Wealth Building Strategies for Jewelry Retailers
Diversify your income streams and protect your assets with this guide
As a jewelry retailer, your primary source of income comes from buying jewelry wholesale from sites like Elf925 and then selling those pieces to your customers at a higher price than what you paid for.
However, in these tough economic times, it’s wise to diversify your sources of income and add in some “risk protection” measures for your personal wealth in addition to your main income stream.
That’s what savvy business owners do: they protect against risk by not putting all of their eggs in one basket.
Today’s post is going to give you 4 different ways that you can either make more money as a jewelry retailer or protect your personal wealth from an economic downturn through precious metals and stones.
The 4 wealth building strategies are:
- Flip gemstones for a quick profit
- Create a new revenue source by flipping used jewelry
- Invest in gold to protect your wealth
- Invest in silver to protect your wealth
Keep in mind, none of these strategies are going to make you a millionaire overnight.
But as a successful jewelry retailer, we’re betting you already knew that: in business, you get out what you put in.
So let’s get started!
Strategy #1: Flip Gemstones For A Quick Profit
Notice we used the phrase “flipping” gemstones instead of “investing in gemstones”.
We did this because according to an article by the Gem Society, holding onto gems in the long run in hopes that they’ll rise in value is not a good play.
Here’s a quote from the article to drive the point home:
“As a rule, gems increase in value at the rate of inflation. This means you should assume that a bad deal today will be a bad deal in 3 weeks or 3 years when you eventually sell.
When I make a bad buy on a stone or make a mistake, I tend to take my licks quickly and sell.”
The author gives a few examples of stones losing value over time:
- Blue topaz used to have a quite high price, as it was rare. Then, a method was discovered where cheap white topaz could be inexpensively transformed into blue topaz. Blue topaz prices dropped dramatically as a result.
- For unknown reasons, the precious stone Tanzanite suffered a huge loss in value in 2014. Imagine if you had a ton of Tanzanite sitting in your store after this happened.
Buying and selling gemstones is more like flipping houses than anything else. You want to find a good deal that can be “fixed up” relatively easily and then sold for quite a bit more.
To execute this flipping strategy effectively, you, or someone that you trust needs to have in-depth knowledge on:
- Gem prices
- How to identify different types of gems and their quality levels
- How to recut a gem and repolish it
- Who to buy and sell gems to at a good price
- How to market gems effectively to customers
Here’s an example of how the Gem Society author flipped a gemstone successfully.
The author bought this gem, which he assumed was a spinel, at a price of $155 dollars from a jeweler he trusted.
After the author consulted their friend, who was a gem cutter, they learned that this gem was actually a sapphire – which is worth MUCH more than a spinel.
The author paid his gemcutter friend to recut this sapphire, and here was the result:
A pretty stunning difference right?
How much money did the author make on this project?
“My basis in this (now 5.80 carat) sapphire is $235 total. So, $40 per carat. On a stone that should wholesale for easily $350 a carat and retail for $1,000 a carat!”
If the author sells this stone to a retailer, he could easily make a few thousand dollars on this one sale alone.
Even if the author sells this stone to a wholesaler, he could pocket $1,000 dollars, easy.
That’s not bad money for a few hours of work – especially if you enjoy this sort of thing!
Strategy #2: Create a New Revenue Source by Flipping Used Jewelry
Out of all the options we are listing in this article, flipping used gold and silver jewelry may be the easiest to execute on.
The process is simple:
- Put a few signs in your store letting your customers know that you’ll give them good money for their used jewelry, even if it’s broken or bent.
- Buy the jewelry at a good price (more on that later).
- Send the jewelry to a smelter or wholesale jewelry dealer to make your profit!
An article from the website “How To Make Money Buying and Selling Gold” breaks this process down for gold jewelry, and the exact same steps apply for silver jewelry.
Just like with gemstones, your profitability (or lack thereof) starts with your ability to accurately judge how much the jewelry your customers present to you is worth.
It’s important to get this right. If you are paying your customers too much for their jewelry, you’ll lose money.
However, if you don’t pay them enough, you’ll lose out on repeat business, and your new revenue source will quickly dry up.
It’s important to keep in mind that when you are selling this jewelry to a smelter, they’re paying you ONLY for the weight of the pure gold and silver that you send them.
- When buying gold or silver, you’ll want to pay out 40-65% of the pure gold and/or silver’s value.
- When selling gold or silver, you can expect to be paid 85-92% of the pure gold and/or silver’s value.
That’s why you, or someone on your staff needs to know how to judge gold and silver jewelry accurately for quality.
In this case, quality means: how high of a percentage of that jewelry is actually gold or silver?
The above article outlines the mathematics here:
“Let’s look at a typical sale. The average person tends to bring in three or four items that altogether weigh about 2 ounces. Most items people bring me are 14K gold which is 58% pure gold and the rest is alloys to lend gold its color and hardness.
Two ounces at 58% works out to 1.16 ounces of pure gold. Let’s say for example you pay that person 50%, which is typical of most legitimate gold dealers.
At $1400 / ounce, that comes out to $812. Now you send the gold to a refiner who will pay you 92% of the spot price.
I will let you do the math – this works out to a very nice profit from just one transaction.”
Strategy #3: Protect Your Personal Wealth By Investing In Gold
An investment in gold is very different from an investment in stocks or bonds.
Why?
Well, “investing” in gold is kind of the wrong phrase – unless you’re a very conservative investor like Warren Buffet who buys stocks to sell them 30-40 years later.
Your basic strategy: buy gold when the price is low, then hold onto it for decades.
As a Money Crashers article titled, “Is Buying Gold A Good Investment?” states:
“Practically speaking, however, a buy-and-hold passive investing strategy may be best for the ordinary gold investor.
Since economies tend to be cyclical, buy when the price of gold is down, whether or not your country is currently going through turmoil or you think it’s headed for some.
In this way, you don’t have to worry about buying when everyone else is buying and driving the price up.”
You don’t get any dividends from gold. The only profit you make is when you sell the gold, if you’re selling the gold at a higher price than what you paid for it (and accounting for inflation as well).
The main advantage to gold? It’s seen as a “bulletproof” investment by many people.
This is because gold has been seen as a form of value for thousands and thousands of years, and that is unlikely to change anytime soon.Even if crazy scenarios happen – like the U.S. dollar losing a huge portion of its value – gold will still probably retain it’s worth.
While the above article gives 4 ways that you can invest in gold, the 2 most practical are :
- Buying gold directly in the form of bullion or coins.
- Buying stocks in companies that have a history of mining reliable quantities of gold each year.
Strategy #4: Protect Your Personal Wealth By Investing In Silver
All of the above information that we wrote about gold applies to silver as well, with a few twists.
The main differences between investing in gold and in silver are that silver is used in many more industrial applications than gold, and silver is much cheaper per ounce than gold is.
Since silver is less expensive per ounce than gold, it can be an easier investment for many people to get into.
However, the more important factor is silver’s industrial uses. In these uses, there are no real substitutes for silver, so silver will have to be used regardless of the cost.
Sure, if silver prices went up exponentially, in the long run different technologies would be developed to use different metals. Innovation always finds a way.
But in the medium term, silver is what economists call inelastic.
That means that the demand for silver is relatively unaffected by the price of silver.
How can this be? Well, as we just said, silver is integral to many products, such as cell phones.
And in those products, silver makes up a relatively small amount of the products’ overall cost.
This situation is summarized in a metal investing expert’s response answering the question, “Is Investing In Silver Better Than Investing In Gold?”:
“For even if the price (of silver) were to double, triple or even skyrocket beyond what most experts predict it will in the coming months or years, this increase would in no way prevent the industries that utilize the metal from purchasing it…
…as it is normally used in such small quantities that they would no doubt continue to purchase it.
Example: If silver were to rise to $150 an ounce, the price of an average cell phone would rise by approximately $25. Not only would this price increase not deter most consumers from purchasing a new cell phone, it would likewise not deter a cell phone manufacturer from producing cell phones
One reason being that silver contains unique properties that cannot be reproduced or substituted by a cheaper alternative, making investing in silver a bargain by any standard at the current price.”
Wrap-up
As a jewelry retailer, you have many options for building sources of income and protecting your wealth once you earn it.
Don’t just sell jewelry like all the other stores. Do more. Be different. Diversify. Protect your assets.
The seeds you plant now will grow to give you returns in your business later on!