First answer that comes to mind is: yes!

What makes that little thing cost thousands? Most of us think, that price of gold makes it bling cost big bucks. True, but it is only part of it. Jewelry is all about fashion and design. Fashion changes rapidly so there are new designs every year. Sexy ads make us want it to buy bling. There are many occasions throughout the year that jewelry giving makes sense. We go to jewelry stores and spend big bucks to make our significant others happy. Happy last year, happy this year and happy every year to come.

But we are still not buying enough bling. So it is not feasible for industry to mass produce it. Jewelry stores are not selling enough merchandise to keep markups low. For example average grocery store marks up their goods by 45% where average jewelry store marks up their merchandise about 300%. That means when they buy a ring from manufacturer for a $1000, they sell it for $3000. I don’t think it is gouging, ripoff or scam.

Simply overhead that these store experience due to high rents, security cost, insurance, wages and most of all maintaining inventory, warrants such big markup. They do not have large number of sales like grocery stores. We don’t see lineups of customers with full carts at jewelry stores. So if we want to buy new jewelry, we have no choice but to pay through the nose.

However there are things that we grossly overpay for without even thinking twice.

For example:

A kilogram of steel cost 70 cents versus a kilogram of gold $47000

400 steel screws weighs about 1 kg so there is about 2 cents worth of steel in dozen screws, yet retail cost of small package of the same dozen screws is about $2.50 – a whopping 12 500% markup (twelve and a half thousand percent).

From 1 kg of pure gold, a 400 of plain 18k wedding bands can be made, at gold cost of $117 per piece. Such ring at the retail store would cost about $700 which is not even 700% markup.

In this calculation I used only cost of material, but you decide what really cost us more. Bling? Or nuts and bolts?

By: Andy Nowicki @ Tecumseh Gold Exchange 

Photo by: InterGem Jewelry