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Usual and Customary Mark-ups


#1

Markup is always a little uncertain for me. I am a jewelry fabricator in
a Park setting located in a tourist area. It is very difficult to get
regular retail at this location but I am trying to approach it as closely
as possible as I know what undercutting can do to the trade! I have been
told by others that the Southern California markup is somewhat different
from other locations and I would like to hear from some jewelers in this
area regarding formulas for wholesale and retail pricing. Other locations
are also welcome for comparison. Susan.


#2

Hi Susan I used to live in Orange County California, but have since moved
to Florida, I have always charged “What the Market will Bare” Here in
Florida it is hard to get anything over 200.00 for anything in Silver.
Gold is another matter. I have always believed in a good turn over that
is, that my inventory turns over at 45 days at the most. I do not make
anything that consumes more time than I can charge for the piece, unless
it is for myself. Also I have found that you need 2 or 3 lines, One I call
my “Bread and Butter” line Things around 20.00. Next “Bread, Butter with
Jelly” Things 50.00 next “Peanut Butter and Jelly” Line, All things over
100.00. I like Quick Turn Over and it has worked very well for me. Hope
this is some help. The one thing that really gets me, is this Consignment
thing, Does any one else have a problem with this? Every business other
than ours the stores are on 30 days or cash and carry. I can’t figure out
why Stores expect us to finance their businesses. We have to pay for our
stones, silver and gold as we purchase them. Does any else have any
thoughts about this. Susan


#3

Hello Susans (plural!) - As far as pricing - in my experience of selling in
an outdoors tourist environment - yes, they do often expect a "bargain"
price. When I find myself in this type of an event - they will have to
make their purchases at the next booth. :slight_smile: I just don’t go back to that
event. In general, our winter visitors are a higher end customer than the
summer tourists. My pricing in the parks or indoor retail events has
always been within 10% of the retail price of the shops where I have my
work. For the higher end pieces, the price is the same as the retail shop
price - unless the shop’s mark-up is more than keystone. The guild or other
screened events seem to attract a clientel (primarily local) that
appreciates the work - so, questioning the prices is not as evident in
those types of outdoor events. Fortunately, the guild locally is finally
doing some nicer indoor events - with a few hours set aside for wholesalers
only. I found by the exhausting trial and error method where to go with my
work - and even then, the economy is so precarious - am still searching for
a way. For 2 years, I was in a fine arts coop gallery in an upscale mall
(for visitors as well as local folks) - and the price was not questioned.
It was refreshing to sell in that environment. There have been some very
good strings in the Orchid archives on these topics - April and May of '99.
I very easily can say “I don’t consign gold” - out of necessity. Am
working on phasing out of the other - the record keeping of consignment
makes me bonkers! Most shops locally seem to consign the local artists (not
just jewelers) work and I have found in some cases buy outright from the
mainland artists. Hmmmm. I’m quite sure it is the only way they can
provide the contemporary mainland work - by buying outright. An artist
locally who gives art related business seminars (and is very active
wholesaling his own work as well) - says to take the “C” word out of our
vocabulary and replace it with the “W” word! Although I like to be in
touch with the public, I’m considering a sales rep - they speak the lingo
and know how to talk with the business owners/buyers. I noticed with my
new computer program - Quicken Home and Business (not as complicated as
Quickbooks) - that the computer invoicing gets a terrific response from the
payment end! My work is currently all fabricated (casting is in the works -
but not on the market yet) and really agreed with Susan’s descriptive
answer. I also have different levels of product - so, when selling in
different environments - one can still pay the bills. However, I am in a
phase of major realignment and upgrade - so, this may be my last season for
doing a few of these other events. I was once injured badly in a high wind
outdoors event - by a neighbor’s booth - and dread the winter weather
locally. Keep an active look out for flying objects. (That is another
subject!) Working behind the scenes is looking much more desirable. A
little (?) feedback from Honolulu, Cynthia


#4

Here’s what I do - I sell the stuff to the store person at a discount
(about 20% off my already reasonable prices) and tell them that they have
one whole year to return it for a full refund if it doesn’t sell. That
way, the store isn’t stuck with it and I don’t have to keep track of my
jewelry that may be located several hundred miles away from me. So far,
I’ve done this about 5-6 times over the past 10 yrs and no one has ever
returned anything. I don’t mind selling something & giving a refund if
they return it but I sure hate lending it out in the hope that someone
else will sell it. During the summer I need all the inventory that I can
make anyway for my shows. Carol.


#5
   The one thing that really gets me, is this Consignment thing, Does any
one else have a problem with this?  Every business other than ours the
stores are on 30 days or cash and carry. I can't figure out why Stores
expect us to finance their businesses. We have to pay for our stones,
silver and gold as we purchase them.  Does any else have any thoughts
about this. 

Susan, yes, I agree with you about this bad habit that was created in the
jewelry business as it relates to consignment. The industry manifests
what we allow to persist! Not only do the stores ask/insist on
consignment, they take 30-45 days to pay! Now that is capitalism at its
worst! The image of the starving artist is created by the artist–we have
no one else to blame. Let’s work on changing this image…

Rebecca.


#6

To try and encourage wholesale - rather than consignment accounts - I have
recently offered to trade pieces that haven’t moved - and deduct the cost
from the new order (haven’t offered to give a refund). A few shops took
me up on this and I found it very clean cut. That way they could test out
my jewelry with their clientel at a lower risk. It seems better possibly,
to do it that way - rather than have the jewelry sit and collect dust or go
on sale. Is this something others work with? Anyhow, so far it seems to
have helped the transformation of a consignment to a wholesale agreement.
Much simpler - and no concern from my side for theft or loss. If they are
returning something - it is tangible! Jewelry can be repolished if
necessary. This concept would not work for all mediums - especially not
for clothing. Otherwise, I’m finally getting more hard nosed to agree with
Rene that it is up to us to change the norm. Sorry to hear it is the norm
on the mainland too. Hearing what works for others is very helpful. Thanks,
Cynthia


#7
Here's what I do - I sell the stuff to the store person at a discount
(about 20% off my already reasonable prices) and tell them that they
have one whole year to return it for a full refund if it doesn't sell. 

Good idea, Carol.

I do something similar. I have my jewellery on consignment at some places
and sell outright to some other of my ‘gallery’ outlets - at a small
discount. I assume they’ll be adding 100% so they get 50% off retail.

Re the discount, I figured that as they are paying upfront and I have the
use of the money right away I needed to persuade them to buy this way.

I have enough trouble of my own keeping track of my stock held at
consignment galleries that when I send off a shipment that’s going to be
fully paid for in the next few weeks I heave a sigh of relief.

Like you I do have a policy of accepting returns, which I credit with
newer work, but I never thought of stipulating a year time limit. Great
idea. Thanks. I’ll add this to what I do.

Brian

B r i a n A d a m J e w e l l e r y E y e w e a r
@Brian_Adam1 ph/fx +64 9 817 6816 NEW ZEALAND
http://www.adam.co.nz/


#8

When someone uses the word Keystone in pricing, does it usually mean that
the item is marked up 2x cost?

Bob Bonvino
Milford,MA


#9
   Here's what I do - I sell the stuff to the store person at a discount
(about 20% off my already reasonable prices) and tell them that they have
one whole year to return it for a full refund if it doesn't sell. 

Good idea. One question, though. 20% is a pretty small markup for most
stores, do you expect the retailer to mark it up above your usual retail?
If they do, is the retailer concerned that you are undercutting his prices
with your own retail sales?

Al
mailto:@Alan_Balmer


#10

Hi again - Yes, that is my understanding - ie: if the wholesale
price is $35 - then, keystone would be $70 - or, 2x the wholesale
price. There was a discussion on this topic in the Orchid
archives back in May '99 - under topic -“Keystone pricing?”

http://ganoksin.com/orchid/archive/9905/msg00303.htm

Cynthia


#11

I have opperated Etienne Perret + Company for 25 years now
selling both retail in my showroom and wholesale to over 100
stores around the world. I have found that traditional retailers
really do need to double the cost of what they sell to make a
profit. In other words their merchandise costs them 50% of what
they are selling it for.The other 50% is typically sread out as
shown below;

100% sales price
50% cost of merchandise
15% saleshelp/personnel
6% rent/lease
6% advertising/promotions
5% borrowed moneys/financing
4% maintainance
3% utilities/electricity/heat/phone
2% insurance/security
1% credit card/banking costs
3% miscellaneous
5% profit

This assumes everything goes well and there are no unforseen
disasters. The 5% is what has to go to pay for future growth,
and pay taxes unless the owner chooses to encrease his debt. If a
retailer can reduce any one of these catagories there is the
potencial for greater profit, and conversely if any catagories
are higher the profit will be smaller. Some retaliers will buy a
product that does not offer them as much mark-up as others
because they believe that it will draw people into the store
where they can then sell them an item they make a better mark-up
on. These are often called loss leaders, you may have seen them
at the grocery store. There may be new rules in today’s market
with the internet. If the inter-net e-tailers can reduce or
eliminate some of these expenses they will be able to reduce
their sales prices or take greater profits. When you reduce the
sales price and keep the merchandise cost the same, then the
merchandise percentage can go up. As you you can see there are
many ifs for a retailer to make money and one of the easiest
ways to make a profit is to keep the cost of the product as low
as possible.

Good Luck,
Etienne Perret
www.etienneperret.com


#12

Hi Bob,

When someone uses the word Keystone in pricing, does it usually
mean that the item is marked up  2x cost?

In the US, Keystone is usually thought of as a 100% markup from the
wholesale price to the retail price. Double, triple, etc. Keystone
are 200, 300, etc.% markup.

Dave


#13

We are a1/2 million a year manufacturer and sell most of our 14k gold
pieces to Guild retail stores for $30/dwt at $400/oz gold
(proportionately lower at $260/oz gold)


#14
proportionately lower at $260/oz gold

So when the market dips to lower costs for gold, do you reflect that
change in your prices? i.e., you set your prices so that your
customers are charged based upon the current market price. Do they
like this? Are they confused as to your prices?

I primarily work in silver, and since prices don’t vary as widely as
for gold, I set my prices based upon a market rate I think is fair,
and as silver prices vary (and therefore my cost of materials), so do
my profits. I am considering making some of my designs in gold and
need to figure out the best way to price it.

Do others use this method? Or do you have any other thoughts on
pricing gold? Thanks! Lori Bugaj


#15

Etienne - Very interesting breakdown. Thank you for sharing this. I
had always wondered how a keystone markup was accounted for by the
retailers.

In looking at the breakdown of costs, it appears that the same
categories would be true for our costs as manufacturers (with slight
tweaking for some - “sales help” could be read as cost of time to
perform sales calls, etc.; and the percentages I think would be
altered - I’ll have to look at my own expenses to see…).

If a retailer can reduce any one of these categories there is the
potential for greater profit, and conversely if any categories are
higher the profit will be smaller.

I can’t remember who said it (on Orchid), but someone listed that the
only thing we really have control over is our cost of doing business -
specifically how we purchase materials. I really believe this is true
and have changed my buying habits.

As you you can see there are many ifs for a [manufacturer] to make
money and one of the easiest ways to make a profit is to keep the
cost of the product as low as possible.

Hmmmm…
Lori Bugaj