(An earlier version of this story ran online.)
Costco Wholesale (COST) sells 10-pound boxes of frozen sausage, 2-gallon jars of pickles, and diapers by the thousands. It also sells Tiffany engagement rings. No, not rings from Tiffany & Co. (TIF), the upscale New York jewelry store, but diamonds placed high on a silver band and held in place with six prongs—which look identical to the classic Tiffany engagement ring setting. In February, Tiffany filed a multimillion-dollar trademark suit against Costco that seeks to determine whether “Tiffany” has become the Kleenex of diamond rings or if it refers specifically to the store famous for blue boxes and Audrey Hepburn’s breakfast.
Unlike Wal-Mart Stores (WMT), which sells diamond rings for only a few hundred dollars each, Costco’s rings regularly run as much as $40,000. (Tiffany & Co. rings with the Tiffany setting start at $11,000 and go up and up.) In 2011, Costco’s website even offered a 6.5-karat ring for $1 million. People who can spend that much money on a piece of jewelry aren’t usually the sort to accessorize at Costco.
Yet some are the type who can’t resist a good deal. The assumed benefit of a Costco ring is that even at $40,000, you’re getting a higher-quality diamond than you’d be able to afford at a more prestigious store. “We’d looked at Jared (SIG) and Shane Co.—all those major stores—and we saw nice things, but Costco’s diamonds were above and beyond what we could afford elsewhere,” says Julie Huezo, 32, an insurance underwriter from Olympia, Wash., whose husband gave her a $6,500 Costco ring in 2010. “For the price we paid, I don’t care where it came from,” she says.
Not everyone is so open-minded. On a Weddingbee.com message board thread about Costco engagement rings, most of the commenters said that while they weren’t against them, they weren’t really for them, either. “I love Costco for grocery items, but I have never even thought to look at their rings,” one poster wrote. Another said she thought about shopping there, but “I was concerned everyone would ask where we got the ring.”
“A diamond is a diamond,” says Russell Shor, a senior industry analyst at the Gemological Institute of America, the premier rating and certification agency for diamonds. “If you have a stone from a top jeweler with the same grade as the discount place, they’re basically the same thing.” Good Morning America tested this theory in 2005, when it appraised both a Tiffany diamond and a Costco diamond. As it turned out, the $16,600 Tiffany cut was valued at only $10,500, whereas the $6,600 Costco version was actually priced 17 percent under its appraised value of $8,000.
As with any other name-brand product, Tiffany’s reputation raises the price of its jewelry. “If you want someone to present the diamond on a pretty cushion and have the box from a prestigious brand, then you’re paying a premium for that experience,” Shor says. “Or you can have someone swipe your credit card, hand you a diamond, and tell you to get out. Your choice.”
It’s this prestige that Tiffany claims Costco was trying to co-opt by referring to some of its products as Tiffany rings. “We now know that there are at least hundreds if not thousands of Costco members who think they bought a Tiffany engagement ring at Costco,” the company wrote in its initial complaint. For its part, Costco claims that “Tiffany” is a generic term for the type of setting that Tiffany’s founder, Charles Tiffany, popularized in 1886. It’s now so commonly known that the term “Tiffany setting” even appears in the dictionary. Of course, Costco rings don’t come with perks such as free cleanings, and they’re packaged in a red and beige box instead of the genteel Tiffany blue. Costco doesn’t even resize rings for customers. But it does sell bouquets and corsages in bulk.