Keystone Pricing: How Jewelry Prices are Determined
April 2, 2012 by Afshin Yaghtin
Such terms are sort of jewelers’ code words for their various pricing structures. So without getting too wordy, what simply is keystone pricing?
Keystone pricing = the wholesale cost of an item x 2
In other words, we are talking about a 100% markup on an item. If a jewelry retailer buys a gold ring for $100, then he or she will sell it for $200. This is the standard default method of many traditional jewelers.
Some higher-end or name-brand jewelers will go as far as charging was is called triple-keystone pricing. This is the wholesale cost of an item x 3 (hence triple markup).
Apples of Gold Pricing Model
When I first started Apples of Gold, I was very well acquainted with these terms and the exorbitant markup that goes into jewelry retail markup. I vowed to create an honest company whose prices were fair. With such in mind, our goal was to be an average of 30-40% below retail markup. As I researched more and more, many retail jewelers were actually selling above keystone pricing and their models were usually somewhere in between keystone and triple-keystone. Somewhere in the 200% markup range. This seemed so high and continues to appear that way to me today.
As a result, Apples of Gold prices are always below keystone pricing. Many of our wedding bands, for example, are priced well below retail. We still often get calls from customers who have found the same wedding band that we sell for $575-$625 advertised elsewhere for well over a $1,000.
One recent customer called about a ring that we have listed on our website for $875 and they wanted to know why another jeweler was selling the same thing for over $2,500! And if our ring was any different? At first our thought was whether they were selling it in platinum instead of gold? (platinum being much more expensive). But as it turns out, no, it was just 14k gold. The only difference we could tell was that it was made by a semi-known brand and they were charging for the name. Otherwise, it was the same item.
Same Style, Less Weight?
As competition increased online, we also noticed that many online jewelers were selling similar rings to us but for less money and we wondered how this could be, as we knew that based on our direct manufacturer’s prices that we have obtained, it would be almost impossible for many online jewelers to beat our prices, especially since we had longer and deeper relationships with those same manufacturers who were producing the rings for both us and the other online jewelers.
As we looked closer and inspected the details, it quickly became apparent that many were taking the same rings and creating them in a lighter-weight version. As gold prices increased in the global market, many manufacturers and jewelry retailers responded by creating lower quality, lighter weight wedding rings. Therefore their prices had become slightly lower than ours. But the quality was not the same.
In response, we have adjusted our weights on select wedding rings that were unnecessarily too heavy and costing our consumers more than they needed to pay (for a while, we made them as heavy as could be, simply because gold was so cheap compared to its valuation today). But for the most part, our rings weights have stayed the same and thus the value and quality has not decreased. All of our rings are still substantial and made with an enduring quality that will last a lifetime. It’s just not worth skimping on the precious metals in order to turn a quick buck. Our goal, at Apples of Gold, is to stay around for the long-term and build a trustworthy brand that our customers will come to know, love, and appreciate!
Is Keystone pricing right?
As noted above, Apples of Gold does not use a keystone pricing model on most of its jewelry, but we maintain a discounted, value-based pricing model for the same quality jewelry that you would purchase in a retail jewelry store. However, if you are a jeweler or retailer reading this, you may wonder if keystone pricing is right for you.
Only you will know what is right for you business, but things to consider are overhead, slow moving items that will hold up your cash flow, advertising costs, availability or difficulty in dealing with a product, labor costs involved in a product, and whether that item is completely unique or is available through your competitors.
Having lower prices, as in the case of our company, has made it more difficult to offer many sales or steeply discounted prices. As we like to tell our customers, our prices are low year round and you don’t need to wait for sales and coupons. You are already getting a discount just by shopping with us, rather than our competitors. But if your business model is going to depend on heavy discounts and coupons, then you may want to consider keystone pricing or higher. This was not the model we went with at Apples of Gold.
I also grieves us to see jewelers who advertise their big 50% OFF sale or 70% off–you’ve seen the ads. We know that if any retailer can give you 40%, 50% or more off their regular prices that they have an exorbitant markup in place that allows them such luxuries. Imagine what their regular prices are normally and ask yourself if you should be shopping there!
At Apples of Gold, our normal sales (when we have them a few times a year) are usually in the 10% range, because we’re already priced well below what many of our competitors are and it simply would not be justified. We also offer free shipping on every order. So imagine if that is the case that we have little room in our margins for big sales, it stands to reason that our prices are already at a value-basis. Our customers understand that once they see our existing prices, quality, and compare us with our competitors.
For more information about the Apples of Gold pricing model, see our articles on: value.
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