The cost of holding out

This last line is from the nest message in the list. And here are
my “two cents” on the cost of holding out or selling short. I am new
to this list and the field of making jewelry.

As an employee of someone else (a worker for some company), you have
every right (if that is a good choice of words) to completely forget
about whatever you had been working on at the end of the day of
shift. You don’t have to think about that task or event again until
the next day. You are paid for the time recorded on the company’s
(your employer’s) time clock.

As a self-employed worker, either in a sole-proprietorship or
partnership with one or two others, when does the “time on the
clock” end? A client wants a specific design for a piece of jewelry
and you make sketches during the rest of that day. After you lock
the door that night and are enjoying dinner an idea for the design
comes to you. A rough sketch on a napkin to be filled in later will
have to do for now. Do you charge the client for the dinner or for
overtime used to finish the drawing and make a sample? If the design
is original, who would (or should) own any copyright? If it is a
good design other clients would probably like the option of buying
one.

In a corporate environment (not related to the making of jewelry)
certain levels of company leadership do allow themselves the option
of passing ALL costs, including meals, to the end user of the product
even though the meals in question are neither on company property nor
"on the clock" for time billing records.

As I write this, more questions gone to mind that would be better
answered by a small business attorney that is just as trusted (by
you) in that field as you are in the field of making jewelry.

Thank each of you for the good and leads.
Jim

Dear Karen, Keep up the good work ! Jewelry that is well executed and
of distinctive design will always find a market, albeit the kind of
market that you are positoned in will also alwys be vulnerable to
economic fluctuations. The point is that we all have to be sensitive
to overall market conditions and that we must bend a little with the
bend or risk getting broken.

I always post my prices and I certainly do not charge some more than
anyone else. On the other hand, when I have a customer who really
likes my work, I am apt to give them a better break pricewise on the
assumption that they will more likely to be repeat customers.

On another plane, let’s not throw all markets into one basket. The
retail jewelers market is one in which more mundane issues apply Here
we are meeting the needs of average consumers who want to commemorate
a special familiy or social occaision. In this market we are not out
to sell a masterpiece of artistic effort, but, rather, a tasteful
piece of jewelry that is affordably priced. The foregoing is so
obvious that I am not going to belabor the issue.

Best Wishes, Ron at Mills Gem, Los Osos, CA…

Hi Daniel These are not David Geller Formulas; they are business and
investment formulas. There is a time line and it’s a year. In your
example you mention going from $100 average sale to $1000. Bold move,
but let’s use it.

At what time in the future will you either say, “It worked!” or
throw in the towel on bigger sales? The formulae say to give it a
year.

Your idea will only hold water as long as you can financially
survive buying, paying for or borrowing money to pay for merchandise,
which is not selling well. If you can survive it you will do well.
But if it never really happens at some time in the future you will
have to realize it didn’t work and sell off the losers.

If it does work you will probably have debt to pay off. If I
remember correctly you have a large markup, which will pay for your
self-financing. Most of these people on Orchid are scared to death to
charge right.

I just left a store doing a million a year in a mall. The owner gave
me the same talk as some have posted here. His salary is $30,000 per
year! Why? Because his beliefs about managing JEWELRY (which is
nothing more than money) is way off base.

Going from $100 average sale to $1000 is JUST like opening a new
business. It’s a very unrealistic example I might say being your
average sale is 10 times normal. But just like opening a new business
you would for the short term not demand the business make a profit or
show good numbers. I think you will agree. But there is a date in the
future of which you, your banker, and your vendors will pull out
these formulas and say “Time to %#@ or get off the pot”.

All of my posting about increasing prices are about repairs. The
formulas is about inventory. You can have low product prices as long
as you have higher turn. It’s a fact that you can’t have low margin
and low turn.

And consumers will not allow a store to send their work to some
third world country to get it fixed, you folks have a great
imagination. :slight_smile:

David Geller

Dear David You sell wholesale. You are not trust sensitive, your
business is indeed price sensitive. That’s why I dropped trade work
within 3 years of doing it. You can’t win.

You will work your butt off to make a living in trade work.

My post specifically was related to retail repair and also some
design.

David Geller

Sorry guys, I just can’t stay out of this one anymore. I’ve been in
the repair business for over 25 years. I am now in a retail
environment. In the past I have also done trade work and owned a
trade shop. What I really want to do, and I am working at it, is
break away from that aspect and concentrate on manufacturing my own
line, only doing selective repairs on the side. I have found David’s
principles sound great, but like many others, I have a very difficult
time trying to price my work. I am trying to get better about that.

My take on repair prices - First, I have limited control. I
basically lease space in a retail store, do their work first, then
have time for my own projects. For the most part, the management
sets the prices on repair work, and I only have limited input. So
far, this hasn’t been a real problem. I think the prices need work,
some too high, many too low. But, I am doing OK, and there seems to
be an underlying attitude of ‘we’ve been doing it this way for xxxx
years’ What I do find, though, is that while David is right about
the trust angle, price is important to these folks. Not so much from
a competition angle, but from a simple dollar angle. I don’t usually
listen to the argument of 'the guy down the street will do it for ',
I just send them down the street. The nice ones will get an
explanation of why he might be able to do it for less than I can, and
I will tell them that I simply cannot do it for less than I am
charging and be profitable. The nasty ones just get sent on their
way. Not politically correct, perhaps, but I really have no patience
for mean types trying to badger or shame me into dropping prices.

There is a real problem, though, especially in todays economy, with
people (at least our average customer) simply not wanting (or being
able to) pay for good repair work. They have low cost pieces and
want low cost band-aid repair work. Unfortunately, our store just
does not draw a lot of high end customers. So, for the time being, I
take what I can get and build for the future.

As for pricing my products, I think finding the right audience is
critical for getting the right price. Again, our store just doesn’t
do it, and as I develop my line I am trying to find higher end shops
and galleries to represent me. My production pieces suffer in our
shop by being put next to items that are bought by weight from
offshore manufacturers. Most of our customers will buy one of those
charms rather than mine, and the decision is often based simply on
cost. They are simply not recognizing, or caring, about the benefits
of owning handcrafted pieces of more unique design. While I try to
get my prices up high enough to be profitable, all the formulas in
the world won’t help when the right audience is down the block in
another shop. I also sell wholesale on occasion, and there I must
be sensitive to the retailer’s markup. Kind of stinks that I do the
work and make little profit, he buys my stuff and makes a huge
profit, but that is the nature of the business. I know I can’t sell
at a loss, but here I need to balance low margin with high volume,
and count my blessings that the risk is now his. He has to turn the
stuff, and I have already made my money without having to hold
inventory.

Jim from the mountains of NC, where it is warming nicely, and the
motorcycles are out from under the covers.

Well actually the time line for the formula may be a year, but IMHO
that is an extremely short sighted view of the world. I have never
looked at my business as a do or die in a year kind of thing, and I
think for most of the Orchid posters that is true as well. Most of
the people on list do what they do because they love it and want to
do it for the rest of their lives.

My example of boosting your price point was not based on the idea of
doing it in a year (which is exactly why the formulas won’t work for
it). It was based on having a long term vision of what you want to
achieve. It took us about 12 years to make the move up the ladder
(in terms of raising our average price points), and we continue to
follow this path today.

Three years ago we made a conscious decision to boost the clarity
grade of the diamonds we were selling (which, as branded diamonds
were more expensive than most to begin with), simply by reinvesting
some of our profits into higher clarity stones that we knew wouldn’t
sell immediately. When all we had and showed were SI grade stones,
that was the clarity that we predominantly sold. Now we show only VS
stones and that is what we predominantly sell. We are on a new 5
year plan to boost it up to the VVS range as well. You’ll note that
none of these actions took a year, nor did we have the shortsighted
view that any of them had to happen in a year. Could we have earned
slightly more money in the last 3 years by not boosting the clarity
grade of the stones? Of course. I probably could have pulled an
extra $5-10,000 out of the business. But the reality is that by
doing what we did, and this is despite the rather severe current
economic downturn, we are now making more money on every diamond we
sell and for the next TWENTY years we will continue to do so. We
have also continued to boost our images in most of our customer’s
minds as being a quality store to buy from.

I agree with you that most jewelers undervalue their work. In my
posting you will note that I said this, and noted that it was
particularly true about repairs. However once a jeweler gets past
the point of undervaluing his work it becomes critical that they look
at the long term view of what they want to achieve as jewelers. Not
everyone will want to follow our path as it can require a great deal
of sacrifice. But if they stick to the tried and true they won’t
ever have a chance at succeeding at something else.

You should also note that it seems that most of the Orchid list is
composed of producing jewelers as opposed to buy/sell jewelers. They
face a whole different set of issues than the buy/sell jewelers do,
who I am sure are a group that absolutely will benefit from your
inventory advice. Daniel R. Spirer, GG Spirer Somes Jewelers 1794
Massachusetts Ave Cambridge, MA 02140 617-491-6000
@spirersomes www.spirersomes.com

David, When you say that “consumers wil not allow their work to be
sent to some third world country” you are flirting with the reality
that many stores are already doing this and you are ignoring the
fact that sending your repairs to an urban jewelry center has been a
standard practice for some for many years. There are also countless
numbers of American companies who send their labor intensive
assembly work to maquilas on the U.S. Mexican border. Your
suggestion that these practices are a figment of peoples
imaginations tells me that you are hiding from the truth.

The practice of sending work to sweat shops in urban centers is, in
many ways , no more risky than sending it to an American owned
company that operates just across the border. These shops ,( urban
sweat shops ) are frequently manned by undocumented jewelers who
work in abominable conditions for abysmal wages. I certainly don’t
advocate using these shops, but I would not have any objection to
using a maquila that is properly managed by an American with a home
base in the 'States…assumng, of course, that the workers are
being fairly treated. As for customers not allowing their work to be
sent outside, this is a matter between you and the customer. If you
tell the customer that in order to get him a fair price you are
going to send their work to an American owned maquilla and that you
accept full responsibility for their belongings, then you can be
sure that most will not mind. Don’t get me wrong; I am not
advocating any alternative. I am just suggesting what options there
are in the REAL marketplace. That you should suggest that these
circumstances and options don’t exist makes me believe that you may
not be as well informed as you should be. Open mindedness is
certainly a key to survival in the marketplace ! Ron at
Mills Gem, Los Osos, Ca.

It should also be noted that there are at least some stores out
there who send the stuff out (to wherever) without informing their
customers. Not ethical, but another reality. Some just won’t inform
unless asked directly, some will actually outright lie about it.
Sad, but true. Many customers coming into our shop ask if the work
is done on premises. Many also relate horror stories (perhaps
inflated) about bad experiences with shops that do send out. These
situations make it hard for all of us who want to make an honest
living, but that phenomenon is not unique to the jewelry trade. I
am too often faced with customers who demand 'while I wait and watch’
service so that their piece never leaves their sight. Sorry, but if
you don’t trust me enough to leave your item, go elsewhere.
Disrupting my schedule hurts everyone and benefits nobody. To cater
to these customers disrupts service to others and also forces their
own work to be rushed, and I find that is when problems leap up from
unexpected places. We turn around most work in 2-3 working days as
it is, so I do get stubborn about having the time to do the job
right, and in the most efficient way I can. As a tongue in cheek
aside to this customer attitude, has anyone else out there noticed
that the customers who are the most distrustful of leaving their
jewelry with you are the ones who own the least tempting pieces???
I mean, really now, who would WANT to switch stones when the customer
brings in a .10 diamond that looks like frozen spit or a chunk of
charcoal??? I guess that goes along with my other repair shop
theory, the thinner the shank, the fatter the finger…
Jim in cloudy western NC.

Jim Ritze explains the issue very well for so many of us. I have
found that a co-op or guild gallery can be a MUCH better way to go
than the traditional consignment or regular sales. Where you know it
will be triple key and you make the short end, it may be better to
look for a jeweler’s store, not a ‘‘jewelry store’’.

The urge to manufacture our own line is such that the trades
traditional practices can be overcome - and a profit made for US,
too. if we think creatively

Frif

Hello David;

    Dear David You sell wholesale. You are not trust sensitive,
your business is indeed price sensitive. 

Actually, to some extent, it is. My accounts are MY customers. But
you are right, not so for the end user, which I do not deal with
directly.

    That's why I dropped trade work within 3 years of doing it. You
can't win. You will work your butt off to make a living in trade
work. 

You are quite possibly right about that. And I have to grow a new
butt nearly every day. And that’s why trade work is probably not
the last step in my career track. :wink:

    My post specifically was related to retail repair and also
some design. 

I realize you were writing about retail repair. But that still does
not dispute my observation that customer’s are concerned about what
they pay for repairs, to the extent that they will get quotes from
different retailers. I know that it is happening. I agree that
customers place a very high value on the trust component of repairs.
If you’d ever read the introductory letter I send to my prospective
accounts, you’d read about that in the first paragraph. It’s a
document I produced long before I ever heard of Orchid or your own
work on pricing. I think the issue, finally, as Ron Mills has
pointed out, and that I also wish to reiterate, is that one has to
choose their price based on many factors. How trustworthy the
service, how prompt and thorough, and price, and other aspects. And,
then the question of how competitive do your prices need to be, and
finally, isn’t it important to be fair (alright, generous) to the
customer. Should we charge them as much as the market will bear, or
shouldn’t price be competitive and “attractive”? Meanwhile, I
appreciate that you are probably doing a free service for folks like
me who will, in the long run, benefit as prices for repairs
increase. I also doubt that repair work will go overseas, at least
not much of it. But what’s your take on the new kid on the block, the
“repair retailer” like the various “quick-fix-mall-kiosk” type
ventures? If retailers continue to balk at the idea of paying bench
people wages that reflect their contribution to the store’s income,
maybe they’ll begin to lose repair business all together if guys like
me decide to retail repair service at somewhere between wholesale and
your suggested prices. Not too many people fix shoes that sell them
any more.

David L. Huffman

This is directed to Jim in cloudy western NC. As much as I can try
to understand your attitude about people who want to see it done and
just aren’t trusting, I’ve seen the other side. Years ago I used a
local trade shop for all my sizings. I was on my way there and a
friend asked if I would take her solitaire as well. No problem, we
checked the size and I was off. Now, this shop had been doing all my
sizings for at least 10 years since we did none in house. I took in a
3/4 carat solitaire and picked up a “sparkle” setting with a piece of
melee in it. Once I got my breath back and said it wasn’t the right
item, the trouble started. My honesty was questioned. In the end the
ring was replaced but it wasn’t the same. Yes, I continued to use the
trade shop but I got very detailed receipts from then on. I have
heard this kind of story told so many, many times in the 15+ years
since. These things do happen on both sides. Trade shops goof and
customers try to pull scams. It works both ways. But because of a
personal experience, I’m now much more understanding when someone
questions me.

But that still does   not dispute my observation that customer's
are concerned about what they pay for repairs, to the extent that
they will get quotes from different retailers. 

Sorry, whole heartidly disagree with you. Across the COUNTRY people
tell me that when they raise their prices 1 out of 10 leave the
store. Don’t let one or two little old ladies sway you. How
trustworthy the service, how prompt and thorough, and price, and
other aspects. And, then the question of how competitive do your
prices need to be, and finally, isn’t it important to be fair
(alright, generous) to the customer.

I bet you’re apologizing for your prices when you present them to
the customer. I can’t TYPE as many responses I have from people who
are amazed at the prices they now get and how few people leave.

You believe your words to be true. OK. I find others prove you wrong
daily. Hey if I’m right and you’re wrong…you get
richer.

David Geller

As a tongue in cheek aside to this customer attitude, has anyone
else out there noticed that the customers who are the most
distrustful of leaving their jewelry with you are the ones who own
the least tempting pieces???? 

We find them to be the ones with the lowest value items, the most
demanding about how the work is done and the cheapest customers. We
tell them quite directly: If you don’t trust us enough to leave the
stuff, find a jeweler that you do trust. You can never make money on
them. Often you are much better off letting them walk.

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

David, The inherent danger in simplistic logic is that it is often
based on assumptions.

You assume that those customers who go along with increased prices
will always come back whereas, in reality, many of them won’t. One
of the reasons that people will go along with a high price is that
they are too embarrassed to take issue or to admit that they might
not be able to afford the higher price. Others will go along with it
until they learn from someone else that a much better price can be
had elsewhere.

I know a medical professional who uses hypnotherapy to treat smoking
addicts. He consistently claims a 95% success rate…the only
problem is that he has no way of knowing whether the patient
relapses. The mere fact that they don’t return or that they don’t
communicate the relapse doesn’t prove anything.

There are also people who don’t quibble over prices because they
erroneously assume that a higher price means a higher quality
service. This is akin to assuming that Dole brand bananas are better
than others or that a higher priced banana is superior to cheaper
bananas.

Your line of thinking has a strong odor of price fixing…"if we
could only eliminate competition we would all be better off"
Malarkey ! Competition is what the market place is all about.
Competition encourages quality as well as productivity. American cars
today are better precisely because the Japanese set higher standards.
We formerly were captive of a marketplace in which planned
obsolescense was the keynote. It still plays a role, especially with
regards to style, but we now have cars that will give us three times
as much longevity De Beers still operates as a monopoly, but cartels
are not legally sanctioned in America and this is precisely why De
Beers is forbidden to operate directly in America. We also do not
sanction price fixing. I wholeheartedly support rational
determination of profitability and I would agree that there are those
of us who might benefit from upwardly adjusted prices, but I
certainly do not agree that all of us should charge as much as we can
possibly milk from the customer. This kind of thinking is ultimately
counterproductive and self destructive. Furthermore, it is all about
overhead and overhead varies astronomically depending on personal
circumstances and inherent regional variations. A snobby marketplace
might not give a whit about price whereas a workingman’s neighborhood
would be very price sensitive. Rents in urban areas may be twenty
times higher than in small towns. Utility costs vary substantially.
Wages also vary regionally. A good benchman is going to get twice as
much pay in an urban setting. No guidebook is ever going to be able
to rationally fix prices across the board throughout the nation.
There are just too many variables.A much better approach would be to
establish guidelines for establishing a system which allows a jewelry
entity to analyze its’ unique operating parameters. I think it would
be perfectly reasonable to team up with an accountant and analyze
your personal circumstances. In any event, I strongly urge you to not
send a copy of your book to the Federal Fair Trade
Commission…

Ron at Mills Gem, Los Osos, Ca.

    Across the COUNTRY people tell me that when they raise their
prices 1 out of 10 leave the store. Don't let one or two little
old ladies sway you. 

David, I know this was not your point but I have to say that all
“little old ladies” want to hear is that their repair will be done
in house by someone with experience who will treat the jewelry as if
it was their own family heirloom.

The ones that have balked at the prices I get from your book are the
twenty something educated male who bought something at a cheap
on-line discounter. They are the type who come to me because their
Grandma or Mother said I do great work. Then they want it done for
next to nothing and on the same day. It is hilarious to see their
faces when I tack on the extra rush service fee.

John Sholl

One thought: I wouldn’t walk into a regular retail jewelry store and
expect to see unique studio made jewelry. I’d go into one of the
dozen or so places in town that sell predominately fine hand made
"art" jewelry. If somebody is attracted to those cheap charms, they
probably wouldn’t understand the attraction of a more expensive yet
unique and handmade piece of jewelry. I think you’d have better luck
with galleries and shops that specialize in unique handmade
products.

Rita
Vancouver, BC

Brad Simon of E-bench offered some software that lets us come up
with a rational price list. Hopefully it is still available. You
simply put in 3 metal prices, labor and other overhead costs and
abracadabra, a 2 page price list. Only down side is that it needs
Microsoft Excel as a base, so if you don’t have that, it can be right
pricey. The nice thing is that it covers the basic repairs, and once
you have done your initial cost calculations, it can be adjusted for
metal prices in minutes. Very handy right now. The real beauty is
that, as long as you put in the time to carefully and realistically
calculate costs, it will give you prices that are sensitive to
all of the regional variations in rent, labor cost and other overhead.