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These “golden” days require a fresh look at merchandising strategy

Bob Epstein by Bob Epstein
November 4, 2010
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Reading Time: 5 minutes

With gold prices rising above $1,300 per ounce, many jewelers have watched gold jewelry sales fall. In a recent survey conducted by National Jeweler, 89 percent of respondents saw gold sales fall or stay flat. Thirty-seven percent of respondents have seen significant decreases, 30 percent reported slight decreases, and 22 percent saw sales remain flat.

These statistics are especially significant when you note that gold jewelry makes up 60 to 80 percent of the products sold by most retail jewelry stores. Yet, since January of 2006, gold has risen from $550 per ounce to over $1300 per ounce. Using those figures, if you purchased a gold ring with an average weight of 5 grams in 2006 you would have paid approximately $50. The same ring purchased at $1,300 per ounce of gold weight would cost approximately $122, or an increase of 144 percent.

As a result, many retailers have had to re-price their merchandise to try and maintain margins, while others have continued to sell existing products at old prices, changing price only when new product is ordered. In the National Jeweler poll, 58 percent of respondents said their margins for gold jewelry had decreased, 35 percent said their margins remained the same, and seven percent saw an increase in margin. Most respondents maintained margins between 40 and 50 percent.

As gold sales declined, many jewelers decreased their inventories in gold. Thirty-one percent of respondents significantly reduced their inventories in gold jewelry, and 28 percent made modest reductions. So what is the average jeweler stocking to replace gold inventory? Most jewelers surveyed (81 percent) reported significant upward trends in their silver jewelry sales. Not only is silver jewelry substituting for lower price points, it also allows for higher profit margins to the jeweler. Seventy-three percent of jewelers surveyed report better than 50 percent margins on silver (vs. gold) jewelry sales.

Many jewelers also have opted to stock gold jewelry with sterling silver accents, and report significant increases in sales of non-gold items such as pearls. This year, most jewelers indicate they are concentrating on best sellers from previous years this holiday season. The holidays have always been a “golden” season for diamond earrings, diamond bracelets and diamond pendants. The bridal category is another strong seller during this time. Further, many jewelers are now stocking alternative metals such as tungsten carbide, titanium and stainless steel to complement their gold inventory.

Several jewelers are also taking advantage of the increased gold cost to melt older gold inventory purchased at a much lower price point. If you have dated, obsolete gold pieces sitting in inventory, chances are that you purchased them when gold was far less valuable. Jewelers may benefit by melting at today’s higher prices, making a profit and yielding cash to purchase new inventory.

While the price of gold will continue to fluctuate, we’re not likely to see prices fall significantly anytime in the near future. Savvy jewelers will embrace that reality, give inventories a fresh look, and work to reinvent their business. Successfully done, their own “golden” days will be far brighter.

Bob Epstein is CEO of Silverman Consultants, LLC. Offering a legacy in sales strategies for jewelers since 1945, Silverman Consultants provides guidance to store owners seeking to turn around a business, sell off unwanted inventory, or liquidate an entire store. With offices located in Charleston, SC; New York City; and Saskatoon, Canada; the company helps jewelry store owners and chains formulate strategies designed to maximize revenue in times of transition, whether due to retirement, store closing, or simply when needing a boost in sales. For more information, visit www.silvermanconsultants.com or call Bob direct at 800-347-1500.

Bob Epstein

Bob Epstein

Bob Epstein is CEO of Eaton Hudson Jewelry Advisory Division.  Offering a legacy in sales strategies for jewelers, Eaton Hudson provides guidance to store owners seeking to turn around a business, sell off unwanted inventory, or liquidate an entire store. With offices located in Atlanta, Charleston, Boston and Toronto, the company helps jewelry store owners and chains formulate strategies designed to maximize revenue in times of transition, whether due to retirement, store closing, or simply when needing a boost in sales. For more information, visit www.eatonhudson.com.

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