Cost, Margins, and Goldsmiths
David Keeling -- JCK-Jewelers Circular Keystone, 4/1/2005
Remaining competitive in the jewelry market requires constant research, skill upgrading, cost management, and a host of other "hands-on" efforts. We have all watched as companies competing within our market areas have undercut standard margin structures in order to attract and win sales, sometimes putting themselves out of business in the process, and seriously hurting the reputations of those whom they undercut. To an outsider looking in, this can't possibly be a bad thing. This sort of competition is present in every business environment, and is a major part of every manufacturer and retailer's strategy.
Where the jewelry industry harms itself miserably as a result of its cutthroat competition is clearly illustrated in the following anecdote: A woman whom I have worked with in the trade called me yesterday to get a quote on a handmade, custom platinum mounting for three diamonds which she had sold to a client of hers. The center is a 3-ct. D/VVS1, the other two are matching .50-ct. D/VVS1, all princess cuts. Nice sale! The total price for the diamonds is in the vicinity of $68,000 Canadian.
I thought about the time that would be spent making the model, the cost of the platinum casting, the time that would be required to properly surface the platinum, fabricate the settings, assemble the ring, and set the stones flawlessly.
I gave her the quote, and she couldn't quite grasp why it might cost up to $3,000. I explained the details, but I wasn't really getting through to her.
The irony in her reaction may not be immediately apparent, so I'll expand on its presence here.
When the diamonds are purchased in Canada, federal excise tax is immediately payable. At 10 percent, the tax on this particular sale might be $5,700, based on diamond wholesale cost. Revenue Canada is paid immediately, and they don't do a thing to facilitate the sale.
The wholesaler who represents the diamond industry takes a profit of at least 10 percent on flipping the stones, and he or she didn't cut or polish them. That amount might work out to $5,000.
The craftsmen or women who are blessed with the task of making these precious diamonds wearable are expected to feel damned lucky to even handle them. It is indeed a privilege, we are supposed to understand … and, "My gosh why is it so much?"
After my material and labor costs are removed from my charge, I stand to make about $1,500 for my professional services … if I'm lucky.
And, to some of the proud members of our trade who are successful in making sales such as this one, that sort of profit on my services is simply unacceptable. How can I sleep at night, harboring such depth in my greed?
I am constantly in awe of the wisdom which is so vividly evident in retail.
David Keeling
Editor's note: Subsequent to the writing of this article, the Canadian government voted to phase out the excise tax on jewelry and diamonds by 2010.
