If you’re thinking of starting a jewelry store, you’re probably wondering just how profitable the business can be.
The answer to that question depends on a variety of factors, but in general, jewelry stores can make a fine living for the owners and employees if they set themselves up correctly and take into consideration who their customer base is, as well as the demographics surrounding the store.
In this article, we’ll take a closer look at the profit machinery involved in the jewelry industry based on our own 15+ years of experience, and what you can expect from owning your own jewelry store.
So read on to learn more from actual Jewelry store owners!
Table of Contents
Factors That Influence Jewelry Store Profit
Remember who you are working for. Remember where you are located.
These are the two things that we had to get straight right up front before investing a dime in our own adventure.
Actually, we did not really want an “adventure” per se.
Adventures are what you do when you are exploring caves with your friends or heading to the Amazon Rain Forest.
Typically, people that go on adventures do not risk their life savings or go into deep debt to do so. When we first started out, we quickly realized the importance of having a realistic and attainable goal.
We also realized that the jewelry business is not for everyone.
You have to have a passion for it, and more importantly you have to be able to sell the products you are passionate about.
That said, let’s dive into some of the factors that absolutely must be taken into consideration financially before applying for your business license:
Jewelry Store Costs
Are you intending to buy or lease a storefront, or are you heading towards e-commerce?
We opted for a brick and mortar location, as we felt it was best to have a physical space where our customers could come in, browse, and get to know us.
Of course, that means that we had to find the perfect location- which is not always easy or cheap.
You’ll also need to factor in build out costs if you’re starting from scratch, which can range from a few thousand to tens of thousands depending on the size and scope of your store.
For a jewelry store, you’re going to need display cases, lighting, and all of the other fixtures that make a store look like a store- not to mention the actual jewelry!
You’ll also need security measures in place to protect your inventory, which can be costly depending on how high-end your merchandise is.
Jewelry Store Labor
Do you intend to run your business with a spouse or with paid family members?
Are you going to hire a bench jeweler full-time or simply pay for their services by each piece?
There is a lot of down time while waiting for customers to come in, and if you have employees, you’ll need to pay them even when there’s no business.
The type of labor you can expect to pay for will also depend on the type of jewelry store you run.
For example, if you sell mostly mass-produced jewelry, you might get by with a sales staff and a part-time bench jeweler.
However, if you sell mostly custom made or high-end jewelry, you’ll need to factor in the cost of a full-time bench jeweler as well as a sales staff.
Marketing and Advertising
All businesses need to spend money on marketing and advertising, but the jewelry industry is particularly competitive.
Even moving our business online was a massive undertaking that involved infrastructure and marketing costs that we had not anticipated.
You’ll need to factor in the cost of a website, as well as the cost of SEO for articles like this one, not even including the costs of all the different pictures and angles so people can see what your jewelry looks like from all sides!
You’ll need to find creative ways to market your jewelry store, whether that’s through social media, print ads, or even television commercials.
The cost of marketing and advertising can quickly add up, so be sure to factor that into your budget!
Overhead For Jewelry Stores
Do you know the cost for commercial leasing in the area of your interest, the cost for commercial utilities, and the cost for liability and inventory insurance?
In addition, you’ll need to factor in the cost of permits and licenses, as well as any other miscellaneous costs associated with running a business.
There are a lot of ongoing overhead costs that go into running a jewelry store, such as the cost of rent, utilities, insurance, and permits.
Internet, credit card processing, taxes, employees, and inventory are just a few of the things that can eat you alive if you aren’t careful.
Jewelry Inventory
Inventory is another significant expense when you’re first getting started- and it’s important to remember that not all inventory is created equal.
You’ll want to focus on stocking high-quality items that will sell, rather than filling your shelves with cheap items that will just sit there.
Of course, you’ll also need to factor in the cost of shipping and handling for your inventory, as well as the cost of securely storing it if you have a brick and mortar location.
- Are you up to date on the wholesale cost of jewelry, diamonds, precious gems, and precious metals?
- Do you know where to find the supply chain and contacts to buy inventory from?
- Are you able to read the demographics well enough to know who your customer base is most likely to be so that your inventory can actually sell?
We found out the hard way that most of our clients didn’t like the direction we were going with our inventory, and it took us a while to course correct.
After much trial and error, we discovered that our target demographic was actually quite different from what we had originally thought.
Sales
Do you have an adequate amount of sales experience in order to run a store like a well oiled machine with minimum waste of case space?
Look around.
How are other small businesses doing up and down your street, and who is going to be your competition?
Do you understand how to calculate profit margins and what to do to recover losses?
Sales are the lifeblood of any business, and the jewelry industry is no different. In order to be successful, you’ll need to have a firm understanding of how to make sales and how to calculate profit margins.
You’ll also need to be aware of your competition and what they’re doing in order to stay ahead of the game. We’ve found that it’s important to constantly be innovating and thinking of new ways to market our jewelry store in order to stay ahead of the competition.
For example, having a layaway program helped us to increase our sales by 20% last year.
Buying Gold and Silver
You will have opportunities to buy gold and silver scrap jewelry or even coins.
Even if you do not advertise, people will bring these things to you when they see that the market has gone up quite high or if they just get tired of what they have and want something new.
People often inherit pieces of jewelry that they would never want to wear and are looking for somewhere to sell or trade it in.
As a jewelry store owner, you can acquire diamonds and precious stones, as well as vintage and antique jewelry, if you are open to buying.
This can net you anywhere from 10% profit for coins, to 25% profit for jewelry if you can refurbish it, or even if you can wait until metal prices go up.
Inventory: Does Your Customer Base Matter?
Does it matter where you get your inventory?
Oh yeah, because where you buy your inventory will also determine the style that it will be in order for you to satisfy the specific tastes of your customer base.
Our customer base came into our town, they did not live in the mountains where our store was originally located, although many of them had vacation properties that they owned.
So we quickly understood that because they came to get away from huge cities, they were also likely to be the part of the populace that turned the financial wheels in those areas too.
Our typical customer had already climbed at least halfway up the ladder of success and the average age was between 40-55 yrs old, so they were not looking for garage sales and/or street fair types of purchases – though much of the locals were.
No, these people had money and were inclined to spend it, but only if we had items that were out of the ordinary.
Our jewelry inventory had to be very much “different” than typical Mall styles, so we had to buy from vendors and dealers who would carry the very modern eclectic or antique Art Deco Era items for us to buy.
Genuine Art Deco, not reproduced.
Where Jewelers Get Their Inventory
The internet is going to be your best friend for finding inventory.
We googled for the type of styles we wanted to buy and then made contacts and appointments to meet with sales reps to see their inventory up close and in person to get pricing for buying in larger lots.
They came to us, we did not have to go to them.
Even so, this was time consuming but it was important because we did not want to offer our customers poorly made items that had little weight in spite of how stylish they were.
We established only one other vendor for sterling silver in our search, simply because we quickly learned what type of styles flew off the shelves and which pieces sat and tarnished.
Where Jewelers Get Sterling Silver Inventory
Our customers were picky.
So we bought sterling silver “artsy” styled jewelry from an Israeli company to appease our customers’ thirst for items that were both exclusive and hard to find.
The only way we discovered this company was because they came to us. Were it not for that, we probably would have never found anything in sterling silver that could have attracted our specific types of customers.
Stefans was a family-run business out of Israel who would come to the USA yearly to offer their line of jewelry to one store in each area to ensure that their buyers would have exclusive sales for their line.
We lucked out, they showed up in town during the time that we were still putting our store together which took months.
We also purchased sterling silver items from Zuni and American Indian tribal jewelry dealers, but those types of styles only seemed to sell to customers who would buy them as less expensive gifts for others they knew.
At the very least, they served as a colorful way to fill cases.
Where Jewelers Find Gold and Platinum Inventory
Jewelry stores can find certain types of fine jewelry from dealers who go to auctions all over the country to buy specific time period jewelry and that is otherwise known as “estate” jewelry.
These dealers will often scour the internet and newspapers for new businesses and will actually show up in your store to sell their findings.
Once they get a feel for your business, they will reach out to you when they acquire more jewelry.
Same goes for Diamond and Gemstone dealers. They appear even if you never look to find them.
These dealers take nearly all of the footwork out of finding inventory because of this modern computer age. This is a huge advantage over what jewelry stores had to do in years gone by.
Because we wanted items that were from the late 1800’s to around 1940 period, we kept our eyes and ears open and would call jewelry stores from other areas from time to time in hopes of buying wholesale.
We also contacted many gemstone and diamond dealers in order to get contacts to people who had access to buy and wholesale these sorts of items. Because of the rarity, the items would be the first things to sell and sometimes we had difficulty buying.
How Much Money We Actually Make With Jewelry
The first year, starting with the “Grand Opening,” we were actually surprised.
We shouldn’t have been, if we had paid closer attention though.
After accounting for the initial start up costs (which were huge), we had a great turn out in terms of customer foot traffic due to the area that we chose for our store, and also due to the fact that our closest competitor was 30 minutes away in a smaller town of no repute.
The biggest factor that marked our profit margin that first year and for the ensuing years to come was that our location was in a Tourist town, specifically “Wine Country.”
We could have made a huge name for ourselves in hindsight, if we had set up our business in a location that had a much larger younger population.
We say that because in a Tourist town, we soon realized that the well to do retirement population who actually lived there year round was not all that interested in buying jewelry, and they pretty much even stopped wearing much of it due to the mountain lifestyle and reduced activities.
The bulk of our foot traffic and sales came from weekenders who flooded the town from afar, and who typically stayed two days drinking wine and window shopping.
That’s it.
During the weekdays, it was D.E.A.D.
Probably the only reason why we did not run terribly low on inventory sooner rather than later was because we were only able to make the bulk of our sales on Saturdays, which was rather unusual for a fine jewelry store.
On Fridays, people would come into town during the later afternoon, get themselves settled and then start in on wine tasting and dinner.
This was a lengthy process for them, and so we were not willing to stick around late into the evening to remain open to try and catch sales that we eventually learned would never materialize.
They simply were not in the mood for shopping yet.
Sunday, potential customers slept in and got ready to head back to where they came from, maybe having brunch…little to no shopping from them either.
Shucks.
But we still made a living.
These are the main factors that contributed to our profit considering the tiny town we ran our business from.
As the saying goes, your results may vary.
Average Profit Margin For A Jewelry Store
Mileage will vary dramatically.
We were on the very lowest end of net income that you can expect for a jewelry store with no other employees located in a tiny town of about 2,000 population.
This town could easily swell to 10,000 people on Saturdays about 6 times a year, but that heavily depended on whether or not there were any planned and advertised “events”.
Typically, our tourists came to town up to around a thousand or so if there was nice weather.
Our monthly profits would also swing wildly because our business, like everyone else in our town, was very weather dependent.
This is part of the area demographics that you will need to consider also.
Bad weather, either too hot, too cold, or too wet, would chop tourism down to 10% on a Saturday.
We were also located in a wildfire area and would have huge amounts of heavy smoke due to forest fires each year. No one wants to shop or even drink wine when their eyes are burning from smoke or if they are sweating and/or shivering outside.
Average profit margin, net, after all expenditures for a tiny jewelry store, will be around $50K per year operating on weekends.
This is why we stated that being in a city matters rather than in a tiny town.
A larger city of 50K+ population may net a jewelry store starting from $150K and up per year, and this means that you can then hire someone full time too.
This is the bottom line amount.
High end jewelry stores in big metro cities?
We will let them write their own article because we can’t speak to those stores. Keep in mind that we never really intended to be in that kind of hustling business environment.
How To Maximize Your Jewelry Store’s Profits
With that said, even though we were in a small town, there were a few things that we did to increase our foot traffic and sales. These are what we did to maximize our store profits, which should work well for both small town stores as well as large city stores.
Do Not Undercut Yourself
While this seems like a motivational poster from the 1980s, it is still relevant today. You need to have confidence in your merchandise, which will come across to potential customers.
Keep your best selling items at the price you want and the price you know that you can competitively get for them.
The same goes for your services.
Do Not Have “Sales”
Unless those will be for items that have hung around your stores literally for years. You can use the money you get for sale items to replenish your inventory with fresh items.
However, if you become known as the store that has those bright yellow flags and balloon men flapping around in the wind because you’re always having a sale, then potential customers will just wait for the next sale to come along before they buy anything.
Refurbish Jewelry
Do not hesitate to buy repairable jewelry from your customers if they bring things to you.
You can also trade their unwanted jewelry for having repair work done too.
Don’t forget that you have the skills necessary to fix things up and bring life back to old pieces. You can use those skills to turn earrings into pendants or pins, for example.
This is a great way to build your inventory without having to spend a lot of money, and we have found ourselves with some gemstones that ended up being worth a small fortune after creating a unique piece out of it and having it appraised.
Slowly Bump Up Prices
Reprice items that are selling faster than you anticipated.
If you even mark up by only 10% per month then that amount can pay for some of your overhead. There is a method to this madness as you do not want to price yourself out of the market, but if your items are selling like hotcakes then it is time to increase the prices.
The trick is to keep increasing prices until you start noticing that items are not selling as quickly as they were before.
Then you know that you have hit the sweet spot and can back off a bit on the prices.
Take Advantage of Other Sales
Keep an eye and ear open for jewelry stores that are having sales and who are not in your area. Sometimes the inventory that does not work for them will be perfect for you, and you may be able to buy below wholesale or do some trading for items you already own.
FAQs About The Jewelry Business
Is jewelry a high margin business?
Compared to other retail businesses, it can be. Unless you are buying larger diamond that are 1 carat and above.
Contrary to popular myth, diamonds are not going to net you as much profit as the mounting they are in. It is difficult to make more than $1,500 on a diamond that cost you $5,000 to buy, whereas, the mountings can be purchased by the gram weight and purity of metal from wholesalers and dealers.
Is jewelry a good business?
Jewelry is a good business if you like people. However, if you live in an impoverished part of a city, or rural part of a county, or if you are in a high crime area, you can be the target for crime in this business, so choose your location well.
What is a good profit margin for handmade jewelry?
If you have a bench jeweler who specializes in making jewelry from design to finish, it will be very expensive. These are typically the types of jewelry that only a few people would be willing to pay for, and your margin might only be 20-30%.
However, if you can learn to make your own jewelry, you can cut out the bench jeweler costs and use your own scrap metal and gemstones that you buy at lot prices. A fairly good profit margin for handmade jewelry (we are talking fine jewelry rather than costume or semi precious), your profit can be as high as 200%.
What jewelry sells the most?
Approximately 90% of our sales are rings. Earrings and necklaces come in second, and bracelets are last. This will be different depending on the demographics of your customer base.
Final Thoughts
Location location location.
Never open a jewelry store in an area that you don’t love to live in.
Realize that the cost of doing business, especially set up costs are going to take several years to recover due to the price of a good supply of inventory.
Also, do not skimp on your security and insurance costs.
If you had to choose between getting a good camera system and an alarm system, go for the cameras. It is no good to hear alarms blare for 6 minutes and not get any video of who set them off.
We have found that selling jewelry and offering customer repair is actually fun. There has never been a day where we had regrets.
Whether you go for a big store in a big city, or a small one in a more rural setting like we did, you should do fine.