Trading akoya-pearls

[neli]

I'm very interested in the way akoya-pearls are produced and traded. I have now found enough information on pearl farming, but almost nothing about the stations they have to pass until they reach european jewellery shops. I would be very glad if someone could help me! thanks in advance!

 

[jshepherd]

The pearls start at a farm. Most farmers then sell to a factory. The pearls are then sold to local traders. These traders will either sell pearls at jewelry trade shows (such as in Hong Kong) or to local merchants such as those at the pearl market in Beijing and Shanghai. These local merchants then sell to consumers and other retailers.
From the trade show the pearls are purchased by wholesalers mostly and at times piecemeal by actual retailers (at a much higher price).
These wholesalers will then sell in the USA, either directly to retail stores, or to retailers who come to the tradeshows such as those in Tucson and Las Vegas.

I would say the most common (because as you see there are several variables) way the pearls make their way into the hands of consumers is:
Farm
Factory
Trader
Local tradeshow – sold to wholesalers
International tradeshow – like those in the USA on Inhorgenta in Germany
Jewelry stores (and at times even more wholesalers buying for smaller stores that cannot make the trip to a show).

Most pearls pass though 5-6 levels before going retail. The biggest markup is retail, of course, where the selling markup averages about 300%.
On this last trip out to Asia I spoke with a very good friend of mine in Hong Kong whose family owns a freshwater pearl processing plant in Zhuji, and a large pearl farm. She travels the US selling directly to (will not name the actual stores) retail outlets, where the pearls are marked up 20 times on average. One of her very large customers – a very recognizable name – purchases one strand of freshwater pearls consistently for $20, and retails them for $400 per strand. I am sure this is because they are now skipping many of the layers they once traversed to bring the pearls to market by purchasing from her instead of a trade show. So instead of dropping prices they are simply raising margins.

 

[Richard W. Wise]

300% average markup in Europe? Is this possible on akoya pearls? Certainly it is not the normal markup in the U.S. in so far as I can determine.

On Chinese freshwater, the markup is higher this is because (I have been buying freshwater since the late 80's) the quality for the wholesale dollar is dramatically better so often one finds oneself with large freshwater that looks as good as Southseas selling at 15-20% of the price of a comparable Southsea pearl. Im speaking now of 9+ mm rounds and large fine pears and buttons.

 

[jshepherd]

I am actually not sure about the mark up on Akoya pearls in Europe, although I do know they are more expensive there.
According to NW Gem Lab out of Boise the average national markup in the US is 2.7. Some stores that I sell to immediately mark a price of 6 times the cost and then sell them at discount.
The reason I say 300% is because this is 'triple keystone' the standard, right?

 

[Richard W. Wise]

God love ya Jeremy, triple key! The consumer public has the idea that triple key is the jeweler's standard markup, well it ain't. Wish it was. Depends on the item, of course, but mostly that is simply a myth.

Without becoming too personal, my markup is generally 50%, that is buy for a dollar sell for two so at 2.00 my profit is 50% not 100%. Can't do that in diamonds, not anymore, hell, 20% to maybe 35% on larger stones...Thats the reason why mom and pop jewelers are in trouble, to much competition, the internet is killing them!

I buy in Asia, Africa, S. America, so my markup on gems can be higher, I sell also to jewelers, but so are my costs. Go mainly for quality, rare stones are rare and therefore gotta go get em! Pearls, same deal. Actually with freshwater, if you don't mark them up no one will buy them. If they are too cheap you can't sell them. Thats the paradox, used to be before the market discovered them.

 

[jshepherd]

Well I really do not do much with jewelry other than pearls. I had not even herad of the triple key standard until I started going to jewelry shows and received all those catalogs. A wholesaler told me to look for the little picture of the 3 keys to determine retail prices for customers. I have heard that the margin is much, much less with diamonds, but that is also why pearls are so popular - they have a nice margin!

 

[mikehrz]

would it be possible to get a definition of "markup"? in richard's case buying at $1 and selling at $2 would seem to be a markup of 100%, since your selling price is twice your cost. true, your profit is only 50% of the sale price, but your profit is also equal to 100% of your cost. a "50%" markup would mean selling at $1.50, wouldn't it?

and it's entirely possible that the retail markup in the usa is 300%, since the department and jewelry stores are always having x% off sales. how could they possibly afford to have tiny markups, then hold sales and still turn a profit?

 

[Richard W. Wise]

Mike,
Well its a bit of semantics. Buying for 1 and selling for 2 means you are marking up 50% given your cost. The profit margin and the markup are the same. Yes 2 is 100% more than 1 but we are talking about markup from cost and profit.

No question stores that offer 50-70% off are marking up more than keystone and sometimes I do to. Hell, Ross Simons, first and only store I ever worked in, was fired too, had a retail markup on the tag and a code that gave you "the best price" that was a specific percentage off.

Fact is stores have to meet expenses and make a profit. I go to the source, Bangkok, Nairobi, etc., and markup to a price below U.S. retail and still make a good profit. But, few retailers can or know how to do that. Also, I deal in very fine rare gems that allows me to avoid being"shopped" simply because you can't find what I have most other places. I also have to hang on to rare pieces, sometimes for years and that gets expensive but, if you deal in the rare its the price you have to be willing to pay.

 

[jshepherd]

Richard,
You really get around a lot. That is quite a spread out schedule! If you ever decide to explore pearls in China let me know. I usually head out there every month. We actually shot a documentary at an Akoya farm two trips ago. I was there last week again to finish it. It really is an amazing place. My next trip will take me out to the freshwater pearling areas as well.

Mike,
According to Kirsten in my office you are only 17, right? She told me, and I must concur, you seem to be one of the most intelligent, well spoken 17 year olds I have had the pleasure to deal with. I do hope you make it back to our showroom and we can have a chance to be introduced.

 

[Richard W. Wise]

Jeremy,
Love to visit the Chinese pearl farms. Have been to some in the Tuamotus north of Tahiti. But, you probably read about that in my book. Tell us more about the documentary, is it in English and how and when can one get a copy?

My travels tend to be focused and intense. Like to spend a month in a place so usually go on one big trip a year. You can read an illustrated travel piece on my Burma sojourn in March of this year on the opening page of my website: www.rwwise.com.

Hope you are enjoying my book and that you have read beyond the pearl chapters.

 

[mikehrz]

umm, well i guess she could have gotten that impression about my age, or perhaps we were talking about the intended recipient of the pearls i was looking at that day (who is 17) and she got confused. i happen to be 23. sorry to disappoint you. lots of people think i'm younger than i really am, which is occasionally frustrating when one is trying to be taken seriously. however, i'm glad to say kirsten did seem to take me seriously, which was nice.

i am also curious about this documentary. more information would be welcome.

 

[jshepherd]

Ahhh, the recipient, not you. Have you ever played the game 'telephone'? Yes, you stand out as one of Kirsten's favorite people that have come into the office!

Well guys, the documentary is something I have been thinking about for quite some time. I finally decided to bring a small crew with me to a pearl farm in January. We shot about 8 hours of footage, and drove for hours to catch farms in the act of harvesting and nucleating.

I was pleased with most of the footage, except the first few scenes. We had arrived late in the evening, and I thought all the footage was too dark. So, I brought a camera man with me last week, and we shot the arrival scene/boat scene again.

I am hoping the editing will be done within the next week. If you would like a copy just send me a provate message with an address.

The documentary starts with an arrival scene in South China and a boat trip to the farms. There are a few street scenes and breakfast scenes, then we drive to the farms. We used a macro lense for the nucleation, so we were able to get inside the oyster during the nucleation. That part of the video is the most amazing, I feel. We then went on a boat into the farm and watched a harvest.
The video then goes into the pearl factory and walks the viewers through the entire process, finishing with our negotiations and the final sale.

I am not going to be selling the documentary. I plan to simply give it away. So if you would like a copy drop me a line. I believe the final copy will be about 20 minutes.

 

[Satine De La Courcel]

Jeremy,

Can anyone geet in on that deal for the pearl Documentation??? I would love to have a copy as well..

Ash

 

[jshepherd]

Hi Ash!

You know I would be happy to send YOU a copy!

 

[Richard W. Wise]

Jeremy,
Great, education is the key! Made some amaturish attempts at a video myself in Africa some years ago. Anxious to see your results.

 

[jshepherd]

An African video sounds great! I was actually part of one in Uganda just last year. It was not about gems, however, it was about an orphanage my family sponsors in Kampala.

 

[Satine De La Courcel]

Thanks! I am just trying to be as educated about as many aspects of Pearls as possible! So I can pass on the information to others!


Thanks Again!
Ash