What are your labor, creativity, and time worth?
You can check the price of gold with a quick Google search, keep up with diamond costs through online sources such as Rapaport and Idex, and comparison-shop for stone setters. But how do you monetize a morning of researching historic jewelry styles, or an afternoon of free-form sketching?
As the popularity of custom-designed jewelry grows—and jewelers eagerly respond to that demand—the standard formula for how to price product has been muddied. After all, how do you put a price on creativity?
David Alan Jewelry Lunette ring in platinum with 18 ct. aquamarine and diamond pavé; $16,000
Peter Norman, owner of Peter Norman Jewelers in Los Angeles, has been making custom pieces for clients for decades. Pricing out materials and labor is a daily chore. But when it comes to marking up pieces for retail, he always puts a premium on his unique ideas. “Stones and metals cost different prices and you can figure out what a diamond weighs and the cost of labor,” he says. “But we also charge for the design because when it’s your own unique design, it takes more time.”
Platinum and diamond rings with sapphire, spinel, tourmaline, garnet, and aquamarine; $6,000–$40,000; Peter Norman, Los Angeles; 888-474-8787; peternorman.com
Still, Norman admits, for custom designers, “there are no guidelines.” Ultimately, the number printed on the price tag is guided, at least in part, by precedent and gut instinct.
“When it comes to pricing, most people are really just guessing,” says David Alan Wegweiser, owner of custom jewelry brand David Alan Jewelry in New York City. “Nobody outside of our industry knows what’s going on with pricing. It’s very veiled.”
To cut down on the ambiguities of pricing his own work, Wegweiser created a custom calculator—an Excel spreadsheet that allows for certain fields, from metal prices to type of pavé diamond styling, to be plugged in anew every time. “It took me five or six years to develop,” he says. “I’m able to adjust the markup on the different subcategories of the work.”
David Alan Wegweiser
Turning a tidy profit tends to be easier with custom designs—especially when they’re created by the retailer or in-house craftspeople—because store owners aren’t utilizing standard keystone pricing from merchandise they bought at wholesale.
Direct-to-consumer sales give retailers “a little more flexibility in pricing,” says Laura Brown, owner of product management company Elbee Strategic. Currently, Brown, who helps develop pricing strategies for her clients, is advising a new jewelry designer on what to charge for her custom pieces. “The question becomes, do you charge more or less for private pieces—pieces created for a specific person—than you do for custom pieces that will be sold at retail?” she asks.
Her answer: Keep costs uniform and let jewelers pocket the higher margins on private pieces, which require major thought and effort.
Jim DeMattei, president of New York City–based sales and marketing company ViewPoint, advises retailers and designers creating high-end custom pieces to be realistic about pricing, but also factor in “what the market will demand after you’re covered the basics of expense and profitability.”
Adds DeMattei: “Pricing is predicated on stone, metal, and labor. But how did Picasso price canvas and paint? When you get to custom work at a certain level, the perceived value is going to be people’s appreciation of the work. Really high-end customers view jewelry as though it were art. And they’re willing to pay for it.”
Of course most jewelry retailers aren’t dealing in 32 ct. emerald brooches—more like half-carat diamond engagement rings. Even when priced competitively, custom designs can offer great value for your customers and robust profits for retailers.
And because the middleman manufacturer is typically left out of the custom equation, generally costs are lower and profits are higher—a savings that store owners can pass on to clients. (Of course, jewelers who don’t personally forge pieces do have labor costs.)
“It’s a misconception that you have to spend a lot of money on a custom piece,” says Helena Krodel, director of Studio PR, a New York City–based public relations agency that represents jewelry brands. “In fact, it’s just the opposite.”
Wegweiser, who happens to be married to Krodel, agrees: “When you come directly to a custom designer and maker, you’re not getting that 50-percent-off price people like to think about. I’m generally more expensive than that because of the quality of my pieces. But there is a larger savings. It can be a much more affordable notion than pieces that have come through manufacturers to retail.”
Many experts agree that now is a good time for jewelers to delve into custom design because margins on products bought from major manufacturers are slimmer than ever—due to high costs of materials and retailer demand for markdown allowances, sell-through agreements, and heartier advertising allotments.
The costs of those demands, on the manufacturing side, mean slightly higher wholesale prices. It’s a hike that, in this dour economy, can’t easily be transferred to the end customer.
“Manufacturers are trying to make sure they’re not cutting their own margins too thin, so they’re able to work with their retail partners,” says Brown. “There’s really a need for good partnerships. If designers and manufacturers are able to accommodate what retailers need, retailers will be more flexible with that company and hopefully be able to invest more. It’s really a two-lane street. And there have to be the same size lanes on both sides of the street.”
When it comes to pricing branded merchandise, Alex Weil, president of Martin’s Jewelry in Manhattan Beach, Calif., says he generally adheres to vendor requests for 2.5 keystone pricing, but has “quite a bit of discussion with the brands I carry so that we can be really consistent with our pricing. The brands that are really successful—like Apple—you get the same price anywhere you go.”
Nevertheless, he says, “We’re not the type of store to sell $50 worth of silver for $500,” he says. “If the pricing from the brand is wacky, we won’t use it.”
When in doubt, many retailers price custom designs based on the cost of commensurate pieces that competitors carry. But that tactic has the potential pitfall of undercutting hours of labor and creative thought.
“One of the hardest things with custom designers is figuring out how to quantify their time,” says Brown. As small-scale artisans, “they’re doing everything from creating the pieces to driving them over to the caster. And with anything they’re sourcing, they have to sit right next to that [contractor] while they do the job. That’s time.”
Brown recommends assigning a monetary value for time spent designing and time spent running around—then figuring both sets of those hours at cost, wholesale, and retail.
The exercise has allowed her clients to “see where the expenses were going within the pricing,” she says, adding that one client discovered that bringing in an entry-level person to handle more of the mundane duties ultimately saves her money.
Wegweiser advises custom designers to highlight the artisanal aspects of their work—not the price tag. “The funny question I get from a lot of people looking through my portfolio is: Are these made by machines?” he says. “It’s hard to understand that these things are forged from scratch. And that’s a very valuable thing.”