| Buying Your Way to Profit for Better Quality | | | | purchase advertising to buy from your suppliers |
| Jewelry Retailers | | | | either, so don't pay more than 1/4 to 1/3 retail |
| 13 years ago I got my start in jewelry store | | | | for those items. |
| ownership when I opened a scrap shop buying | | | | Larger loose diamonds will take a different |
| and selling gold, diamonds, watches, & | | | | approach when making offers. I usually pay 75% |
| antiquities, eventually I moved to high-end bridal. I | | | | to 30% back of rap for round, princess, and |
| purchased a lot of scrap gold and made a nice | | | | emerald cuts. I'm not so aggressive with all other |
| living do it, and that was when it was $275 per | | | | shapes and sometimes I pass all together. Let me |
| oz. Now you can offer someone $450 per oz. and | | | | give you an example - let's say you can purchase |
| it becomes a fair amount for their scrap jewelry. | | | | a 1.00ct G - SI2 pear for $1500 from your |
| Imagine trying to offer someone $7 for a 14kg | | | | customer. You could retail that stone for $4000 |
| bracelet that they paid $75 for, that's the way it | | | | and make $2500. What a great opportunity - |
| was 10 years ago. Let's look at today's scenario: | | | | right?! Wrong! Compared to purchasing the stone |
| A customer buys a 3 gram item 10 years ago | | | | from your supplier for $2800 and making $1200 it |
| for $75, at today's price you can scrap the | | | | looks attractive. But when is the next time that |
| bracelet for $46. You can offer $23 for their item | | | | you'll sell a pear shape, I have pear shape |
| and it seems like a fair offer. This makes it much | | | | diamonds that I purchased 5 years ago that I still |
| easier to buy scrap from customers and there's a | | | | haven't sold. It doesn't matter how cheap you can |
| ton of money to make - you can't ignore it any | | | | buy them for if they can't be sold. Don't tie up |
| longer. If you've never purchased gold | | | | your money, save the funds to buy more scrap |
| over-the-counter and would like to get some | | | | gold, rounds, and princesses. You're better off |
| insight on how to successfully create a buying | | | | calling your supplier when you need off-market |
| department then please read on. | | | | shapes. Don't be tempted unless it's a dirt cheap |
| Calculating the value of scrap gold | | | | deal. |
| To determine how much an item is worth you | | | | I don't use the rap sheet for I1 or imperfect |
| need to know what the daily spot price is for | | | | stones, keeping in mind that there are 5 different |
| gold. I use the website kitco's website for daily | | | | price categories for I1 diamonds. 1ct round stones |
| quotes. Take the daily spot price and multiply it by | | | | that are I1 clarity grades can sell for $1000ct or |
| the percentage of melt that your refiner will pay | | | | $2000ct and you have to determine the |
| you for gold (Most refiners will pay you | | | | perceived value of the stone. Once I've determine |
| 80%-90% for .999 after melt, the correct | | | | the perceived value of the stone I can figure out |
| number is 90% and I wouldn't use anyone that | | | | the amount that I would be willing to pay. If I've |
| pays you less), then take that number and | | | | determined that an I1 diamond will retail for $2999 |
| multiply it by the karat content of the metal, then | | | | then I would pay $800 - $1000. If you use the |
| take that number and divide it by the weight, | | | | rap sheet to determine the purchase price of an |
| then make your offer based on that number. So | | | | I1 then you'll pay too much. Always consider the |
| the formula is (spot gold) x (% of melt) x (karat) | | | | perceived value for I1 stones. |
| / (weight) = scrap value per gram or dwt. | | | | I must preface the diamond buying side of things |
| Follow the example below: | | | | by saying that unlike gold, you shouldn't make an |
| Example - 5 gram 14k gold bracelet, Spot Price - | | | | offer. Let me tell you why - prices are |
| $895.00/oz. $895 x 90% = $805.50/oz. $805.50 x | | | | transparent and customers are ill-informed. Many |
| .585 = $471.22 $474.22 / 31 grams = $15.30 per | | | | customers have a good idea of what their |
| gram $15.50gr x 5 grams = $77.50 full scrap value | | | | diamond is worth because it's easy to shop prices |
| I would offer $38.75 and make a %50 gross | | | | now. Also, some of the people that you'll be |
| profit | | | | dealing with were involved in purchasing the |
| How much should I offer my customers for gold? | | | | diamond and they know what the item was |
| Many full fledge scrap shops/pawn shops offer no | | | | purchased for. What's more, they could have an |
| more than ½ scrap with an effort to buy | | | | inflated appraisal that was given to them by the |
| most gold at 1/3 scrap. I personally offer | | | | original jeweler and in their minds they're using this |
| ½ of the scrap value in an effort to be fair | | | | as a starting point for an asking price. There's no |
| and competitive. If you have an established retail | | | | reason to get involved in a guessing game if the |
| store then creating a buying department is a | | | | customer is way out in left field on their asking |
| windfall and any profit you make is pure gravy | | | | price. I'll give you a scenario that I've been |
| anyway. So why not be as fair with your | | | | involved in many times...A customer has a |
| customers as possible and still make money. I | | | | diamond to sell and asks me to make an offer. I |
| create a sign daily with the current day's offer | | | | decline and ask them "Well, how much do you |
| per dwt on 10k, 14k, 18k, platinum. I display this in | | | | want for it?" they respond to my question with |
| my buying area and everyone gets the same | | | | "No, I want you to tell me!" I don't want to miss |
| amount for their items. This will legitimize the | | | | an opportunity to purchase the diamond so I give |
| buying process and remove some of the stigma | | | | in to my temptation and make an offer. Then the |
| behind buying gold & diamonds. Some of | | | | customer rips the diamond ring out of my hand |
| your competitors play games with their | | | | and says "That's ridiculous, my appraisal says it's |
| customers and won't make them an offer. They | | | | worth twice that!" What did you accomplish by |
| require the customer to tell them how much they | | | | making an offer? Nothing, all you did was make |
| want for their items, in the end the jeweler ends | | | | someone angry and now they think that you're a |
| up looking like a huckster. I prefer to maintain my | | | | scoundrel. Of course, that's his/her opinion but |
| image in the community as a resource for honest | | | | why give anyone a chance to tarnish your |
| answers and services for their needs. So I lay it | | | | reputation. Don't make an offer on diamonds, |
| all out on the table and let the customer decide | | | | 70% of the time you'll come out looking bad. Find |
| what's best for them. I also recommend that you | | | | out if they are thinking reasonably by asking them |
| create a separate area in the store away from | | | | what they want first and if they won't give you a |
| your paying customers. Mixing the two is not | | | | number then pass. You can learn more about the |
| good and when a paying customer witnesses you | | | | buying process at custom jewelry design. |
| purchase used jewelry, they can sometimes | | | | Know your buying laws & avoid problem |
| assume that most of your items are used. So | | | | buys |
| keep the two apart from each other. If a selling | | | | Before you go guns blazing, you should contact |
| customer starts a conversation with you in front | | | | your local police department and determine if |
| of a buying customer then kindly usher them | | | | there is a holding law in your city or town. A |
| over to the buying area. I can't express enough | | | | holding law requires you to hold all jewelry |
| the importance of using your separate buying | | | | purchases for a specified amount of time before |
| area. | | | | selling or scraping it. If you do have a holding law |
| How much do I offer for Diamonds? | | | | in your town, make sure that you conform to |
| When the scrap gold has melee I calculate the | | | | their standards and apply for any necessary |
| approximate carat weight of the diamonds and | | | | permits. Some towns require a criminal |
| pay the customer $1.75 per carat point. This of | | | | background check in order to be approved for a |
| course assumes that the stones are of finer | | | | buying license. Even if you don't have a buying law |
| quality and can be resold. I don't pay more than | | | | I recommend that you create a series of your |
| this because some of the stones will be damaged | | | | own standards and require your staff to abide by |
| when they are removed and some of them will | | | | them. When buying diamonds from customers I |
| be lost. In addition, you can buy nice quality melee | | | | require that the person supply an appraisal or |
| from .01ct to .08ct for around $500ct. If the | | | | receipt with their name on it. I also require that |
| diamonds are .25ct and larger then I use a slightly | | | | everyone selling to me provide a copy of a |
| different formula for buying them. Sometimes | | | | drivers ID and sign a release form. The release |
| you'll come across items that are more important | | | | form states that the items being sold are in fact |
| looking or are re-saleable and then you'll need to | | | | their personal property and they have full right to |
| change your entire mindset. You'll have to | | | | sell them. In the event that the items are stolen, |
| determine how much that you think the item can | | | | nobody can accuse you of unlawfully purchasing |
| retail for and then make an offer for 1/4 to 1/3 | | | | them. I have a file that I keep on my selling |
| of the projected retail amount. Don't be shy | | | | customers and I save the release forms, receipts, |
| about making the offer either. Too often I speak | | | | and drivers ID. |
| with jewelers that are afraid to offer a customer | | | | Finally, I subscribe to the theory that if a |
| 1/4 of what it would retail for. Keep this in mind - | | | | customer seems shady then the deal probably is |
| You're paying COD! You can buy beautiful new | | | | bad. Don't waste your time, simply pass. The last |
| jewelry any day of the week from your suppliers | | | | thing you want is the police interrogating you in |
| and get generous terms. So you need incentive | | | | front of your regular customers. I think you'll find |
| to buy their items in place of buying it from your | | | | though that requiring ID and sometimes receipts |
| suppliers and you'll also have to advertise in order | | | | will just about eliminate all non-legitimate store |
| to see those customers. You don't need to | | | | buys. |