Negotiating with Retailers

Jewelry Discussion
1

Wendy,

I know how you feel because for many years I did one of a kind or a
few of a kind pieces and consigned them.

I bought all the materials, I did all the work, took the risk and
the gallery made all of the money.

As time went by my line evolved into more of a production line but I
still felt the same way at net 30.

One particular gallery owner was always trying to back my prices
down because he felt the retail price ended up being too high. I was
insulted every time he tried to get me to take a buck or two out of
my end of a $20 wholesale pair of earrings, which would have to come
out of my paltry starvation level labor charge, while he had $20 or
more worth of markup to play with.

My attitude softened a bit over the years as I got to know many of
the gallery owners better and learned more about the economics of the
business.

In 1999 my wife and I opened our own gallery. We sell our own
jewelry and the work of about three dozen other artists and jewelers.

We mostly buy outright. We do some consignment and some of that is
at 60/40. Most of our 60/40 consignment is pottery.

It costs us $210 / day to open the doors. That’s rent, utilities,
labor for one full time and for one part time employee, insurance,
alarm service, etc. We don’t do any advertising. My wife also gets
minimum wage for 20 hours a week at the store. She works about 40-60
hours a week on the business. I get no wages.

If I sell a $100 vase the artist gets $60. Our daily average so far
this year is just over $700 so that sale is approximately 1/7 of our
gross for the day. That means 1/7 of our daily nut of $210 ($30) has
to be covered with that sale. Almost all of our sales over $50 are by
credit card. There goes almost another $3. A string bag, bubble wrap,
a handout about the artist and you can figure another $1. That’s a
total of $94 already spoken for, leaving me with $6 before taxes.
Never mind the occasional breakage or theft. We have to REALLY love
something to take it on at 60/40. If that was how we did all of our
business we wouldn’t have lasted two months.

If that vase was 50/50 we would be left with $16. Not huge, but 2.66
times what we get at 60/40. This is the difference between life and
death for many galleries.

I know that the solution is to keep upping our daily average to over
$1,000 and more and that way that $100 sale will need to cover much
less of the daily expense. But in the meantime I don’t think our
situation is all that unusual and we are taking advantage of no one.

Because we also sell things we make ourselves and other things that
we can mark up 100% or sometimes more than 100% (thank God for the
Tucson shows) we can make a living and afford to have some fun
offering other things we love in a business model that most regular
businesses would not even consider.

John Flynn
http://www.kahiko.com

2

Capitalism: an economic system characterized by open competition in
a free market.

A person (crafter or artist) makes an appointment with me and tries
to sell it to me. I either accept or decline, try to negotiate the
price or not. If I decide not to buy, they may offer to consign it to
me (something I RARELY agree to do–if I’m not willing to buy it
outright than apparently I don’t think it will sell at a high enough
price or fast enough to assure me an acceptable profit). Again I
either accept or decline the offer to sell the piece/line on
consignment. If I do accept the offer, the seller creates an invoice,
and I owe them a specified amount of money per item regardless of how
much I sell the item for. If (for example) the seller originally
offered to sell me a particular necklace for $250, why should I pay
them more because I later sold the piece for $650? I don’t tell the
crafter/artists how much their time is worth per hour or how much I
think they should sell their work for (its not my business nor my
decision to make); likewise, why is it their business or should it be
within their rights to determine how much I markup / or decide what
gross profits I receive from a particular item?

Please understand that I am not the typical fine / handmade jewelry
retailer found on this website. I have a 12 X 12 foot kiosk in an
very upscale mall in Florida, and I pay slightly over $8000.00 per
month in rent alone. (Yes, I know this sounds crazy!) Add nearly
$2,000 a week in employee payroll, and what this means is that I’ve
got to sell a ton of jewelry at very high profit margins simply to
pay my bills and stay in business.

Everyone is familiar with terms like 60/40 split, 50/50 split,
keystone, triplekey, etc. However, there is not a standard agreement
that will work in every situation or economic environment. I
understand an artists desire to have their work be priced the same
whether it is in a gallery New York or in Mississipi, but the
economic realities (rent, employee wages, gross sales per day) are
vastly different in those two locations.

Regardless, what it all boils down to is this: both the craftperson
and retailer are free to engage in whatever agreements they work out
between themselves. If a artists or craftperson demands that their
work be sold at a particular price, or demands to receive a certain
percentage of the sales price, than they are free to do so and not do
business with anyone not willing to abide by such terms.

That’s how capitalism works!

3

Lee:

In theory your proposal of establishing coops, etc., could gain some
ground, but in reality, I don’t think they tend to work out all that
well unless you have a dedicated management system in place. Many
artists I have known do beautiful work in their field, however, when
it comes to managing a business most fall short of expectations. I
don’t think most coops work all that well. Would you be willing to
donate more than your allotted time each month because some artist
didn’t show up on their required dates? What if that occurred every
month? That’s just the beginning. You need dedicated management in
place for a coop etc., and I don’t think most artists would be
willing to cover that expense plus the cost of additional overhead.

Scott Lewis

www.webhostingforcraftsmen.com & many others

4

The recent thread “negotiating with retailers”, while interesting is
somewhat off the mark.

Independent craftsperson’s should understand that handcraft does not
fit comfortably within the wholesale/retail distribution model. The
end result, the retail price is simply too high and not competitive
particularly for limited production jewelry. I started in business
25 years ago when there was a real appreciation of handmade for its
own sake. After a couple of years of attempting to wholesale it
became clear to me that I was never going to do much more than
struggle to make a living. It was not that the retailers were
“greedy”, they were simply doing what I was doing, trying to make
the most dollars for our work.

In today’s market the problem is even more acute. There is little
appreciation among the members of generations X and Y for handcraft.
Instant gratification has become, in all things, the order of the
day. Today we compete with commercial jewelry that is made
offshore. Jewelers in Bangkok make approximately $150.00 a month,
in China much less. How do you compete with that? Then there is
the cost of materials.

Fabricated gold sheet and wire cost about 25% above the spot price.
Gemstones are another problem: Most crafts persons pay the same
price for a stone that a retailer pays. Do the math: a sapphire
that costs 100 dollars is marked up by the craftsperson to 150, the
retailer keystones to 300. He can buy that same stone and sell it
for 200, same percentage of profit but the sapphire sells for 33%
higher if it sells at all.

What’s the solution: Vertical integration is the key. In the old
days craftsmen made and sold what they made directly to the public
without a middleman. This is one of the oldest business models.
Today we call it an atelier. Notice the trend toward “retail only”
sections at craft shows. Take a look at who is in those sections!
Some of the finest craft jewelers in the country have given up
wholesale entirely, the others have gone commercial, with designs
that can, and are, mass produced. Some have done both.

Quality is the second criterion: It is impossible to compete on the
production level with foreign labor rates so don’t try. Our
strength is quality, embrace it! High quality one off’s and limited
production pieces that require the work of a master craftsman to
produce.

Finding a quality receptive market, that’s the next step but this
post is too long already. By the way: Anyone going to The East
Coast Gem Show in Springfield, Ma. August 9-11? I’ll be giving a
talk about gemstones on Friday and Sunday love to meet some
Orchidians or is it Orchadians?

Richard

Watch for my new book: Secrets Of The Gem Trade:

5

Pam, The jewelry designer I work for is a wholesaler to the trade,
only. We set our prices accordingly and they mark it up for their
respective areas. We have made catalogues to accommodate their needs
anywhere from keystone to 2.2, 2.3 and even 2.5. On occasion we do
get a call from a stores customer wanting to know if they can get
the jewelry cheaper through us. We of course tell them no and that
each store we have our merchandise in sets their own pricing and
that we are a wholesale company. Some people don’t understand that
concept and figure if they go to the source they can get a lower
price.

The website we are designing does not have any pricing but links to
stores that represent us. That way the stores sell more and then in
turn order more which makes everyone happy! Our customers also like
the fact that we will not sell to another store anywhere near them
so they can have exclusivity to our line.

We will also not do any retail shows in any city who represents us.

Sure it would be easy and much more profitable for us to sell to
anyone, anywhere through any means but the destroys the lore of
"designer jewelry" and the bond we have with our customers. So far
it seems to be working.

Laurie

6 
     <SNIP...I don't tell the crafter/artists how much their time
is worth per hour or how much I think they should sell their work
for (its not my business nor my decision to make); likewise, why is
it their business or should it be within their rights to determine
how much I markup / or decide what gross profits I receive from a
particular item? SNIP>

First off, I am a complete newbie with virtually no consignment
experience, and I respect your view, but when talking about
consignment I can see a flaw in your logic: If a certain piece will
sell for $100 within a month, but may take 3 months to sell at $300,
then the amount I decided to sell it for (assuming it would be sold
at $100) is no longer enough to justify the time. I completely agree
with you as far as wholesale goes,and as you stated that is mostly
what you do. Once I’ve been paid I may not care if the shop takes
forever to sell the piece at their markup, but I feel a slightly
different viewpoint is warranted for consignment.

Again, I respect all opinions and help i’ve gotten
from this list, and no disrespect is intended.

7 
 Once I've been paid I may not care if the shop takes forever to
sell the piece at their markup, but I feel a slightly different
viewpoint is warranted for consignment.

I think that is being a bit short sighted. You should care very
much how fast your work is moving at a retailer regardless if it’s
consignment or wholesale. I visit my best customer, who buys at
wholesale, once or twice a month not only to sell and pickup repairs
and special orders but also to see what is moving and what is not.
You’re not going to get much future business if you’re trying to sell
items that are not moving for a retailer.

Just my $.02 worth…

Rick Copeland
Silversmith and Lapidary Artisan
Colorado Springs, Colorado
http://home.covad.net/~rcopeland/

8

Thanks to all who took the time to share their experiences and views
in response to my questions.

I have been contemplating changes in my own approach to marketing. I
felt that I could reduce some of my perpetual decision anxiety by
being better informed. I really appreciate the insights and hearing
from various positions has been quite helpful to me.

What a wonderful community this is for their knowledge and sharing.
I’ve said it before and I’ll say it again: Please pardon my
shouting :-} but I think Orchid RULES!

Thank you Hanuman and Ton and all who help support Orchid so that we
can communicate this way.

Pam Chott
Song of the Phoenix

On a personal note, I’m off to Portland, OR tomorrow to be with our
27 year old son David who will be having a procedure Tuesday to try
to eliminate a heart arrhythmia caused by Wolf-Parkinson-White
Syndrome. We would appreciate any good thoughts and prayers for a
success.

9

I think that is being a bit short sighted. You should care very much
how fast your work is moving at a retailer regardless if it’s
consignment or wholesale. I visit my best customer, who buys at
wholesale, once or twice a month not only to sell and pickup repairs
and special orders but also to see what is moving and what is not.
You’re not going to get much future business if you’re trying to sell
items that are not moving for a retailer.

Just my $.02 worth…

Rick Copeland Silversmith and Lapidary Artisan Colorado Springs,
Colorado Index of /~rcopeland>>>

Point taken.

I edited my draft post from " I don’t care…" to “I may not care…” I
agree that as a craftsman I should definitely care, but if the reason
it won’t sell fast is because of an outrageous mark up on the part of
the retailer then there is not much I can do about that…on the other
hand, when talking about consignment, a slow selling piece could end
up eating into my profit. That was just my feeble attempt to explain
it. At wholesale, I’ve already been paid, so the time it takes to sell
will not affect my profit, (though I concede it may hurt any chance
of future sales), but for consignment I may have a certain price
point in mind because, (at that price), it will sell fast. If the
retailer then turns around and marks it up so high that it takes
longer to sell, my percentage of the original price may not be
enough.

This was in response to the original post that I shouldn’t care what
the retailer sells it for whether it is wholesale or consignment, and
again, its just my feeble attempt to explain why I might feel differently.

10

I have read a lot of negative comments about retailers on this list.
I have read nothing about the cost of being in business and keeping
the doors open and paying the retailer a living wage. A retailer has
taken a large risk opening their business. The retailer has put in
a lot of time, work, and money establishing a presence, a
reputation, and a customer base during a less then stellar economy.
A retailer has a set location and is there for the customer. We
have to have at least a open thirty day return policy to keep up
with the competition. We have to have a 6 month free repair policy
on purchases to beat the competition. We have been left on the
short end of the stick by artists on both instances. We have had
artists refuse to return funds on returned pieces even though they
have agreed to the return policy. We have also had artists refuse
to repair their work with the comment that they do not have the time
to work on anything for free. As a retailer I do have to make the
customer happy and have to pay out the refund or do the repair for
free. My customers are valuable and I will fire an artist before I
will fire a customer. Artists expect when they come in to find a show
case for them with displays provided. They expect insurance
coverage, security system, advertising, customer base, open 5 or
more days a week, 10 hours a day. All this has no cost right? The
government and trade organizations expect us to be aware of the FTC
rules and regulations and obey them. The state expects the retailer
to keep complete records of business and pay sales taxes. The county
expects to be paid a annual property tax on all displays, fixtures,
and property not for sale in the business. The city expects
collection of sales taxes and licenses for signage and business. Oh
did I mention the cost of an accountant? We have had held trunk
shows. Our customers invited from our mailing list at our cost. We
provided the appetizers and beverages. The artist was very brazen
about handing out her cards with each sale with the comment buy
direct from her and save fifty percent. If you wish to negotiate with
a retailer ask yourself, is this how you treat your customer? It
would be nice if you provided your own packaging, complete
on materials and enhancements, and marketing material
such as a Bio. I suggest that if you do not like negotiating with a
retailer/customer, try negotiating with a realtor and open your own
business.

11 
    In today's market the problem is even more acute.  There is
little appreciation among the members of generations X and Y for
handcraft. Instant gratification has become, in all things, the
order of the day.

as a member of “Generation X/Y” (ew god, can’t believe i owned up to
or said that) i beg to differ, slightly…

it’s not that people of my generation have less appreciation for
handcraft - on the contrary, many of us HAVE picked up a craft, or
further explored an art, or said the heck with it and decided to
attempt it full time in lieu of a wall street career - in fact, i
know many people who won’t buy or wear anything that’s not handmade.
i know people who wouldn’t be caught dead in a piece of jewelry
‘made in china’ unless it was traditional, bright-yellow-18k-gold
work that cost a fortune. there’s practically a crusade for the
handcrafted.

of course, i DO understand what you meant - it’s true, you can buy
stones cut in india for a fraction of the price you can buy them
here in the states, you can buy duplicates of expensive designer
jewelry in thailand (again for the fraction of the price).

but what you can’t buy is the originality of an artisan - the
difference in buying overseas or forking out the additional money to
support an artist here at home is that you know from start to finish
where everything came from, whose hands it was in, and the fair
process in which it was produced (unfortunately, for the majority of
people this really doesn’t matter, agreed. but it’s not just gen
x/y that wants things now. after all, we’re not the generation that
invented the TV dinner - you did, and we were raised on it. :wink:

now, it’s just too bad very few of us can actually afford to support
that on a regular basis, which is why we often resort to buying
cheap replicas produced overseas - believe me, there have been many
times i’ve thought to myself “well, maybe when i’m 50 years old,
i’ll be able to afford to give that guy a wad of dough and
commission him to make me something no one else has in the manner
that he is so well-known and revered for.” these days tho, if i’ve
got a wad of dough together, chances are it’s because it’s going to
my landlord.

dori

12

Dear J.B., I do think I tried to make some of the same points in my
post, but my style isn’t as straightforward as yours and I haven’t
had the kind of real word experience you have. Frankly, I can’t think
of a riskier business than a jewelry gallery and I’m very grateful
that there are people like you who are able, never mind willing, to
negotiate with realtors. And the woman who pulled the stunt at the
trunk show is a creep who gives us all a bad name. I’m really sorry
you got treated so shabbily.

Lisa Orlando
Aphrodite’s Ornaments

13

Hello J.B. You gave a good description of the headaches of retail.
The small business owner faces great financial risk, hopefully offset
by financial reward and satisfaction. Unfortunately most small
businesses don’t make it, and many survive only because a spouse has
a decent job with benefits. (I speak from experience.) However in
this land of opportunity, rewards are there for those willing to take
some risks and work hard. I hope you are very successful, for your
success is shared by those you sell for and
from whom you purchase! Warmest regards, Judy in Kansas