I could really use some input on a potentially huge problem for me
in the next few months. The main component of my spring line is
sterling silver. I’m getting ready to ship my samples to my reps and
struggling with how to price my items. I want to add enough of a
safety net to compensate for the rising price of silver, but seeing
that the price rose another $.41 today, I’m wondering just how high
silver is going to go. My main problem is that once my prices are
set, the customers order at those prices and may not want the order
processed or shipped for several weeks - or more. I’m not in a
situation where I can constantly change my prices and I sell
wholesale. Once they are set, they are set. Even the findings that
I am purchasing (such as earring posts) are changing in price every
day. I’d be interested in hearing how others are handling this
situation.
Catherine
Catherine, I think that you should consider doing what most
manufacturers do; quote prices based on the current metal price and
inform your reps and customers as to what the increase would be at
different silver prices. Calculate your material costs and profit at
different silver market prices. Silver was $6.50 on 1/12 so why not
determine your price at $6 - $7 and then another price at $7 - $8,
etc. You have to protect yourself. I remember when silver was over
$50/oz. Non of us can be expected to absorb these additional costs.
You also have to be prepared to lower your prices if and when silver
goes below the current price. If you remember silver was $4.50 in
early July last year. Joel
Joel Schwalb
@Joel_Schwalb
www.schwalbstudio.com
Catherine:
You have a couple of solutions: First, you can set your prices in
tiers, the first will cover the market up to a certain market, say
$7.00 Silver. The next tier could cover up to $8.00 and so forth
setting up different price levels. And, naturally you would price
your product at the highest level in that tier. That way, the market
could vary from say $6.00 to seven and you would be priced at seven
and would have eliminated any exposure to the market. Should the
market go above seven dollars you would price using the next tier and
so on. This is a very reasonable method for you and the customer.
The next way would be to change price every day by calculating metal
value increments to cover the daily fluctuation of the metal market.
Bill on the day after shipment and buy enough metal to replace the
amount of metal sold the day before. This technique would allow you
to maintain your metal inventory without exposure to the market. You
wouldn’t make any money speculating on the market using this
approach. But , you would be safe from exposure and allowed to make
normal profit margins. But, you claim the buyer would not be
receptive to this method.
A third method would be to purchase enough metal to cover all your
orders, calculate the price at that market and fix the sell price.
Often when a buyer wants to fix price in the precious metal market
he would pay for the raw silver in advance to secure his price
position. For a supplier to guarantee the price of finished goods in
a volatile rising market is a very risky policy.
Try fixing the price of future silver shipments with one of your
suppliers! Sorry! Business should be a two way street, everyone has
to work together in situations like this. We make findings and our
computers are set up to change our prices every day. And, the metal
we sell today is replaced tomorrow.
Good luck,
Ron
Catherine:
You have a couple of solutions: First, you can set your prices in
tiers, the first will cover the market up to a certain market, say
$7.00 Silver. The next tier could cover up to $8.00 and so forth
setting up different price levels. And, naturally you would price
your product at the highest level in that tier. That way, the market
could vary from say $6.00 to seven and you would be priced at seven
and would have eliminated any exposure to the market. Should the
market go above seven dollars you would price using the next tier and
so on. This is a very reasonable method for you and the customer.
The next way would be to change price every day by calculating metal
value increments to cover the daily fluctuation of the metal market.
Bill on the day after shipment and buy enough metal to replace the
amount of metal sold the day before. This technique would allow you
to maintain your metal inventory without exposure to the market. You
wouldn’t make any money speculating on the market using this
approach. But , you would be safe from exposure and allowed to make
normal profit margins. But, you claim the buyer would not be
receptive to this method.
A third method would be to purchase enough metal to cover all your
orders, calculate the price at that market and fix the sell price.
Often when a buyer wants to fix price in the precious metal market
he would pay for the raw silver in advance to secure his price
position. For a supplier to guarantee the price of finished goods in
a volatile rising market is a very risky policy.
Try fixing the price of future silver shipments with one of your
suppliers! Sorry! Business should be a two way street, everyone has
to work together in situations like this. We make findings and our
computers are set up to change our prices every day. And, the metal
we sell today is replaced tomorrow.
Good luck,
Ron
In a volatile market, you may to price it at some markup over spot
price, with prices varying based on a volatile market. Another way
of doing it is quote a higher price, with a discount that varies
depending on spot.
This is a messier sales approach than having a price; however, this
beats having messier (read negative cash flow) financials.
Mark Zirinsky
Denver,CO
’private cutter buying rough and collections’
Dear Ron, Wow! Your pricing dissertation on silver jewelry, based on
commodity prices, is quite logical, but , it does not address the
fact that the cost of the silver is insignificant vis a vis the
value of the labor and artistry of the craftsman. I suggest that you
rethink your approach to this query. After all…we are not talking
about the vehicle of conveyance, but, rather, the end product. The
value of a work of art is not based on the cost of the components,
but, rather, on the value of the finished product…Ron @ Mills
Gem, Los Osos, Ca…
Ron, While I agree with what you said in some respects, I have to
disagree in others. What you said is true in the context of one of a
kind pieces but if someone is making production pieces the formula
changes. Cost of materials become a more important factor. So, I
would say, it all depends. Joel
Joel Schwalb
@Joel_Schwalb
www.schwalbstudio.com