Manoeuvring margins

Importers like Toronto-based European Design, which pays for a fair portion of its products in U.S. dollars, are definitely feeling the pinch.

“Margins are tighter now, of course, because you don’t want to drastically raise your prices,” says Daniel Kundakci. “But for some inventory, you can’t justify not doing that because you would be operating at a loss. It is tough. Even though customers understand the U.S. dollar is higher, they can’t grasp the fact something they bought a few months ago costs much more today. It’s tough to balance. You try to keep prices as low as you can, but you obviously have to consider higher operating expenses.”

At the consumer level, however, Kundakci says a weaker Canadian dollar may be a deciding factor for those looking to purchase from U.S. e-tailers. “When the dollar was par, the downside was there was a lot of buying online or cross border. The plus of a weaker dollar is that it may move consumers away from doing that.”

Apel Camgozlu of Mary Jewellery in Toronto says that even though gold costs less these days, the price is still too high to be able to justify higher volume of sales to retail clients. Like European Design, Mary Jewellery has also had to raise its prices.

“Every company has to survive on a certain profit margin in order to stay in business,” Camgozlu explains. “If you’re not making that amount of profit on the products you sell, you’re going to lose at the end of the day. You have to pass it on to your customers, and hopefully, they pass it on to theirs, so that everybody makes money.”

Camgozlu says the sudden 20 per cent increase in the exchange rate forced Mary Jewellery to re-work the sales structure it developed last fall. “Most of our clients are business people, and they buy gold and import it themselves, so they understand currency fluctuations,” he adds.

The effects of the poor currency exchange are most apparent in gift-giving sales, Camgozlu says. Consumers may be willing to spend $300 or $400 on themselves, but are less inclined to do the same when buying a gift.

An inverse effect

Kenneth Laughlin, sales executive for United Precious Metal Refining for the Canadian market, says it’s not all bad news for retailers.

“When the price of gold decreases, it helps them sell jewellery, but when it increases, it helps them with buying gold from consumers,” he adds.

Kamel Hanna, owner of refiner and gold dealer, 24 Gold Group, agrees with Laughlin, adding he’s noticed a drop in retailers bringing in gold they’ve purchased from their clients to be refined. Although he says times are tough in the Canadian jewellery scene, he adds businesses offering a wider selection of product appear to be doing better when trying to capture consumers’ interest.

With the Vegas shows upon us, the Canadian jewellery industry may be looking to embrace a cautious attitude when it comes to stocking up. However, awareness about lower gold prices may entice consumers to buy more of the yellow metal than in previous years. How will the Canadian economy affect buying trends at JCK Las Vegas and Couture? We’ll have the answers in the August issue.