A COLORED STONE INVENTORY THAT MOVES

You may already have an established colored stone business and routinely purchase these gems from suppliers or at trade shows. Or you may be just venturing into this arena, hoping to build the colored stone inventory in a new or existing store. Either way, you probably could stand to improve your colored stone buying skills.

The annual winter gem shows in Tucson, Ariz., present a great opportunity for a quick education in colored stones. Charlene Fischman, owner of Northbrook Jewelers in Northbrook, Ill., says Tucson is “the place to go for meeting colored stone dealers and learning. I use this show for my loose color needs and JCK Las Vegas for my mounted color needs in jewelry lines.”

Learning by buying. The best way to learn is by getting out into the trenches and buying. We gain valuable experience from both our successes and our mistakes.

I remember making a risky investment in a new find of Russian pink spinels some time ago. Few jewelers had heard of the stone, but instinct told me the price was right and the color would sell. I bought more than my budget allowed, but it paid off. I soon recovered my investment and went on to make a nice profit.

On the other hand, I’ve stumbled, too. Sometimes I bought a stone because the price was right, not because I had a customer in mind or any calls for that stone in the past. Years later, when I sold my inventory, the stone was still there, and I had to sell it for even less than what I paid.

Designing your shopping lists. Before you start buying, you need two lists and a budget. The first list should be of gems for your customers; the second, gems for your overall inventory.

Prepare this second list with a goal and a budget in mind. For example, your goal for buying at a particular show may be to improve your image by carrying more custom pieces. On the other hand, you may be looking to stock items likely to have mass appeal and be quick sellers. Tailor the list by adding or subtracting units from each category until you’re close to your budget.

Make sure you budget enough. If you can afford to be flexible and exceed your budget, that will help. Gem shows are like candy stores to kids. Right after you have made your last purchase and spent your last bit of money, you’ll inevitably find the one gem you must have.

No shopping list will ever be perfect. As you shop, you may find yourself adding and subtracting from various categories, and you’re certain to find gems to purchase that aren’t on your list. But as long as you stay close to your budget and your list, you’ll return satisfied.

Two types of lists. The conservative jeweler may choose to follow published guides to what is hot. The adventurous jeweler may set a goal of uniqueness and go for more variety. Examples of both lists follow. In each, I set an initial budget of $25,000.

The lists don’t distinguish between loose or mounted colored stones, because each store will have its own preferences. Some will opt for more custom work or in-house design and mounting; others will prefer to purchase already-set gems. A mix may work for your store. Whatever the choices, be sure to specify on your list how much of each type of stone you intend to buy.

An example of a conservative list is given above. Make your decisions by looking at projections of best-selling gemstones. You should purchase fewer units of gems farther down on the popularity list.

An example of an adventurous list, including a variety of gems, is given below. The gems are fine qualities in various sizes and shapes. Calibration wasn’t a factor in the selection; I chose many of the gems for their unique design capabilities.

Knowing what to purchase. Except for designer cuts, in which labor – and possibly provenance – becomes a consideration, color has the greatest influence on price. Although there is a market for all qualities of gemstones, my advice is to concentrate on the finer colors. This will help set you apart from competitors.

Comparisons to other stones can be helpful. Since it’s impractical to own master sets of each colored stone, many in the industry rely on comparison tools, such as the Gemological Institute of America’s GemSet or the GemDialogue color sample booklet from GemDialogue Systems Inc. of Rego Park, N.Y. Communication with your supplier about color can save a lot of time, reducing mail and memo costs as well. All this adds up to more profit.

Clarity plays a lesser role in pricing. In gems such as aquamarine and tanzanite, look for stones free of eye-visible inclusions. In rubies and sapphires, some minor eye-visible inclusions are acceptable if they aren’t detrimental to the overall beauty of the stone. Emeralds probably will have eye-visible inclusions; avoid the excessively included material.

Very expensive gems often are native cut. In our industry we tend to be less critical of native cuts when the rough material is very expensive, such as ruby, sapphire, and emerald. On the other hand, gems such as amethyst, citrine, and rhodolite are all expected to be cut to better proportions.

Designer cuts can greatly influence gem prices. For example, a five-carat amethyst in a standard cut, of fine quality, should cost approximately $25 per carat, or $125 for the stone. In a designer cut, the price for the same stone could be $250. The cost should not be viewed as double the per-carat price; rather, it is $125 for the stone plus $125 for the labor. If this were an aquamarine that cost $300 per carat, or $1,500, the labor would be far less significant to the per-carat price and the overall price.

Enhancements are now a major issue. Ask your supplier what enhancements have been done to the gems you’re purchasing. If you’re in doubt, or if you need further insurance, ask for a written guarantee. The American Gem Trade Association currently requires its members to disclose all gem enhancements through a coding system on invoices.

A beginning inventory. A different focus is needed if you’re starting a colored stone inventory in a new store or making the transition to color in an existing store. Using the same $25,000 budget, we will now look at how to shop for color from ground zero.

You must set realistic goals. With a budget of $25,000, you should concentrate on the staples. First, make a list based on what your typical customer will buy. Quick turnover is the goal; it will do no good to have gems sitting in inventory for years. You know that there obviously will be interest in the “big three” (ruby, emerald, and sapphire), but judging beyond that is hard.

Tips from the pros. The advice of other independent jewelers who have experience starting and building small stores is extremely valuable.

According to Frank Pintz, owner of Franz Jewelers in Northbrook, Ill., rings and earrings constitute most colored stone business, with pendants a distant third. He recommends that about 25% to 35% of all earring units be ruby, emerald, and sapphire. The remaining 65% to 75% should be other colored stones, including tanzanite, rhodolite, peridot, and opal. Be sure to stock all birthstones in earrings.

Pintz suggests a different system for ring purchases. He recommends ruby, emerald, and sapphire for 60% to 70% of the units, with the rest in other colored stones. He also will stock a selection of anniversary rings, but only in the “big three.”

Since you probably won’t have enough capital for a complete inventory, work with suppliers by purchasing some stones outright and receiving memos for the balance. Building up takes years, so it’s as important to develop strong relationships with suppliers as it is to purchase inventory. Although you will pay a higher price for memo goods, the benefit will be a better selection for your customers with less working capital.

Charlene Fischman of Northbrook Jewelers approaches the inventory question differently. She stocks the basics in smaller quantities. She will carry a small selection of pendants, earrings, bracelets, and rings in the “bread and butter” varieties. From there, her inventory changes to unusual noncalibrated gemstones in a variety that includes even Paraíba tourmaline. “They come in looking for a birthstone and I try to sell them a Paraíba,” she says.

Above is a basic shopping list for startup inventories. Total purchases here are 160 units at cost of $27,650, slightly over budget. This covers basic needs. The quality ranges will satisfy many customers, and the list avoids the low-end items that will retail for less than $75.

While these choices satisfy the basics, no real attempt is made here to go after high-end business. For those wanting to go upscale, $25,000 would purchase only a handful of items.

Going for the high end. Now that his store is well-established, Frank Pintz is trying to move his customers toward more expensive color and custom settings. It can be a real challenge, though, to increase your higher-end business or to move toward more custom work, in which a greater profit can be made.

Working with suppliers and building relationships are a good first step. Ask to get a few more expensive pieces on memo as a test for your store. A new store, admittedly, lacks credit history, but purchasing outright and paying bills on time greatly increase your chances of implementing a much-needed memo program.

One way to move toward the high end without increasing your budget is to remove some of the starter units on the initial shopping list. Each category included from two to eight units; the goal was to show a selection. Taking away a few units in a particular category will not damage the mix. Start with about $5,000 and head for a major colored stone show. Tucson is the obvious choice, since the selection there is the most extensive.

Fischman suggests starting with actual customer orders to fill. From there she begins shopping. This is where personal taste often plays a role. Be careful here; you may think a particular gem is attractive but may have no market for it back home. Buy too much and you will regret it for years. So start with popular gems, such as tanzanite. Even if tanzanite isn’t your favorite stone, you’d be remiss if you failed to include it in your shopping list.

Perhaps the most important thing to consider when you buy loose colored stones is what products you will ultimately make when you return. Some free-form designs look magnificent but will require a custom setting. If you intend to mount goods in standard settings, stick with the calibrated sizes. Fischman prefers unusual designs because they create opportunities to work with the customer.

Having loose gems available in your showcase, especially in unusual varieties or shapes, creates an image of uniqueness for your store. And by introducing custom design, you are opening the door to greater profits.

Richard Drucker is the president of Gemworld International and publisher of The Guide, a pricing publication he began in 1982. He is an international gemstone consultant and currently lectures and conducts seminars. He has published numerous books in the jewelry industry. His company can be reached at (888) GEMGUIDE or (847) 564-0555.