Ever see a photo of jewelry and fall in love... until you scroll down far enough to find the price? We've all been there. But why is some jewelry expensive while some is cheap? Let's dive in.
All jewelry is not created equal. As with all consumer products, price is a combination of time, materials, and markup. These things factor into literally any product you buy, but there are some unique variables when it comes to fine jewelry, so let's talk about the bits and pieces.
Time
Jewelry design and production are the primary items underneath the 'time' category for pricing. These processes are all across the board, ranging from large-scale, outsourced manufacturing down to a single artisan jeweler designing and creating each and every piece.
Think of the cost of time as a fixed price. So, the quicker you can make the product, the lower your cost. In general, the main ways to reduce time related costs for a product are:
- Pay the producer(s) less
- Streamline the creation process
This is somewhat oversimplified, so let me explain.
One of the most well known ways larger companies trying to sell huge amounts of product can do both of these things in one fell swoop is to outsource overseas. This moves the creation process to a production facility in a country where 1) workers can be paid less money by working on 2) an assembly line that breaks out the creation process into smaller bits. Many jewelry companies utilize manufacturing in this way, and others are able to keep their manufacturing in smaller facilities that may or may not be local.
No matter the scale, when manufacturing is the process you can run the risk of lower quality work, pieces of product that have been made incorrectly, and the realization of a design not coming out as well as imagined. Assembly line workers may or may not be well trained or have solid credentials for making jewelry, and this can affect quality of product. On a well-oiled assembly line for manufacturing, there will likely be a range of experience level and even some pieces that may even be machine-made.
On the other end of the spectrum, with artisans and very small, in-house handmade jewelry, you are paying for the time of experts in their craft. Where artisan jewelry is designed and handmade by one individual, other small teams may include several bench jewelers. Artisans must be well trained in all aspects of design and jewelry-making and often handle the entire process themselves or with one assistant. A smaller team may have the designer, a bench jeweler doing fabrication, another doing wax carving and formation, and an assistant for the more simpler pieces like removing cast pieces from the sprue, polishing, or forming earring wires.
With any company size or style, you won't necessarily know the details of their processes, and it all falls somewhere on the spectrum between massive scale manufacturing and an artisan at the bench. Some companies will streamline by purchasing ready-made parts that were most likely made overseas, such as earring wires, gem settings, and pre-sized ring bands. Some artisans will streamline by reimagining their own part creation processes and may consider hiring an assistant. Each designer and each business figures out the best way to create their pieces efficiently and effectively, and it truly is a very wide range.
This discussion of process and time comes down to this: a mass manufactured piece of jewelry will usually cost less to make than a piece of jewelry that was carefully handmade by one person. But time is just the first of three puzzle pieces.
Materials
The variety of materials used to create jewelry have very specific costs associated with them. Materials also define what is and isn't fine jewelry because they so greatly affect quality and value. Take gold for example, which is actually very seriously regulated by the Federal Trade Commission.
The gold weight for a piece will greatly affect its price, but just because a piece is heavier or thicker does not mean that it is higher quality or has a high gold content at all. Everything that appears to be gold is not necessarily gold. We recently wrote a blog post that can help you understand the differences between gold plating, vermeil, and alloy gold (also known as Karat gold). These differences will have a huge affect on the overall price of a piece of jewelry.
Then, to understand gold pricing you first have to understand variable markets, because the price of gold fluctuates constantly, in real time. Investopedia has great information on why gold prices change. Their key takeaways about the gold market are:
- Supply, demand, and investor behavior are key drivers of gold prices.
- Gold is often used to hedge inflation because, unlike paper money, its supply doesn't change much year to year.
- Studies show that gold prices have positive price elasticity, meaning the value increases along with demand.
- However, the investment growth rate of gold over the past 2,000 years has not been meaningful, even as demand has outpaced supply.
- Since gold often moves higher when economic conditions worsen, it is viewed as an efficient tool for diversifying a portfolio.
When you combine the amount of gold used in a piece with the current market value of gold, you can get a better understanding of why a piece of gold jewelry is priced the way it is.
Outside of gold, fine jewelry is most often made from other precious metals like rhodium, palladium, platinum, and silver. In rather stark contrast with gold, the ever-popular sterling silver is much more affordable. Yet, this is also based on market pricing and silver fluctuates in real time. One additional reason silver is valued lower for jewelry is because unlike gold, it tarnishes easily and requires much more regular care to maintain its shine.
Gemstones are the other side of the materials picture for fine jewelry. Luckily, there are plenty of choices for precious stones in various colors and price categories. But understanding the different options can be difficult. Check out our gemology page to pick through the knowledge we've downloaded from Geralyn's brain so far.
Because of the multitude of materials options, the details of each piece can get pretty complex. It is imperative to understand the materials used in a piece before making a purchase, but materials are not the last piece of the puzzle.
Markup
We know, we know. Everyone hates the word markup, but it's a huge piece of any business's pricing.
The nature of business is to make money, and you can't make a profit if you don't add a cost for the unique service your business provides. It doesn't matter if your business provides a product or a service, markup is always a factor.
According to Wikipedia, "Markup (or price spread) is the difference between the selling price of a good or service and cost." The difference between cost and price is simple: cost is literally what it costs a company to make that product and price is what the business then sells it for.
We've talked about time and materials extensively, and both those things add up to what business professionals often call costs of goods sold. These are the expenses related to the production of the merchandise. Markup is what allows you to account for overhead costs and ensure your business is making a profit.
Overhead costs are the costs of running the business that aren't specifically tied to creating the merchandise, such as the cost of facilities, marketing, shipping, and payroll. A percentage of overhead costs is added into each product's pricing equation, and so is a percentage for profit. These two percentages make up what we describe as markup. But the purpose of this article is not to teach business finance, so for an overview of pricing in finance terms, please see Amanda McMullen's article in the small business section of Chron.
Things to Remember
The price you see as a consumer is not come to arbitrarily. It is a carefully thought out equation that helps the designers and business exist and provide the product you're eyeing.
While markup is more of a business necessity, the quality of your jewelry is very much determined by the time and materials needed to create it.
So next time you come across a piece you love, we hope you see the amount of care that was put into its creation and note the quality and quantity of precious materials used. When you're talking to the person behind the showcases, don't be afraid to ask about that piece's story and how it came to be.
Want to learn more about fine jewelry as a whole? Check out our Understanding Fine Jewelry page!
