The cost of the gleaming yellow metal may be at all-time highs, but jewelers who can stifle their own sticker shock and sell the aesthetic appeal of gold jewelry can turn a tire kicker into a collector.
In the fourth quarter of 2010, a couple in their mid-60s came to K. Jon’s Fine Jewelers in Atascadero, Calif., to replace a broken money clip—a 30-year-old piece of substantial weight rendered in 14k gold. “I knew the couple was not current on the gold price, so I said, ‘Let me just calculate the cost to make it,’?” recalls owner Stan Sherwin.
The price of the gold sheet alone was $1,500. When factoring in labor costs to replicate the cobblestone-textured surface, set with a U.S.-issued $10 gold bullion coin, the final bill totaled $3,000. Anxious about the price, the jeweler was eager to suggest alternative options so as not to lose the sale. So when the couple agreed to the purchase without complaint, he was stunned.
Sherwin is one of many jewelers who feel the need to downplay gold’s cost—at press time, more than $1,400 per ounce—at the counter. In the manufacturing sector, sellers meet resistance daily. “Our retailers are saying, ‘What do you get for $200?’ A two-gram gold chain, or a sterling bangle that makes some kind of a statement?” says Tod Michel, vice president of sales at Leslie’s Gold in Greenwich, Conn.
Strategies to overcome this opposition include manufacturing pieces in less-pricey metals. Leslie’s unveiled a silver earring line at JCK Las Vegas 2010, and a silver and copper line this year; starting suggested retail prices are around $50 and $150, respectively. And while Leslie’s does import some bonded jewelry (gold sheet layered over silver), others favor electroforming to make lighter-weight karat gold pieces. The latter makes sense for earrings, but can lead to disappointment with larger pieces like chains, where consumers expect some heft. “Ultimately, this can undermine the preciousness of the piece,” explains David Lamb, managing director of jewelry for the World Gold Council in New York City.
While these products can offer some price relief, they still can’t diminish sticker shock for jewelers who want to sell only karat gold. “I like to sell fine jewelry, but I have to contain my shock,” says Sherwin, using the cost of 6 mm 14k gold wedding bands as an example. “For a decade we sold them for $150 to $200. Now they are $600 to $800.”
Overseas, the high cost of gold is considered largely a positive development for manufacturers in India and China, where cultural traditions communicate the long-term investment value of gold in jewelry form. According to World Gold Council research, gold jewelry consumption in tonnage was up 9 percent in the first three quarters of 2010 in China, and “79 percent in India despite a price rise of gold of 60 percent over the same period,” Lamb says. In fact, all-time high gold prices in India “actually drove consumers to purchase more gold jewelry because it reinforced its investment value,” adds Lamb. “It was used as a strong positive selling point by retailers.”
For Serago Roberts Jewelers’ David Rovinsky, price is less of an issue in marketing gold jewelry because his 10-year-old Northfield, N.J., boutique caters to customers buying 18k gold watches that start at $20,000, such as those from prestige brands like Ulysses Nardin. “If you only offer the customer a $200 item, that’s all you’ll ever sell them,” he says. “If you have collectors, they are less affected by the economy.”
To that end, he advertises his diamond fashion and bridal lines—Christopher Designs and Gregg Ruth—more than silver and gold-plated ones. He urges peers to be mindful of stocking too much gold-plated merchandise because of its infinitesimal intrinsic value.
Leslie’s Michel wishes more retailers would embrace this point. “What will your titanium ring be worth in 15 years?” he asks. “What value does it have to pass down to your children or grandchildren? The price of gold is high because there’s a value in it.” Lamb adds another word of caution: “Jewelers switching inventory from gold to vermeil often do not fully appreciate the risk of undermining the consumer’s perception of their store as a fine jewelry store.”
On the flip side, there are plenty of consumers who simply aren’t concerned about gold’s cost. “I am selling omega [chains] for $2,000, which is pretty crazy,” notes Michel. Adds Rovinsky: “We are finding that the more affluent customers don’t need the money from gold sales; they just want to update their wardrobes.”
Hammered disc necklace in 18k gold; price on request; Matthia’s & Claire/Orexport Italia for Gold Expressions 2011, Arezzo, Italy; 39-57-538-2562; orexport.com
Ditto for Gail Friedman, owner of Los Angeles’ Sarah Leonard Fine Jewelers, who sees little price resistance. “Some might go to a thinner chain, or wish they would have bought when gold was $1,000 an ounce, but they still buy because they want or need to,” she says. In the past year, she’s experienced the same volume of sales, just with higher costs.
Meanwhile, Jeremy Oster, co-owner of Oster Jewelers in Denver, saw sales rise a bit when gold surpassed $1,000 an ounce. “It actually became a little easier for some to justify the purchase of 18 karat gold once everyone started talking about investing in gold,” he says. “It makes sense for a luxury client to invest in gold in a form that they can enjoy.”
Vardy Shtein—founder, president, and master goldsmith at Vardy’s Jewelers in Cupertino, Calif.—is sometimes forced to craft shanks a little thinner than he’d like; still, most of his customers understand the value of such purchases. “People are quite smart,” he observes. “They don’t mind paying a little more when making an heirloom piece.”
Reminders of gold’s long-term value are all around, like recent sales at Christie’s, Sotheby’s, and more. “Auction houses are selling 200-year-old pieces, and people are fighting to get them,” Shtein says.
Ultimately, it pays to remember—and remind customers—that in the luxury business, rare materials are not inexpensive. Of course, those conversations can have unintended consequences. Says Sherwin, “I don’t want to buy [customers’] gold for the rest of my life.”