Survey reveals sweet spots in designer goods, pearls

New York—As the Internet and the shrinking diamond pipeline put pressure on diamond margins, retailers have found that margins in other categories have risen, according to The Cost of Doing Business Survey, 2006, from Jewelers of America (JA).

Margins on fashion jewelry, pearl jewelry, colored-stone jewelry, pearls and platinum all surpassed 50 percent in 2005. By contrast, diamond margins averaged 37.8 percent on loose stones and 48.7 percent on finished jewelry.

Allen Kidd, owner of Kidd's Jewelry in Greenville, Pa., says he gets top margins on designer jewelry.

"It has the highest margins because it is unique," he says. "Designer jewelry is harder to shop for on the Internet, so we can keep our margins on it high."

Kidd says he focuses on high-quality designer jewelry, marking it up 2.5 times and offering a 20 percent discount at sale time. But he has a harder time keeping margins up on karat gold and diamond jewelry.

"Karat gold is a very competitive market," he says. "It's hard to convince a customer that all 14-karat gold is not the same, even though it's not. But diamonds are the worst [for margins] because of the Internet and [mass retailers]."

Repairs also provide a regular income source for his store, he says.

Gold designs, like these by Amy Levine, still earn profits.

Many retailers who spoke with National Jeweler say that margins on designer and fashion jewelry have progressively increased over the past few years, a trend reiterated by The Cost of Doing Business Survey, which found average fashion jewelry margins at 54.4 percent, up from 49.7 percent in 2002.

Mampre Mici, owner of Da Mincci Jewelers in Las Vegas, says he marks up his fashion jewelry about 2.2 times, and he thinks constantly about margins when making his merchandising decisions.

"I look for designer and fashion pieces that are exclusive," Mici says. "I want designs you can't get elsewhere. So I buy from a lot of small designers and Italian designers."

Mici marks up pearls and colored-stone jewelry 2.5 times each, and most [finished diamond jewelry] sells at about twice its wholesale value, although larger stones demand smaller margins.

Margins on most categories have remained level for Denny Clarke, owner of Jorstad Jewelers in Seattle. Clarke says he keeps his prices at keystone for pearls, colored-stone jewelry, karat gold and smaller diamonds. But margins on larger stones have shrunk for him as well.

Colored-stone jewelry margins slipped slightly in 2005 to 52.4 percent, down from 55.5 percent in 2004 but above 51.9 percent in 2003, the survey finds.

Average pearl margins across the nation continued their increase in 2005, according to the JA survey, reaching 53.8 percent, up from 52.3 percent in 2002.

Nicole Lasker, owner of Lasker Jewelers in Eau Claire, Wis., keeps her pearl margins even higher, averaging 54 percent.

Lasker also maintains 54 percent margins on designer jewelry. Karat-gold margins usually remain about 54 percent, but they have risen lately as Lasker re-prices older merchandise to keep up with gold prices.

Even diamond margins have remained robust at 50 percent for Lasker.

"Our margins are good because we really concentrate on it," she says. "We are very buyer-savvy. For diamonds, we won't buy pre-certed goods."

The fact that karat-gold jewelry margins appeared healthy in 2005 came as no surprise to John Calnon, managing director of the World Gold Council United States.

"A healthy business must include gold jewelry," Calnon says. "Gold turns faster, is a lower investment and has higher margins [than many other categories]."

Calnon says retailers should focus on finding innovative styles to boost sales of gold jewelry, which once enjoyed a 14 percent market share that has since slipped to about 8 percent.

Gross margins by category, 2005

Diamonds (loose only): 37.8 percent
Diamond jewelry: 48.7 percent
Colored-stone jewelry: 52.4 percent
Cultured-pearl jewelry: 53.8 percent
Karat gold jewelry: 52.5 percent
Platinum jewelry: 50 percent
Timepieces and watchbands: 43.8 percent
All other new fine jewelry: 53.1 percent
Estate/antique jewelry: 48.5 percent
Flatware: 50 percent
Repairs: 59.7 percent
Fashion jewelry: 54.4 percent
Other: 49.4 percent

Source: Jewelers of America, The Cost of Doing Business Survey, 2006