4Cs, the quality of the setting, and the retailer.

The Costco website lists rings starting at $499.99 for a simple solitaire ring set in 14k gold with a 0.22-carat VS2 diamond. The priciest offering at this writing is $419,999.99 ring set in platinum with a 10.03-carat diamond rated with VS1 clarity.

Tiffany does not use the 4Cs to describe its rings, relying on proprietary processes to handcraft jewelry set with stones. Many of the rings displayed on its website are embellished with diamonds, often clustered with other stones. A solitaire diamond ring starts at about $13,000, with many customizable options for size, color, and setting.

Online diamond retailer Blue Nile Inc. (NASDAQ: NILE) sells loose diamonds as well as pre-set diamond rings and lists one-carat stones starting at about $2,900. Blue Nile shoppers can choose from several setting styles for the diamond that they select at an additional cost. It uses the GIA rating system.

Old-fashioned jewelry stores allow customers to customize their purchases. If you like a stone in one ring but the setting of another, many jewelers will make a custom version for you. Some even allow you to design your own ring and will work with you to produce a one-of-a-kind ring based on your description.

When you purchase a ring from a traditional jeweler, you also can generally take it back when it needs cleaning or repairs, or even to have a gemstone reset in a new piece of jewelry.

All Costco diamond rings are pre-made and buyers don't have the option to customize them. The specifications on the Costco website list ring sizes, but you will have to take your ring to a jeweler if you need to have it sized to fit.

Costco does not offer cleaning or repairs for its jewelry.

In August 2017, a federal judge ruled Costco owed Tiffany at least $19.4 million in damages, lost sales, and interest for selling rings falsely advertised as Tiffany jewelry.

The trial followed a 2015 verdict against Costco in U.S. District Court in Manhattan in which a jury determined the company was guilty of trademark infringement for using the term Tiffany to describe rings in its jewelry cases. Costco had argued that Tiffany was a generic term used to describe a style of ring setting.

If nothing else, that notorious case suggests that a consumer considering fine jewelry should know the basics before buying fine jewelry.