What Is the Percent of Profit Margin That Retailers Expect From Jewelry?
A 2010 study conducted by "National Jeweler," an industry publication, showed that 26 percent of retail jewelers achieved a gross profit margin of 48 to 52 percent, while 29 percent reported margins greater than 53 percent, and 45 percent said their margins were between 20 and 47 percent. As a retailer, you can expect similar gross margin percentages.
Diamonds make up 41 percent of retail jewelry sales, according to "National Jeweler." The gross margin on diamonds was less than 47 percent for 61 percent of the retailers surveyed. Diamonds are a controlled market, with the major diamond mines and dealers controlling the supply and allowing only so many stones to be sold at any given time. It is difficult for the customer to personally evaluate the worth of any stone, as it takes an expert to differentiate between a nearly flawless stone and one with slight imperfections that can't be seen with the naked eye. Internet sites such Blue Nile, Miadora and Diamond don't have the overhead of brick and mortar stores, so the can undersell diamonds and still be profitable. Some retailers will match the online store's prices to win the loyalty of a customer, hoping she returns for further jewelry purchases.
Colored stones typically have higher margins than diamonds -- 48 percent or more for nearly three-quarters of the retailers. It's difficult for the customer to compare prices of jewelry pieces given that the quality, type, color and size of the stones vary so much. For example, a bracelet of blue topaz is less expensive than blue sapphires or blue tourmaline, although all look somewhat similar. And red stones are not just rubies; this color class includes garnets, spinels and tourmaline, while green stones go beyond emerald and include peridots, sapphires and tsavorite garnet. Another reason for the higher margins is that colored stones can be bought wholesale at gem shows, unlike diamonds.
The gross margin on sterling silver jewelry is higher than on gold. Ninety percent of the retailers reported margins greater than 48 percent for silver, while only 72 to 74 percent had margins of 48 percent on gold. When two pieces of jewelry are placed side by side, one of silver and one of white gold, the consumer has a tendency to purchase the sterling silver jewelry, because it comes across as a much better deal. Sterling silver is used with colored gemstones as well as diamonds.
Gold, silver and platinum fluctuate in value over several months, but the price of a piece of jewelry remains the same over longer periods. If the precious metals drop in value, the gross margin increases. If precious metal prices go up, the gross margin decreases.