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What is the Profit Margin on Jewelry?

Starting a jewelry business can take years to master but when done right, a decent amount of profit can be gained. Here's a guide on the market prices, labor cost, and what kind of profit margins you can expect.

A display of jewelries in a store.

Everyone loves a nice piece of jewelry. From British monarchs to famous rappers, jewelry has become an indicator of status and prestige. That’s why some of the world’s most famous jewelers have amassed small fortunes from selling custom pieces to their celebrity clients.

But not all jewelers make it big. It’s still a difficult business and can take years to master. Here is a look at the business behind jewelry and what kind of profit margins you can expect.

What is the Retail Price of Jewelry?

Gold ring with Topaz stone.

The retail price of jewelry varies depending on the quality of the metal and stones, as well as the size of the piece. For instance, a piece of costume jewelry may only cost a few dollars. Whereas a similar piece made from real precious metals could cost several thousand.

The most expensive piece of jewelry in the world is the Hope Diamond, which is currently on exhibit at the Smithsonian National History Museum. It’s estimated to be worth around $250 million.

The retail price of jewelry is greatly impacted by the materials used. For instance, if the piece is made using pure gold or silver, it will cost significantly more than if it is made from copper or brass and simply gold-colored. Even jewelry made with pure gold or silver typically isn’t made with 100% of that metal. They are often an alloy with other metals mixed in to improve the function.

A solid 14K gold chain weighing 825 grams is worth over $25,000 in gold alone. That price will only go up if you add diamonds or other customizations that increase the value of the piece. Plus, the amount of labor put into adding any additional features will also increase the price. So, the retail price of jewelry can vary greatly depending on what kind of piece you get and where you purchase it.

What is the Wholesale price of Jewelry?

Pair of earrings in boxes

The wholesale price of jewelry can also vary greatly depending on a variety of factors. The wholesale value refers to the price that retail jewelers pay for the product before marking it up and selling it to customers.

Some jewelers purchase raw materials and construct the pieces themselves, while others simply buy products in bulk and market them to customers. Others do a hybrid of both and wholesale purchase simpler pieces while creating custom items for select clients.

Wholesale prices are typically somewhere in the ballpark of 50 to 60% of the retail price. So, if you purchase a $100 bracelet from the store, the wholesale price would have been between $50-$60. Retailers typically buy these products in bulk to get a discount, then pocket the profits minus any expenses such as packaging or advertising.

Every jeweler has its own formula for pricing items that will depend on the amount of labor put in to create each piece. But you can generally expect the wholesale price to be about half of the retail price for most common items.

What are the Costs Associated with Manufacturing Jewelry?

Man making jewelry in workshop.

To truly understand the business of jewelry, you also have to understand the costs associated with manufacturing the items before they can be brought to market. There is a lot that goes into creating a piece of jewelry. Besides the raw materials needed to make the piece, you also have to factor in the labor, marketing, and additional overhead costs. A neckless may only cost $5 to manufacture or it might cost $5000. It depends greatly on whether you’re using real precious metals and gemstones.

One ounce of 14k gold is worth about $1100 (although this price fluctuates with the market). A 1-carat diamond ranges in price from about $2500 – $18,000, depending on the cut and purity. So, if you’re using real gold and diamonds, it’s going to be far more expensive than knock-off alloys and rhinestones.

The cost of labor is also a major consideration. Most professional jewelers charge a flat hourly rate, which is built into the wholesale or retail price, depending on who’s doing the work. The average jeweler charges around $20-25 per hour. But skilled jewelers can charge between $30-65 per hour. Most custom pieces take several weeks to make, although it depends on the intricacy of the item.

Man putting diamonds on a ring.

Next, you should factor in any marketing efforts. On average, most specialty jewelers spend about 4-5% of their revenue on marketing. Larger chains like Sterling or Tiffany may spend more and smaller, independent jewelers may spend less. But like any business, advertising is essential to making sales and should be factored into overall spending.

Finally, jewelers must factor in any administrative costs. This includes any additional expenses needed to run the business. Common expenses outside of the raw material and labor typically include office supplies, website maintenance, postage stamps, machines needed to create the jewelry, and any utilities required to power these machines. The exact administrative costs will vary depending on the jeweler but it’s typical for administrative overhead to make up about 10-15% of your total manufacturing costs.

What are the Profit Margins on Jewelry? 

Interior of a jewelry store

The average jeweler makes a gross profit margin of about 43-47%. Luxury jewelers who have built an impressive brand for their business may make more, whereas those just starting out may make less. But this number has been pretty consistent over the past few decades and seems to accurately reflect the profits of most jewelers in the US.

There are still many factors that can impact your success, such as the type of jewelry you manufacture, how you choose to market yourself, and where you source your materials. But if you can manage to build a solid customer base, you can expect consistent profits from the jewelry business. 

References:

ItsHot: How Much is a Real Gold Chain

Jewelry Making Journal: Jewelry Pricing Formula

Small Business: What Is the Percent of Profit Margin That Retailers Expect From Jewelry?