Costco Wholesale Corporation (NASDAQ: COST) may not be the first place that comes to mind when you think about shopping for diamond rings. However, the sparkly jewelry case often positioned near the entrance of the wholesale club is enough to make many shoppers curious about the value of buying a diamond ring there. The catch is that warehouses may offer deals on diamond rings, but finding the ring you want can be a confusing experience if you are not an experienced fine jewelry buyer. Here is our review of things to consider before you buy a diamond ring from Costco.

Costco Jewelry Review: Understanding the 4Cs

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 GIA standards use terms like VVS1 and 2 (Very, Very Slightly Included), VS1 and 2 (Very Slightly Included) to describe clarity. The GIA D to Z letter scale describes the color, with D being the best quality.

Costco provides some information about diamond buying on its website, and guarantees that the diamonds it sells are at least VS2 in clarity and I grade in color. Costco diamond rings with a center stone that is 1.25-carat or larger come with a GIA Diamond Grading Report. Rings with diamonds over 1 carat come with an International Gemological Institute (IGI) appraisal that you can use to ensure their fine jewelry investment. By contrast, shoppers who buy diamond rings at the luxury jeweler Tiffany & Co. (NYSE: TIF) don't have to make sense of technical reports on their own. Tiffany offers consultations with diamond experts in store, by phone or by email to help buyers through the buying process.

Diamond Ring Prices

A 1-carat diamond can sell for anywhere between $3,500 and $27,000. The Costco website lists diamond rings priced from $1,599.99 for a 1-carat VS2 ring to $329,999.99 for a 6.55 VS1 carat solitaire set in platinum. By comparison, a 1-carat, brilliant, diamond solitaire set on a plain band on the Tiffany website starts at $12,600, and a 1-carat set on a diamond band starts at $14,000. Tiffany does not use the 4Cs to describe its rings but says it uses proprietary processes to handcraft jewelry set with brilliant quality stones. Online diamond retailer Blue Nile Inc. (NASDAQ: NILE) sells loose diamonds as well as pre-set diamond rings and lists 1-carat stones starting at about $2,900. Blue Nile shoppers can then choose from several standard-setting styles for the diamond that they select, at an additional cost.

Customization and Service

All Costco diamond rings are pre-made and buyers don't have the option to customize rings. The specifications on the Costco website list ring sizes, but you will have to take your ring to a jeweler if you need the ring sized to fit. Traditional jewelry stores, on the other hand, typically allow you to customize your purchase. For example, when you shop in a traditional jewelry store, if you like a stone in one ring but the setting of another ring, many shops will allow you to select the stone that you want in your preferred setting. Some jewelry stores also allow you to design your own ring and will work with you to produce a custom ring based on your description, which may include a sketch. When you purchase a ring from a traditional jeweler, you can generally return to that jeweler whenever your piece needs cleaning or repairs. Costco does not offer cleaning or repairs for its jewelry, so you would have to find another jeweler to service your ring.

Tiffany vs. Costco

In August 2017, a federal judge said Costco owes 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" in jewelry cases to describe rings. Costco argued that "Tiffany" was a generic term used to describe a ring setting style, but the court disagreed. The misleading labeling is one of the reasons why shoppers who aren't familiar with diamond ring features should work with a traditional jeweler instead of buying pre-made rings at a warehouse.