By Jennifer Heebner, Senior Editor
This story appears in the December 2012 issue of JCK magazine
As the price per ounce approaches $2,000, what type of gold jewelry should retailers invest in? JCK asks those who’ve weathered past sales seasons for tips on breaking free from the constraints of cost.
In the early 1970s, when Matt Stuller was just starting to build his company, store owners told him if gold hit $100 an ounce, they would go out of business “because the customers will refuse to pay the high prices that would result,” recalls Bob Cox, chief sales and marketing officer for the Lafayette, La.–based Stuller. “This kept Matt up at night. He invested everything he had in his new business. But we can see how well those predictions worked out, as some years later, gold went to a level over $800 per ounce.”
Moral of the story: Gold prices have gone up in the past, and will go up again, but that doesn’t mean people will stop buying.
For one thing, higher gold prices don’t just mean higher jewelry costs. They further substantiate the metal’s luxury status, and ensure that consumers will continue to trade in pieces they no longer wear. They also bring more attention, in general, to gold—“which is not always bad,” observes Georgie Gleim, owner of Gleim the Jeweler with locations in Palo Alto and Stanford, Calif. In fact, Gleim treats a rally in the price of gold as a good excuse to beef up her estate cases.
Practically speaking, however, what’s a retailer to do when the price per ounce hovers at historically high levels? Heed these tips from industry veterans who have been down this road before. Their advice is sure to help you break free from the (presumed) constraints of soaring metal costs.
Talk about design, quality, value—anything but the price! Arch Kitsinian, director of sales for S.A. Kitsinian and Vanna K in Lake Balboa, Calif., advises retailers to train staff not to discuss rising prices. “Many consumers often are in a store for the first time purchasing an engagement ring, so the last thing they need to be educated on is the rising price of gold,” he explains. Instead, keep the conversation focused squarely on craftsmanship.
Should that escalating cost issue arise, explain that the metal has an inherent value as a “long-term investment,” says Sally Morrison, director of jewelry and public relations for the World Gold Council in New York City.
“Retail employees may have to learn to sell gold more like platinum, as a rarity and an investment,” adds Ashley Bowen, brand ambassador for Simon G in Glendale, Calif.
While it’s true that clients, particularly men in the market for wedding bands, get sticker shock—Katrina Hess, co-owner of Old Northeast Jewelers in Tampa and St. Petersburg, Fla., says she’s selling more Teno silver and steel bands to men who recoil at the price of hefty size 12 18k gold numbers—focusing too much on the metal’s cost can be self-defeating. It can lead to merchants “becoming commodity traders,” observes Amit Sofer, president of Beny Sofer in New York City.
Emphasize the emotional aspect of the sale—but remind buyers of gold’s inherent value. Gold jewelry often sells to people celebrating an occasion, so focus on the joyfulness factor. “The consumer is in your store to buy a gift for themselves or for someone they love,” says Sofer. “They want to hear about the quality of the piece and how it will make that person happy. Without emotion our industry has no reason to exist.”
And it doesn’t hurt that gold jewels boast a consistent—and rising—value. “What other luxury product do you get to buy, enjoy every day, and have it actually increase or retain its value?” Sofer says. Clients who aren’t shy about wearing their wealth won’t mind being reminded that gold is still considered an ideal way to display affluence. “Wearing a piece of gold jewelry is like wearing a monogram Louis Vuitton bag,” says Bowen. “You’re telling everyone around you that you have excellent taste and an appreciation for the finer things in life.”
Add to these arguments one pragmatic point about sales: “You may sell fewer units, but you get the volume and profits much faster,” says Cox. “Since gold has such a higher selling price per unit than sterling silver, you attain your sales and gross margin dollar goals at a faster rate than with silver.”
While silver may sometimes offer higher profit margins, a higher gross profit percentage does not necessarily mean retailers will collect higher gross profit dollars. “And those are what pay the bills!” adds Cox.
Get creative with gold jewelry offerings. Think thinner, lighter, or electroformed pieces with creative uses of negative space that don’t sacrifice style or quality yet come with a lower price tag. “My customers are always asking if I can manufacture a chain or pair of earrings lighter, without compromising quality, and the answer is ‘yes,’ we are able to do so,” says Kitsinian.
There’s also the option of selling petite gold pieces, like charms, where there is still “a perception of weight but the jewelry is small,” says Morrison. These can be amassed over time, thereby minimizing upfront costs, and can inspire a treasure-hunting mentality as clients return to your store to nab new pieces for their collections. And don’t forget the appeal of gold-accented styles in silver, bronze, and titanium, where gold sometimes “acts as the jewel in the piece,” she adds.
Finally, consider positioning gold as the best choice for those interested in buying fewer but better pieces. The focus here should be on stocking chain necklaces and bracelets that can be hooked together for multiple looks—long and short, Y configurations, or layered.
Of course, many retailers reach into their own bags of tricks when the gold price rises. Gleim directs customers to her antique jewelry, which offers some “good values,” she says. And Jeffrey Hess, co-owner of Old Northeast Jewelers, never fails to remind shoppers that “nothing feels as warm as gold on a finger or wrist,” he says. He’s also careful not to repeat the mistakes of his peers. On one visit to a competitor less than two years ago, Hess noticed that the jeweler “paid so little attention to his older inventory that the scrap value was worth more than his stated retail price!” he recalls. “Retailers should be aware of this.”
In the end, retailers who embrace gold jewelry as a timeless treasure that appeals to people in spite of—or even because of—its high cost are bound to be rewarded. “We sell an emotional product and we always recommend putting the emphasis on that,” says Sofer. “We still see people buying the diamond gold jewelry no matter what the gold price is.”