I normally sell my jewelry wholesale, but took a consignment order
just this weekend. Long story short…my husband and I own a
winery…that’s our real jobs and seven years ago I also started
making jewelry. The store I took the consignment order from is a
large gift shop in a city and also has a wine tasting bar. They have
been selling our wines for years. The owner will only sell jewelry on
consignment, so I thought what the heck I’ll try it.

She told me to give her an invoice for what I need from the jewelry
and then she would mark it up 40% (I would get 60%) of the sale.

I use Jewelry Designer Manager and for instance on one of my
sterling silver bracelets, my wholesale price would be $55 and my
profit is 27.53, direct price would be $65 and my profit is 37.53,
retail price would be $75 and my profit is $47.53. I gave her Direct
prices on everything thinking she would take $65 x 1.4 and that would
mark the bracelet up 40% to $91.

She uses a chart that she says she’s used for years. It shows that
if I need $65 the retail price would be $108.55. Then she would take
$108.55 divided by 1.67 and that would give me my $65.00. The
employee who was marking my jewelry up asked me if this was right
and I didn’t think it was. Both of us couldn’t understand the method.
I visited with the owner about it and I really didn’t want to upset
her, so I told her to mark them the way she’s always been doing it
and I would take another look at it over the weekend and get back to
her. I’ve know her for a long time, so I’m not worried about our
relationship… I know she also wants it to work for me.

So my question to you is, is she pricing things correctly or should I
have given her my wholesale prices?

Markups get complicated when you use percentages that look as though
they should be correct.

Have a look at the figures in the second paragraph - if the store
marks up by 40% and you expect to get 60% of the selling price
someone will go home disappointed and my guess is that it is going to
be you. Using simple numbers, if you want $10- for a piece and the
store adds 40% in markup, the selling price will be $14-. If you get
60% of that you will be taking home $8.40 not $10-.

The store is certainly marking up more than the stated 40% -
actually it is more than 60% if the owner wants to sell the piece for
$108. As you say it should be $91-.

I’m not saying that the amount of markup in this case is over the
top, it depends on the product turnover that she might provide you or
exposure to possible future clients but just make sure that you get
percentages squared away before going into business together or there
will be a lot of frustration on the way.

Ummmm. I don’t know diddly about selling at retail or JDM or charts.
I’m just doing the algebra, but if you want $65 to be (your) 60%
share of the retail price, then the retail price must be $108.33.
65=.60x, x=108.33.

I will try to give you a formula on how to figure the multiplier
number to get what ever profit margin you wish.

Determine what % of profit you wish = X

100 - X = difference = D
3 Divide D into 100 = multiplier number.

i.e.

X = 40 percent
D = 100 - 40 = 60
100 / 60 = 1.67

So multiply your base cost by 1.67 for a selling price that will
have 40% of it as profit. So your 65 clams times 1.67 (40% profit
margin) = 108.55 clams selling price

Let us say you want 60% profit

Then X = 60 percent
100 - 60 = 40
100 / 40 = 2.5

So, multiply your base cost by 2.50 and 60% of the selling price
will be profit. So your 65 clams times 2.5 (60% profit margin) =
162.5 clams selling price.

There is big a difference between Profit margin and markup. All of
the business management classes that I have attended talks in profit
margin. If you try to use markup for your profit level you will loose
money.

Pardon what may appear as a really stupid question from someone who
doesn’t deal with galleries and whatnot but instead of all these
confusing formulas, some of which apparently are in dispute…

why don’t you just say, “I want to net $90 for this piece and $65
for that piece” and so on.

In the fine jewelry industry we have what’s called memo. I must have
taken over a million bucks in memo over the last few years. Sometimes
it includes hundreds of pieces, sometimes its a onesy. Everything was
stipulated on a per piece basis. I look at the memo and know this
here chatchky costs me $X and I’ll mark it at $Y. When its time to
settle its easy to figure what’s due. There’s no misunderstandings
about what game we’re playing.

If I mark something up more than customary, that works to the
supplier’s advantage cuz if I make nice money from his goods I’m
gonna continue with the line. If I mark it less I’ve still made money
with no investment. If one is concerned about being snookered on the
final selling price, really, you have no control anyway. The gallery
could easily mark stuff up beyond the ticket you might put on it. And
you know what? That’s fair. Its his business, he has to price
accordingly. If he wants to discount it and it results in a
sale…why would anyone complain about that? You still make your $65.

I don’t know but I would imagine from the existence of a percentage
settlement agreement that in the event of a retail discount you get
less money? Hmmm, let’s see…I can put my faith and money in a
perhaps confusing formula and hopefully honest retailer or I can
spell things out plainly…decisions, decisions.

First, Holly, I want to congratulate you and your husband on opening
the first commercial winery in Nebraska. I can’t begin to imagine the
hurdles you must have gone through to make that a success! I am sure
that your actions have changed the agricultural climate of Nebraska
on a permanent basis, with your grape breeding program and the
knowledge that is is possible to commercially succeed where there is
no track record to follow.

I love Google!

Now, the messy part

If your customer sells for $91 (your idea) and gives you $65 (also
your idea), that leaves $26 for the retailer, which is only 28.6% of
the sale. I’m pretty sure that very few (with any business sense) are
going to be willing to take consignment goods for less than 30% of
the selling price. Also, when you list a retail as $75, direct price
as $65, and wholesale as $55, does that mean that you sell direct to
the public at $65? Most retailers won’t even think of carrying a line
if their supplier is competing with them, especially one selling to
the public for the same or nearly the same as the price they are
charging the retailer!

Your program tells you that you should sell a $27.47 cost bracelet
for $55, $65, or $75, equaling a mark-up of 100%, 136%, or 173%.
Shouldn’t the retailer be entitled to the mark-up of 67%, which is
what they need to achieve a 40% margin? It sounds like maybe this
program is providing you with unrealistic expectations, both for what
you should get (perhaps a little too high of a wholesale price) and
what your retailers should get (definately too low of a markup to
survive).

She told me to give her an invoice for what I need from the jewelry
and then she would mark it up 40% (I would get 60%) of the sale.

If you want to get 60% of the SALE price and that number is USD$
65.00 then her calculations are absolutely correct.

What is not correct is if you want to MARK IT UP 40% and still want
60% of the sale to be equal to USD$ 65.00

To give you 60% of the sale price, your price would be divided by
0.60 or multiplied by 1.667

Come see us at the 2009 Tucson Show at the GJX in Booth Nr. 205 for
great Brazilian Colored Stones and Emeralds and Australian Opals and
we can give you some math lessons on mark-ups and percentage of sale
price calculations.

Best regards,
Robert P. Lowe Jr.
Lowe Associates - Brasil
Gemstones, Rough, Specimens

The store is certainly marking up more than the stated 40% -
actually it is more than 60% if the owner wants to sell the piece
for $108. As you say it should be $91

I already responded to Holly but will respond here again so that you
can see how to calculate the prices.

They are calculated in the following manner. The $65 represents 60%
(or.6) of the SELLING price, so you can divide the $65 by.6
(representing 60%) to find out how much the full selling price is.

Therefore, $65 divided by.6 equals 108.333333 or rounded up it would
simply be $108.33.

To check your calculations take the selling price of $108.33 and
multiply it by 60% (or.60) and you will find that you would receive
$64.998 and rounding up to the nearest 100th makes it $65.

This is the correct manner for calculating selling prices if you
wish to get 60%. This represents the fact that you would be entitled
to 60% of the actual selling price and the retailer would get 40%.

Using the calculations of $91 as the selling price and $65 as your
price, would mean you are calculating the retailer’s portion based
on YOUR price, and the resultant amount she would be getting would be
$26. This would in essence mean that you would be getting 70% of the
selling price and she would be getting 30%.

It’s easy to do if you don’t really stop and think about the
process. You are wanting to get 60% of the FINAL SELLING PRICE so the
method I described in the first paragraph is the correct way to
achieve this process.

She is probably using a discount chart that shows what a 40%
discount off of the sale price is, not what a 40% mark-up on cost
would be. $65 is 60% of $108.55 (what her sale price would have to be
to pay you 60% of the gross sale). Conversely, $65 X 40% mark-up (or
140%) = $91, which when split 60-40 would be $54.60 and $36.40. The
program you are using must be figuring out margin. A 40% margin and a
60-40 split are two different things.

In simpler terms, she is determining her selling price by figuring
she will pay you 60% of the gross income, not by adding a 40% mark-up
to her cost.

Cost times 1.67 does indeed yield a retail price for a 60-40 split
(or at least very close to it, 1.666666 ad infinitum or 1 2/3 is the
correct constant for a 60-40 split). This is how I figure a 60-40
split with my consignors. They get 60% of the selling price (or their
minimum dollar amount, whichever is higher, if I decide to give my
customer a discount).

65 X 1.67 (167%) = 108.55. 108.55 X 0.60 (60%) = 65.13. If I decide
to sell it for $90, you still get $65. If I can sell it for $125, you
get $75. That’s how I do it, anyway.

Call it my stubborn streak but I just want to clear something up.

Whilst I don’t disagree with any of the responants claiming that the
figures are correct based on $65- being a 60% return to Holly on
$108- selling price I thought it was clear that the retailer told her
that she was only going to mark-up the consignment price by 40%.

"She told me to give her an invoice for what I need from the
jewelry and then she would mark it up 40% (I would get 60%) of the
sale."

Note in my earlier post that I said a 40% markup will not provide
Holly with a 60% return on the retail price. This is why I also said
that these figures were going to have to set in stone before leaving
the goods.

P = retail price
x = payment to Jeweler
c = commission to store

Far too complicated, divide the price the artist wants by the
percentage of the price the artist gets for the retail price, $65
divided by (60%).6 retail price.

I did not pass algebra 1 the second time. But I can figure out
percentages for alloying my own gold formulas and raising or lower
gold karat. Artists in my gallery get 60% of the retail price
regardless of whatthey say they want as sometimes we can price their
work higher than they feel they can get. As strange as it is, one
artist was pricing a bracelet at $98. We sold it for $138. She gave
us more and raised the price, but not as high as what we had sold
one for. She said she wanted to be fair to the other galleries that
had her work. If I could get $138, I guarantee that she could get the
same at the other galleries. I guess some people don’t want to get
paid what they are worth, even when you prove it to them that they
underprice themselves.

Note in my earlier post that I said a 40% markup will not provide
Holly with a 60% return on the retail price.

Consignment 101

Apparently the mis-communication is that someone misunderstood that
the artist’s price was going to be marked up 40% whereas the 60-40
split is based on the RETAIL price, not marking up up the artists
price 40%.

Since most consignment agreements are 50-50 or 60-40 I would think
most artists would have this understanding and if they don’t, they
get educated by the store owner who theoretically has previous
experience showing artists work on consignment. Standard operating
procedure.

I am all for the use of math, but this thread brings to mind an old
joke.

A professor of mathematics decided to borrow some money from a
jeweler, using diamond ring as a collateral. Jeweler looked at the
ring and said that he can give him 100 dollars, to be paid back in 6
month with 150% interest. Professor wasn’t happy with the deal, but
he found jeweler’s arguments about level of risk that he is
undertaking and the market been soft, persuasive so he agreed.
Jeweler gave him money, professor gave jeweler the ring and promised
to pay back 250 dollars in six month. When professor was about to
leave, jeweler offered to reduce interest rate by 50% if professor
would pay back 50% of the loan now, and the rest in 6 month.
Professor gladly took the deal. The total loan amount was calculated
to be 200 dollars, so professor gave jeweler 100 dollars and left.
When he got home, his wife asked him if he was able to borrow the
money. Professor said "You know dear, the strangest thing happened.
I do not have the money, I am 100 dollars in debt, I do not have the
ring, and I checked all calculations 3 times and everything is
correct.

Your program tells you that you should sell a $27.47 cost bracelet
for $55, $65, or $75, equaling a mark-up of 100%, 136%, or 173%.
Shouldn't the retailer be entitled to the mark-up of 67%, which is
what they need to achieve a 40% margin? It sounds like maybe this
program is providing you with unrealistic expectations, both for
what you should get (perhaps a little too high of a wholesale
price) and what your retailers should get (definately too low of a
markup to survive).

While there are many things I love about Jewelry Design Manager (I
use it myself), for my work the pricing algorithms simply don’t work
so well. My work tends to be higher cost in labor than materials in
many cases, and it really makes no allowance for that, at least not
in the version I’m running.

I do find it useful for figuring out the wholesale price… and then
I double that, more or less, for retail rather than relying in JDM’s
figures. It IS very useful for me, though, in getting a good idea of
the wholesale price!

This is my second reply to this thread. The first time I tried to
give you a formula for determining the retail priced based upon your
wholesale price needed for you. If you let your wholesaler use a MARK
UP of 40% and when it is sold you will end up with less that what you
needed. That is why you need to use a PROFIT MARGIN of 40%.

Better yet, just agree or, as Roger says, “set it in stone”, as to
how much your buyer owes you when the item is sold. Then let the
buyer decide how much they need in profit on their own. That way no
matter how much the buyer sells it for they owe you the price you
need.

As far as what consignment sales go, I have had buyers use a 40%
profit margin to as much as 60% margin. I don’t worry about how much
they increase their costs as long as they pay me what I feel I need
for the item.

I have a buyer that pays me out right and they triple their costs.
This does not bother me, because I received what I needed.

I know it can be confusing when talking PROFIT MARGIN and PROFIT
MARK UP.

The best thing is get what you need regardless of the final selling
price.

She told me to give her an invoice for what I need from the
jewelry and then she would mark it up 40% (I would get 60%) of the
sale.

Well Roger - you are most definitely right - and you had clearly
pointed out that with the 40% mark up she wouldn’t get 60%. On the
other hand I was focused on the message in the parentheses (“I would
get 60%”) and was trying to make it clear to Holly that usually one
got 60% of the SALE price not of the mark up price. But I think (if
I remember right) that I also told her she wouldn’t be getting 60% if
the price were simply “marked up” 40%.

Then I described how I arrived at my numbers.

I guess these things can get sticky and I probably should learn to
keep my mouth shut and not even offer any answers because I am only
a hobbyist (although I do sell my things) so I work by my own
standards which are often far different than what you in the business
have to deal with.

In any case, I think we both made the same point - that if she
wanted 60% to equal her cost of $65, then it would have to be 60% of
a
SALE price, not a mark up price.

The other day, while telling my husband about this thread, and how
the algebra presented itself as being useful, he said he could write
the code for a calculator that anyone could use without having to
crunch the number s themselves. Ok, cool, I said.

You determine how much you want to receive for your piece and plug
that in to the first box on the left. In the second box, on the
right, put in the percentage that the gallery or store wants off of
the retail price. The calculator will then tell you what the retail
price will be within those parameters.