Oh Susannah (couldn’t resist),
I opened our store in 1979, and began a wild ride on the metals
surge for the next couple of years. Like most situations, there were
both positive and negative impacts, and as a business owner you need
to maximize the first and avoid the second.
On the positive side, we made a huge amount of money in buying
metals from the public and re-selling them as fast as possible. I
have never believed in trying to play the investment game, trying to
guess the the flow and direction of the market. I would pay cash at
50% of the return, have a set amount of cash to work with, then
liquidate as needed. Refiners would be paying about 90% of market,
and we would drive the metals to them up to twice a week. Like any
retail business, turnover is the key to profitability, and the margin
would pretty much remove any possibility of loss.
We bought mainly silver coin and gold rings, and paid $1.00 a point
for the little diamonds that were in most of the stuff. The profit
was better than anything I have ever seen before or since, and
allowed us to purchase another jewelry store in another community. We
hired a full-time employee to handle the metals purchasing, became
licensed by the State of Michigan, and played a rold in recovering
stolen jewelry on several occasions, as that also was a negative
by-product of that period.
As to selling our regular products, we made some changes in selling
that helped. We sold chain by the gram, and adjusted the price daily
to avoid any loss. We would go through the entire inventory and add
some as the price went up, but you will find that the overall gross
retail price doesn’t fluctuate greatly as the metal price is the
smallest portion when compared to labor and stone values. On new ring
orders, we tied the quote to a gold price, and customers were
understanding that the end price they paid might go up somewhat if
metal did so. Surprisingly sales were very strong during that period
as there was so much talk about the Hunt brothers and gold price s
that people seemed to think they should buy now and not wait to see
where the prices would go.
On the negative side, there were two main difficulties we faced. One
was that interest rates were also going through the roof, and I
remember paying over 22% on our bank loans during that period. Being
new in business, we were heavily financed, and it became very
difficult to just pay the interest let alone anything on the
principle. The other major problem was one that many people don’t
remember as well, and that was the “investment diamond” craze that
paralleled metals. These phony company representatives worked the
automotive plants, selling diamonds at above-retail prices to the
factory workers, promising inflated returns on their investments,
and leaving town with their hard-earned money. A 1.00 carat
D/flawless went from $13,000 to $56,000 in a couple of months, then
crashed back to reality after the companies started to be exposed and
the guarantees proved worthless. It took a long time to recover from
this situation, but as with most problems of this nature the business
finally settled down to what is considered normal.
This is a long-winded response to your question, but if you want me
to be more specific on certain areas write me off-list.
Jon Michael Fuja
