1.7grams of the finest 14kt yellow gold. I say the finest
cause it must be really good stuff priced at $164.00. Still not a
bad profit margin....
Ok here we go again. Let’s see if everyone can understand the costs
that go into selling a piece of jewelry. Let’s assume, for argument’s
sake, that the manufacturer of the piece is able to take his $25
worth of metal (1.1 dwt of 14k gold @ approximately 25/dwt.—I don’t
know the exact price right now because I buy primarily 18k, but my
18k is running about $33/dwt right now in wire or sheet form), stock
it, stamp it out on his machinery (machinery costs money to invest in
to begin with and to finance), produce a catalog from which to sell
the piece, pay his salesman a commission on the piece, pay for his
heating, cooling, phone, labor (oh and by the way it’s nice to have a
little profit too so that he can buy a new machine when the old one
breaks down) etc. and by some miracle after all this, is able to sell
the piece for $55 to the retailer.
That would then assume that the retailer is running a triple key
markup (300%). Sounds high right? Alright, let’s look at that too.
The retailer has to pay shipping to get the piece to his store.
Someone has to log in the piece (usually into some computer system
which means it helps to have some familiarity with the programs),
price it and put it out in the case (all labor that has to be paid
for). Let’s assume it’s a hot seller, so they don’t have to sit on it
for more than a week (remember, every penny tied up in merchandise
that isn’t selling is costing you money). But in order to sell it
quickly they have to have enough customers coming in the store. Ok
that means they have to advertise (advertising is usually pegged at
about 5% of sales–that’s 5% of the gross price, not the markup).
Then they have to have staff that actually has to sell the piece. I
don’t know about you, but usually it takes more than 5 minutes for
any of my customers to get in and out of the store. So let’s assume
it takes a half hour of labor to actually sell the piece, get it
written up, boxed up (oh boxes—they cost money too–mine cost me
between $5-12 apiece although they’re probably better than most),
wrapped, etc. Oh and then you have to take their credit card. Credit
card fees----1.7-3.5% (that is 1.7-3.5% of the gross price, not the
markup) of each sale. On top of that, if you have a sales staff of
more than a few people, you also need a manager to manage them. They
have to be paid. If you’re a mall store you have to pay a percentage
of each sale to the mall. Of course you also have to pay rent, phone,
electricity, heating, stationary costs, cleaning (someone has to
actually clean the store on a regular basis), computer upgrade
costs, and yes, you also have to figure in the costs of the rather
normal pilferage that occurs over time in most shops (not to mention
things just disappearing because stuff does sometime just get lost),
oh and then there’s insurance (mine is over $5000 annually and I’m
not a huge store), oops and I forgot the owner actually has to make
some money on his initial investment, plus actually earn a living.
After reading all of this do you honestly think that making $109 on a
piece of jewelry that cost $55 is excessive??? In fact they’re
actually probably losing money on this piece and trying to make up
for it on the higher priced items.
These types of thoughts are another prime example of the
WalMartization of America. Everyone assumes that if something costs
you $100 to buy, then you should be happy reselling it for $105
because they think you’re making a profit. That’s great if you’re Wal
Mart and have the buying power and selling power that they do. But
for the rest of us poor slobs out there, it just doesn’t work that
way.
Daniel R. Spirer, G.G.
Daniel R. Spirer Jewelers, LLC
1780 Massachusetts Ave.
Cambridge, MA 02140