Appraising Question

   Daniel a question from a newbie - what is a "keystone" markup? 
Does keystone refer to true wholesale cost? If so, how does one
know from catalog to catalog whether it is a double or triple
markup? 

A keystone markeup is a retail price that’s twice the wholesale
cost. Triple keystone pricing means retail prices that are three
times the wholesale cost. Catalogs are printed with either keystone
or triple keystone pricing so you can use the catalogs as a retail
sales tool, showing the catalogs to your customers, sell the items to
them at that price, and make money on the deal since your actual cost
is half or a third of what’s printed. Generally, somewhere in the
intro pages, or ordering section of the catalogs, or in
paperwork that was sent along with the catalogs, will be a note that
tells you that printed prices are keystone. Sometimes it’s indicated
by a small graphic “key” symbol in the corner of a page, or three
little keys for triple keystone pricing. At shows, one will often
also see vendors of stones or finished goods, especially those where
they may also occasinally sell at retail shows, have keystone prices
on their goods. they’ll tell you if you ask, and many times, items
with price tags at such shows will show a price number followed by
the letter K, which is your clue that your actual cost will be half
what’s marked if your are a valid wholesale buyer.

Hope that helps.
Peter Rowe

Sounds like you have figured it out for yourself. Keystone is 200% of
the actual cost, triple keystone is 300%. It is usually noted
somewhere unobtrusively in catalogs (I guess they figure that retail
customers “ain’t too bright.”) If it is not noted, you just have to
call and ask.

Just for your further amusement (and possible confusion) there is
also what is known as “retail markup”

“Retail mark-up” is a formula used in retail management.

Retail mark-up = 1-(cost /price). (The result is a percentage.)

also, to determine price:    Price= Cost divided by (1-Mark-up)
also, to determine cost:  Cost=Price X (1-Mark-up)

example: an $8 retail item with 50% Mark-up: 50%=1- ($4cost /
$8price) This is the same as marking up at two times cost.

David Barzilay, Lord of the Rings

All, So what good is an appraisal? To the average person on the
street an appraisal means that for a specific item it has a set value
of so much money. (Again: What is Value?) Dishonest sellers use
appraisals to make people think they are getting a bargain. In a
recent Phoenix, Arizona, USA major newspaper a seller was advertising
$10,000 + jewelry at less than 1/2 of the appraised value. To me
this is a very large problem for the jewelry industry. You can talk
around it all you want. Appraisals are mostly used to misrepresent
the value of jewelry items to enhance the marketability of the items.
Apraisals are one of the most dishonest tools a seller can use. In
my opinion it should be illegal to use an appraisal to sell an item.
Until appraisals are standardized with only one value assigned for
an item they are of no use. Currently the selling price on the
invoice is the closest to an honest appraisal you can get. Even that
is highly variable. So again: What good is an appraisal and What is
value? You can check the archives for lengthy discussions about
value. You will find out that no one can describe value accurately.
Including me. We cannot describe value because there is no set
guidelines on what establishes value. A favorite saying amongst
gemstone dealers is: We have the perfect product - everyone wants
it, everyone knows our stones are valueable, and know one knows the
value.

Gerry Galarneau

  Keystone is 200% of the actual cost, triple keystone is 300%. 

Not of the actual cost but of the wholesale price! The
wholesale price will include actual cost of materials, labor,
overhead, plus a profit margin.

Beth

Gerry, An appraisal is good for a lot of things. It is good for
someone to have an accurate appraisal so that they can be properly
insured. It is good for the IRS to have fair market appraisals so
that estates can be settled, and as it happens it can also be good
for the family to have the appraisal in order to appropriately divide
inheritances. The fact that an appraisal can reflect different
prices determined by the circumstances does not undermine them by any
reason. The reality is that the same goods can be sold for different
prices depending on the circumstances.

Today I had a retail customer bring in a diamond he managed to
purchase from a wholesaler, who charged him about $200 more than the
going wholesale price. When I appraise his diamond I take that into
consideration. When I write an insurance appraisal up for him it
will reflect the fact that a certain number of people in my
geographic area will be able to purchase a similar stone at the price
he did. It will also reflect that other people in my geographic area
paid a higher price for a similar stone. It will not reflect what
the price in Arizona for the same goods might be, nor the price in
Georgia. It will reflect the price range available in my area,
which is where the insured client is located. In other areas the
price range will be different as living costs, and therefore selling
costs, are all different.

It does not take anything away from the value of the piece that it
can be valued differently under different circumstances in different
areas. As long as proper valuation guidelines are followed properly
written appraisals have a great deal of value.

Daniel R. Spirer, GG
Spirer Somes Jewelers
1794 Massachusetts Ave
Cambridge, MA 02140
617-491-6000
@spirersomes
www.spirersomes.com

    Appraisals are mostly used to misrepresent the value of
jewelry   items to enhance the marketability of the items.
Apraisals are one   of the most dishonest tools a seller can use. 	

Gerry,

This posting is a very negative response of what I consider a cynical
view. If you have your house insured and damage or loss occurs,
depending on how well you are covered depends on whether or not you
are “made whole”. Same with car insurance.

I notice that there is a tendancy for some people to be very
emotional about certain subjects about jewelry. There seems to be
controverial opinions, not necessarily related to facts. These
opinions seem to be based on personal prejudice.

For those of us with indepentant retail stores, we will be closer in
agreement on some of these issues as we have to deal with these
issues. The industry is the way it is, I can’t change it, I have to
work with it. It is about learning to “navigate”. I have my opinions
and my feelings, and it seems that I can present options to my
customer, and they determine how I best serve them.

There was a discussion about rhodium. I tell my customer that they
can have a slightly yellow white gold, or it can be plated, it will
wear off and have to be replated. They choose plating. I don’t need
to have a moral or ethical issue. I just need to be there for my
customers need.

With the issues of why jewelery is valued the way it is and what
these valuations mean, I educate my customers about quality and
value, and about how to insure so they can protect themselves.

“Insurance replacement value” is a very important phrase. If you have
insurance and are paying a premium based on the premise that you are
protected from loss, if you do suffer a loss, what are you going to
get from the insurance company as a replacement?

More to the point, If I sell a custom cut gemstone by an american

cutter, that fact can be used in the appraisal to help the customer
get what they had if there is a loss. They do not get a crappy
windowed native cut stone as a replacement.

Gerry, “In my opinion it should be illegal to use an appraisal to
sell an item.” I do not know how you can possibly justify this type
of statement with any use of reason.

I can use an appraisal on a gemstone or a piece of jewelry as a
sales tool. If an item is normally triple keystone, the item costs
$500 wholsale from Stuller Settings, my competition sells it for
$1500, it will appraise for $1500 and I tell my customer that it
normally retails for $1500 and tell them that I can order it today,
have it tomorrow, and they will pay $1250. What is the problem with
that? My rent is lower, my staff is smaller, and I don’t wear a suit.

Appraisals “mostly used to misrepresent” Mostly? As if you have
investigated this enough to make such a broad generalization. I doubt
it.

The normal problem independant jewelers have is not with appraisals
or anything related to them,but the mall stores that advertize
something for a high price, but now 50% off. My price is usually
lower than their discounted price.

I have working relationships with quite a few other jewelers. They
are conscientious, honest,and have integrity.We all use appraisals.
Are there people who misrepresent? I am sure there are. Not the
people I know and have worked with. I can send my customer to someone
else and my value for something will be confirmed, without any
communication on my part. Thousands of customers, hundreds of
appraisals. Not one problem. Coincidence? NOT!

Appraisals serve no purpose for you. If you had a business like I
have, you’d be doing it! It is a supportive tool.

This forum states it is an “Open Electronic Forum for Jewelry
Manufacturing Methods and Procedures” and I have at times wondered
why some people seem to have misguided vendettas to judge and
criticize an industry ( or a part of it) that by and large is an
honerable way to make a living.If someone has an issue with an
individual or an organization that is operating unethically, there is
the Jewelers Vigilence Committee. That is an organization that is
jewelers policing themselves.

This is the world I live, and operate in, it is practical and not
some theoretical abstract headtrip.

Hot in Denver, not from the fires
Richard in Denver

Richard, I certainly agree with you that Galarneau’s representation
of appraising being a widely used tool for exagerating the value of
jewelry is an unfair and unfounded statement. Those of us who
perform appraisals for insurance and for theft recovery are
performing an essential service to the public. There are, of course,
those who mis-use the process…especially those who appraise
their own product. When I sell something that I have made and the
customer wants an appraisal I explain that I will certify the
product by weighing, grading, measuring and identifying. I then tell
him or her that an independent appraisal should be performed by
someone who is not beholden to me. I never tell them to go to a
particular appraiser.

And, while we are on the subject of your letter, I am curious to
know what your take might be on 24 K gold flash plating. In my book
this is misrepresentation. Would you tell the customer that you have
done this because the carat gold beneath is ugly ? Would you also
inform him that the flash plating will wear off rapidly and the
appearance will degrade ?

And then there was your statement that you would appraise an
American cut stone at a higher value. What does American cut have to
do with quality of cut ? A stone can be cut poorly or well anywhere
in the world ! One of the best cutters I have ever used was a
Zambian who used a modified jamb peg machine. And, I have seen some
really crappy cuts by Americans using modern equipment.

Believe me…I am not trying to pick a fight. I simply want to
clear up some inconsistencies. Any open forum should exchange
opinions freely and statements that may seem illogical should always
be challenged…including my own !

Ron at Mills Gem , Los Osos, CA.

All, I disagree that my statement about apraisals as being unfounded
and an over exageration. I back up my statement with any major
newspaper in the United States. I will gaurantee that you can find
somewhere in any newspaper someone selling jewelry items for 50% of
the appraised value. Look in the advertisements and in the individual
items for sale. Selling jewelry using insurance appraisals is a
widespread practce. I do agree that the way appraisals are made is
legitimate, but their use to sell items is a widespread practice and
should be stopped.

Gerry Galarneau
@Gerry
www.galarneausgems.com

Hi, all Regarding appraising for selling, I have to admit that I use
’appraisals’ for selling quite a bit. The fact is, however, there
is some legal issues that vary from state to state. Because the JVC
(jewelers vigilance committe) has had much experience in lawsuits
regarding ‘appraisals’ a jeweler can actually loose his/her business
from an improperly written appraisal. There are unfortunately many
documented cases of this, luckily the jvc helps to solve them out of
court.

I have instead institued an INSURANCE EVALUATION document to cover a
theft or loss of the article. Apparently, one can write an
evaluation listing that you are the seller of the article, and that
in the event of a loss, your business can replace this article for a
certain amount of money. So far, I think this is legal, at least in
NY. I think other states as well.

This serves several purposes, the most important one in my opinion
is the ‘closed loop’ situation. I use Jewlers Mutual insurance
company and incourage all of my clients to insure their precious
jewelry. I write an evaluation for them for what I have sold, and
follow their guidelines in terms of pricing. The closed loop is
that the client will not necessarily feel the need to go elsewhere
to evaluate. Assuming you are giving fair value for your price, I
have found that it works for me. In the last few years, I have had
no complaints or comebacks. In the event of a loss, Jewlers Mutual
will authorize you to replace the jewelery for the client, sometimes
giving you more leeway than you originally sold the item for.

allan