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The Glittery Economics of Jewelry Stores

How much is jewelry marked up, really? How else do they make money? And why are there so many of them?

Jewelry stores are full of expensive items — obviously! Rings, necklaces, earrings, watches, all made of precious materials. Many of them are Veblen goods, a class of goods for which demand actually increases as the price does. So jewelry store profit margins must be pretty healthy, right?

There’s a bunch of questions to get into here. How exactly do they operate? How much of their business is engagement rings? What do all those repairs add up to? What’s the markup on jewelry? Alongside Cecilia Vasquez, a jeweler and owner of Cecilia’s Fine Jewelry, we’re polishing up some answers.

What are jewelry store profits like? And what’s the markup on this stuff?

When it comes to the markup, Vasquez says it all depends on the jewelry store. She worked at a larger jeweler for years before opening her own small business. There is a jewelry store for pretty much every price point in the market, after all, and so it’s all up to the business.

She explains that some stores will mark up their jewelry three, four, five or six times the cost! That’s why you see amazing sales sometimes, for as much as 80 percent off. Vasquez doesn’t mark up anything she sells to that extent, and thus, she can’t offer discounts that steep. “It’s hard because a lot of times I see my customers, they’ve seen a ring that’s 50 percent off,” she says. “I’m like, ‘Wow, if I could give you 50 percent off, I’d be driving a Mercedes or a Lamborghini!’” 

In other words, it’s a trade-off between making consistent sales, or relying on a roller coaster of huge markups and steep discounts. But that huge markup is also what allows some retailers to negotiate on the price of an item with a customer.

Does the price depend on the quality of the materials at all?

Usually, although brand-name jewelry skews that relationship. A Tiffany & Co. ring made of the same gram gold or silver will almost always carry a higher price, for example, than what your local bench jeweler can make.

How much of a jewelry store’s profits come from engagement rings?

Maybe not as much as you’d think, despite all the marketing for them, and the fact that most every married couple shops for them. Even though Vasquez does a lot of custom design and is always doing engagement rings, she estimates they’re only 30 to 40 percent of her business.

Is Christmas the busiest time for a jewelry store?

Christmas is no doubt a busy season, but Vasquez says there’s actually another unexpectedly busy time for her every year: January.

Um… why?

Because that’s when some people have received their annual bonus. Or they have money left over from Christmas shopping, and when that’s the case, this is the time they finally spend money on themselves, on that one piece they’ve had their eye on for a while, but held off on purchasing. It may also be a matter of people having their wedding rings remade and they’d waited till now to get it done.

What about repairs? Are they a big source of jewelry store profits?

Oh, you bet. All those jewelry repairs and, hell, watch battery replacements, add up. But it’s work mostly done by smaller, neighborhood jewelers. For family-owned businesses like Cecilia’s, repair can account for as much as 75 percent of revenue. But a larger chain, like, say, Jared or Tiffany & Co. won’t rely much on repairs — they prefer chasing the big money of sales instead.

Repairs don’t earn the big bucks that sales do, but it’s a lot more reliable. Here’s an example: When a jeweler quotes the price of an item and makes a sales pitch, 70 percent of customers will walk away. But when a jeweler explains the cost to fix a ring, for example, nine out of 10 customers will say yes.

What about watches?

They’re a rather small part of the jewelry industry overall, for how much they’re advertised. Depending on what statistics you’re looking at, they can account for 12 percent or 18 percent of all jewelry sales.

Where do all of the materials for these things come from?

Literally from all over the world, Vasquez says. She makes her own jewelry and buys materials as well as finished, one-of-a-kind pieces from everywhere — Italy, France, China, India, wherever the designer is located.

Notoriously, raw materials like diamonds are extracted largely from the developing world — the subject of numerous investigative news articles, 2000s-era Leonardo DiCaprio thrillers or even as the lead-in to an Adam Sandler prestige vehicle. It’s an ongoing, truly horrible issue.

Damn. But despite that, jewelry store profits are pretty healthy?

Yes — you don’t see too many of them closing. They’re passed down through generations of families, and Vasquez points out that usually when a jewelry store closes it’s because no one in the family wants to take it over and the owner is unable to sell the business. As noted earlier, there’s a jewelry store for every different price point in the market: Vasquez’s most expensive items are $4,000 to $5,000, and she sees everyone from doctors to auto mechanics coming in after their shift looking to buy their wife something special. Even though jewelry is a discretionary item (way below things like, you know, food and housing), most everybody ends up buying it. One wonders how else the likes of QVC would survive!

In any case, the people who are in it also happen to simply enjoy working around jewelry, as Vasquez does, whether that’s antique jewelry with a story, custom jewelry that someone else designed or a piece she designed exclusively for a customer in the style they’d always dreamed of. 

However, the jewelry industry overall has some catching up to do in the 2020s. The industry isn’t really growing, and many traditional jewelry stores aren’t particularly visible on Instagram or the other places younger people — say, women picking out an engagement ring — tend to spend time or shop. That said, it also isn’t shrinking yet, and people are spending more on the jewelry they buy — the price of an engagement ring is up 56 percent from three years ago! So it’s safe to say that whatever the future holds, jewelry — and the many jewelry stores you find everywhere — will definitely be around for it.

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