Shanu Singh Guliani

Jewelry Storeowners and Their Pricing Tricks
February 6, 2007

A joke with some truth: A retail jewelry storeowner who advertises to the public as a “diamond wholesaler” on average purchases diamonds 40% off Rap, then turns around and sells them for only 35% off Rap. Noticing this strange behavior, his/her partner asks, “How the hell do you expect us to stay in business?” The man responds, “Volume!”

Some jewelry stores employ a variety of pricing tricks, to make their discounts seem better than they and/or to intially attract customers so they keep coming back when the price goes up. The joke above is only one of the pricing tricks employed by retail merchants; the other is the constant “sale.”

The sign reads “sale.” But what does that really mean to the consumer and the other independent merchants?

It’s not an unusual practice for jewelry storeowners to buy an item for $100, and the normal markup is $200-$220. But when they mark it up to $400—they know most people are not going to pay that. The store will then run a 50% off sale. The consumer thinks their getting it at cost while the whole industry is taking a beating from shoppers that tend to believe diamond and jewelry prices are unfair.

Price should never be the basis of your strategy; I understand it also can't be ignored. So how can independent jewelry storeowners, who may not qualify for large discounts due to purchasing power---still maintain competitive pricing?

• Find your one thing. Be one of the few in your area to sell kids jewelry or numerous men’s brands. Promote advertising to women self-purchasers. Create a catchy logo or slogan. Purchase a wine and beer license and offer it to your customers of the appropriate age. Offer to charge your customers cell phones and PDA’s.
• Be innovative. Let’s face it, some of your competition is just plain dumb. So, improve profits through innovative practices. Consistently train your staff on diamonds and each brand in your store. Pay for courses for your staff offered by GIA, JA, AGS, etc. Purchase books on selling strategies and have a staff member a week go over a strategy they learned. Purchase brands that offer technology to help support their brand. Offer educational classes to your customers on Sundays…send them invitations to which they have to RSVP. Get your vendors to send a representative to talk to your clients about their brand. Contract a diamond cutter to come out and speak with your clients.
• Create value. Value is a term used to mean the combination of price and quality. When customers object about price try this, “I found that when making a purchase we all want the finest quality, best service, and lowest price. I have yet to find a company that could provide the finest quality and the best service for the lowest price. Susan, I understand that you are going to make a commitment that will last a lifetime and would want this diamond to symbolize that commitment. For your long term happiness with this ring, which three would you be most willing to give up: quality, service or low price?” You’ll find that most clients will not be willing to give up quality and do not like the idea of inferior customer service. You’ve just helped your customer rationalize and justify the amount they were unwilling to pay moments ago.
• Target the right customers. Not all customers are willing to pay more even for better quality. So make certain you aim your marketing efforts at customers who will respond to the differences you offer and can pay a slightly higher price for that value.
• Build loyalty. Even if you use special pricing (discounts, introductory offers, promotions, sales) to initially attract customers, immediately go to work developing a relationship that keeps customers coming back when the price goes up.

Remember, you’ve got a lot more to offer than just a low price.

Posted by Shanu Singh Guliani on February 6, 2007 | Comments (0)