Sunday, November 25, 2007

How to avoid the Low Making Charges Trap in jewellery

In an earlier post I had mentioned how much I disliked the idea of making charges in jewellery taking precedence over everything else. Especially my rant on how radio is being used to dish the "oh-so low making charges" tune.
Jewellers tend to gain from such 'positioning' as they can now "distract" shoppers from other real issues like Hallmarking.

The Trap: Jeweller advertises a low making charge of say Rs. 60/gm and sometimes even lower.

Gullible Shopper: Sees a deal at hand and goes happy hopping and cannot contain his/her glee.

Wise Shopper : Goes to check out what the heck is this deal about. Finds the jeweller is selling non hallmark jewellery, leaves the "deal" on the table.

What did the Wise Shopper know that the Gullible didn't?

Besides the common sensical thing that something that looks too good to be true is usually that. There's a rationale behind this.

Assuming the price of 22K gold is Rs. 9700.

Non Hallmark Jeweller:
Price of 22K gold is : Rs. 9,700.
Price per gram : Rs. 970.
Making charges : Rs. 60.
Total price per gram : Rs. 1030.

Actual purity from such jewellers comes to about 16-18K( Our first hand experience). Averaging it to 17K.
Value of gold of 17K is Rs 7083 per10 grams.
Value of gold of 17K is Rs 708 per gram.

Jeweller's margin a whooping Rs 262 per gram + ( Rs.60 - actual karigar charges).

Hallmark Jeweller:

Price of 22K gold is : Rs. 9700.
Price per gram : Rs. 970.
Making charges : Rs. 150.
Total price per gram : Rs. 1090.

Actual purity from such jewellers should come to 22K. Your value is retained even though you feel you are paying more. You are actually getting more.

Since Jewellers' margins are under threat as hallmarking leaves no scope for manipulation in the purity of gold, they will charge more Making Charges. Be prepared for that.

Jewellers Margin = ( 150 - actual karigar charges)

So my little piece of advice next time you go jewellery shopping: Turn off your radios and look for the blue triangle.

1 comment:

avinashG said...

"Since Jewellers' margins are under threat as hallmarking leaves no scope for manipulation in the purity of gold, they will charge more".Does this mean that every non-Hallmark article has less carat-age"?Hallmarking charge is below Rs.100 and they can charge it to the customer,