Pricing Gold Jewelry, An Insider’s POV
January 1, 2009 by Afshin Yaghtin
Keystone pricing is taking the wholesale cost of a piece of jewelry and marking it up 100%.
Information site, About.Com, takes this a step further. They advise entrepreneurs:
“A simple formula when pricing for wholesale is to add up your costs (this includes labor, overhead, and supplies) and multiply by 2. For retail, do the same, but multiply by 2.5 to 3.”
In other words, they advise taking not only the cost of the jewelry into account, but also other variable business expenses to determine the net cost of jewelry and then to multiply by 2 to obtain a wholesale cost or 2.5 to 3 times to obtain a retail price.
Keystone refers to doubling the cost of jewelry, whereas triple keystone is tripling the cost of jewelry to determine the retail value (A staggering 300% Mark Up)!
This is not uncommon in the jewelry industry and some jewelers mark up jewelry even higher.
Apples of Gold Pricing Methodology
Where Apples of Gold Jewelry differs significantly from standard jewelry industry pricing is that at best we mark up our jewelry an average of 30% from the cost of the actual merchandise. On select designer pieces, we may mark up select items 40% – 50% (you can call this half-keystone, if you will).
Compare this to 100% to 300% markup of the traditional jeweler, and you will see why customers often call us to ask us how we are able to sell jewelry for so low.
This is where we stand apart from most traditional jewelers and even online jewelers. When comparing Apples of Gold to traditional jewelers we are usually 50% below retail and when comparing to online stores, Apples of Gold Jewelry is an average of 30% lower than most online jewelry competitors.
This leads us to our value-based pricing methodology.
Value Based Pricing
Apples of Gold strives to determine its jewelry prices based on the value that a piece of jewelry creates for our customers. We believe that this is more profitable for us in the long term–as we serve our customers and provide an affordable, quality product.
By selling with greater volume nationally across all U.S. States and internationally across Europe, Asia, Canada, and other parts of the globe, and by limiting overhead, and very significantly not having the huge burden of stocking every jewelry item in-house, we are able to sell at vastly lower prices than most jewelers, while providing a fair valuation of our gold jewelry.
Additionally, we combine our value-based pricing with a “fair pricing” method. “Sometimes it simply doesn’t matter what the value of the product is, even if you don’t have any direct competition. There is simply a limit to what consumers perceive as ‘fair’. If it’s obvious that your product only cost $20 to manufacture, even if it delivered $10,000 in value, you’d have a hard time charging two or three thousand dollars for it — people would just feel like they were being gouged” (entrepreneurs.about.com).
The Bottom Line
Most jewelers have to charge anywhere from 100-300% to maintain a profitable business. With large overhead, shifting gold and metals prices, employee costs, and most costly–expensive inventory–they cannot survive on smaller than keystone margins.
The difference with online jewelers–and especially those who have deep and mutually beneficial relationships with manufacturers and wholesalers, the markup on jewelry will be significantly less, usually not breaching 30%-50%.
At Apples of Gold, we recently were in talks with one of our major suppliers to get lower prices to obtain a 40-50% margin on products that they supply us, and the idea was quickly dismissed–because both we and our suppliers understood that to be competitive in the online environment, such a mark-up is difficult to achieve. We finally settled on a 29.5% margin on items that we purchase from them. So an item that cost us $300, we are selling for about $385.00. A traditional jeweler would normally sell an item obtained at wholesale for $300 for $600 (keystone), or possibly $900 (triple keystone).
That is why Apples of Gold rightly advertises our products are approx. 50% below standard retail (and that is a conservative estimate).
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