Whether you’re passionate about gems and precious metals or enjoy the art of crafting unique pieces, the jewelry business offers ample opportunities for creativity and profit.
However, launching a successful jewelry store requires more than just technical skills. It involves careful planning, market understanding, financial management, and strategic marketing. This guide aims to navigate you through this process, providing an overview of the business, steps to get started, and answers to common questions.
Jewelry stores sell various types of jewelry and accessories directly to consumers. Stores typically specialize in either fashion jewelry or wholesale jewelry. They may specialize further, like by offering jewelry within certain price points or offering jewelry from particular jewelry designers or jewelry brands. In many cases, these stores don’t just sell jewelry but also offer fittings, repairs, customization, appraisals, and purchase precious metals. Some may purchase used jewelry, and some jewelry store owners not only stock pieces by others but also make their own handmade jewelry products to sell.
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The jewelry industry in the United States is mature and competitive. Total annual revenues are expected to be $68.4 billion in 2023, and there are 61,892 stores operating nationwide. Most stores are small, family-owned businesses, though there are some large national and regional chains.
Fine jewelry sales make up the bulk of revenue, including diamond jewelry, gold jewelry, watches, and precious gemstones. Profit margins tend to be low, around 2-4% of total sales on average. Seasonal holiday shopping accounts for a large portion of annual sales.
The industry faces competition from department stores, big box retailers, TV shopping channels, catalogs, and online retailers. However, small specialty jewelers can compete by providing excellent customer service, building relationships with customers, and offering unique jewelry lines and custom designs.
The jewelry industry can fluctuate dramatically, so it’s important to be prepared for unpredictability in profits from year to year. The health of the economy can significantly impact jewelry sales, and fluctuating gold prices can also contribute to the uncertainty of this industry. Jewelry store owners should have plans on how to weather the times when the economy is down and how to maximize their profits during better times.
Steps To Start A Jewelry Store
Step 1: Market Research
Starting a jewelry store can be profitable, but like any other business, it requires thorough research and planning. One of the most important steps in starting a jewelry store is a substantial customer base to sustain it. Though it’s not an exact science, comprehensive market research can illuminate your path, helping you make informed decisions. A few things to research include:
Area demographics: Top on the list is understanding the demographics of the area where you’re considering setting up shop. Factors like population, age distribution, education levels, and household income can tell you a lot about your prospective clientele. Since higher incomes often correlate with greater spending on jewelry, this is a vital first step. The Census Bureau has a lot of data to help with this research.
Market size: Next, we can use the area demographic information and data from the US Bureau of Labor Statistics Consumer Expenditure Survey to see how much people spend on average for jewelry. This will give you a ballpark figure of the possible revenue your area might spend on jewelry.
Evaluate competitors: The next step is to identify existing jewelry stores in your area. Visit them, study their websites, and assess their offerings, prices, and customer engagement strategies. Don’t overlook online reviews of local jewelry stores. Reviews can provide insights into what existing businesses are doing right or wrong and help you identify opportunities for your own store.
All of this information can help you find gaps in the market, like unfulfilled customer needs or specific niches that your store could cater to.
Local economic health: It’s also important to look at the overall economic health of the area. Growth indicators like employment rates, new housing starts, and the rate of retail growth can give you insights into whether the local economy can support another jewelry store.
Review wedding statistics: Weddings can bring in big business for jewelry stores. So, look at local statistics on marriage rates and average wedding expenditures. If these numbers are high, you’re more likely to see strong demand for bridal jewelry.
Step 2: Write a Business Plan
After gaining a deeper understanding of the market and feeling confident that there is potential for a new jewelry store, crafting a business plan becomes the next step. Think of this plan as a reality check. It lets you take the enthusiasm you have for your jewelry store and funnel it into a structured document that exposes any gaps in your initial thinking and gauges whether the venture is financially feasible.
When writing a business plan with an eye toward securing funding, there are specific sections that lenders tend to pay more attention to more than others. Let’s break down which sections are most important.
In the market analysis, it’s your job to convince the lender that your jewelry store will succeed. To do so, present a compelling argument based on the gaps you’ve identified in the market and how your business will fill them. Explain the unique aspects of your products or services and how they’ll resonate with your target audience.
The Management Team
The management team, which includes the business owners, holds a lot of weight for lenders. The logic is simple: the success of any business is often a direct reflection of the people running it. Thus, demonstrate your qualifications, industry experience, and why your team is best suited to make the venture a success.
Location can make or break a retail business, especially one like a jewelry store where visibility and foot traffic are important. In this section, discuss why the location you’ve selected is a perfect fit for your business model. Offer data to back your claims, such as traffic patterns and demographics.
Banks will review your financial projections very closely. Present reasonable and well-supported projections of your revenue, costs, and profitability. Include a break-even analysis, cash flow statement, balance sheet, and income statement. Be prepared to explain how you arrived at these numbers.
Before presenting your business plan to a lender, it’s a good idea to have an experienced business owner or accountant review it. They can provide an outside perspective, point out potential weaknesses, and give advice on how to make your plan more persuasive.
Related: How to write a business plan
Step 3: Secure Funding
Having gathered your market data and honed your business plan, the next hurdle is often the most challenging: securing the funds to actually open your jewelry store. Let’s examine some common sources of funds:
Personal savings: One common avenue is to tap into personal savings. This route offers you the most control over your business but also carries the risk of using your own financial safety net. Depending on the scale of your operations, using your own savings might not be enough to get started.
Bank loans: Bank loans are a traditional source of business funding. Banks typically require borrowers to invest at least 15% of their personal funds towards the total cost of the project. In addition to personal investment, banks usually require borrowers to have a good credit score and sufficient collateral. Collateral can be any asset that the bank can seize if you default on your loan. It reduces the risk for the lender and can help you secure a larger loan or better terms.
Sometimes, banks may consider a loan too risky to approve on their own. In such cases, they might opt for an SBA loan guarantee. This is a program where the Small Business Administration (SBA) guarantees a portion of the loan, reducing the risk for the lender and making it easier for businesses to get approved. However, securing an SBA-guaranteed loan can be a more complex and lengthy process than a conventional bank loan.
Friends and family: Another option is to borrow from friends and family. While this eliminates dealing with banks, it can strain personal relationships if the business faces financial challenges. Always put any loan agreements in writing to prevent misunderstandings later on.
Home equity loans: If you own your home and have built up equity, a home equity loan is another option. These loans usually offer lower interest rates but come with the significant risk of losing your home if the business fails.
Credit cards: For a small-scale operation, credit cards may suffice for initial expenses. However, the high interest rates make this a costly option in the long run. It’s best to use credit cards as a last resort or for short-term needs only.
Retailer financing: Some suppliers in the jewelry industry offer inventory financing. This can help you stock your store without needing a large amount of cash upfront. However, be sure to understand the terms and whether this type of financing makes sense for your business model.
Microloans: Finally, microloans from economic development organizations can be easier to obtain than traditional loans, especially for business owners with less-than-perfect credit. These smaller loans can give your business the initial push it needs, although they might not cover all your startup costs.
Step 4: Register the Business
Starting a jewelry store involves more than just having beautiful products and a business plan. It requires you to register your business and make it legal. Here’s a step-by-step guide to help you navigate this process.
Choose a business structure: The first step is to choose a business structure for your jewelry store. The four main types of business structures are:
- Sole proprietorship: This is the simplest structure, where the owner and the business are legally the same entity. The advantage of a sole proprietorship is its ease of startup and lower cost. However, the owner is personally liable for all the business’s debts and liabilities.
- General partnership: In a general partnership, two or more people share ownership of the business. Like a sole proprietorship, it’s easy to set up, but each partner is personally liable for the business’s debts and liabilities.
- Corporation: A corporation is a separate legal entity from its owners (shareholders). This structure provides liability protection, meaning the owners’ personal assets are not at risk if the business incurs debt or faces legal issues. However, corporations can be complex and costly to set up and run.
- Limited Liability Company (LLC): An LLC combines features of sole proprietorships/partnerships and corporations. Owners (members) have limited personal liability for the business’s debts, and it’s easier to manage than a corporation.
While the choice of business structure depends on your specific circumstances, many jewelry stores opt for an LLC because of its liability protection and management simplicity.
Related: Comparison of business structures
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
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Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.
During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.
Obtain business licenses and permits: There are no specific licenses for jewelry stores; however, there are general business registrations at the local, state, and federal levels that a jewelry store might need. The actual requirements vary by where the business is located, but common registrations include a local business license, sales tax permit, Employer Identification Number, and Occupancy Permit, among others.
Step 5: Acquire a Location & Set Up Operations
Before you settle on a location for your jewelry store, make sure to research local zoning laws and permit requirements to confirm you’re allowed to run a retail business in that location. It can be tempting to go with a lower-cost location, opting for a more expensive but high-visibility, high-traffic setting, like a shopping district or mall, generally attracts more walk-in customers. Also, pay attention to the local demographics; areas with higher income levels usually offer a better customer base for jewelry. It’s smart to visit potential locations during both busy and slow hours to assess customer traffic. Once you’ve chosen a spot, work on negotiating favorable lease terms.
After getting the keys, it’s time to start mapping out the floor plan and designing the interior. When it comes to setting up your store, prioritize a strong window display to attract passersby. Inside, your cases should be organized by jewelry type and style, and make sure they are of high quality to both display your items well and keep them secure. Be sure to invest in good lighting that makes your jewelry sparkle and offers a comfortable area where customers can sit for personalized consultations. You’ll also want a private workspace for jewelry repairs and high-quality security measures to protect your inventory.
Step 6: Find Suppliers & Purchase Inventory
Finding the right suppliers is the next step to cover when starting a jewelry store. One solid approach to finding the best suppliers is to get recommendations from other jewelers, trade associations, or industry contacts you trust. You can also attend major jewelry trade shows like JA New York and JCK Las Vegas to meet suppliers face-to-face, discover new styles, and negotiate deals.
In the beginning, it’s a good idea to concentrate on a select group of core suppliers who specialize in your target product categories. This focused approach has a distinct advantage: by doing more business with fewer suppliers, you increase your buying power. In other words, spending more money with a single supplier can often give you leverage to negotiate better prices, terms, or even exclusive access to high-demand products. This is especially beneficial when you’re starting out and need to stretch every dollar as far as it can go. Spreading yourself thin with too many suppliers can dilute this buying power and make it more difficult to negotiate favorable terms.
When you’re in talks with potential suppliers, it’s crucial to nail down the details. Negotiate payment terms, return policies, and delivery timeframes. Managing your cash flow and maintaining inventory flexibility is especially important when you’re starting out.
Finally, be strategic with your initial inventory selection. Focus on items that are likely to sell quickly, such as staples, basics, and pieces that are in line with current trends. Holding too much high-priced stock at the outset can tie up your cash and add stress to your fledgling operation.
Step 7: Hire Staff
Hiring employees is an essential part of running a jewelry store. Common positions in such a business might include sales associates, jewelry designers, gemologists, and store managers. Each role plays a different part in the overall functioning and success of the business.
Before you can hire anyone, there are several legal steps to take. First, you’ll need to obtain an Employer Identification Number (EIN) from the IRS for tax reporting. Second, ensure your potential hires are eligible to work in the U.S. by verifying identification and work authorization. Each state has its own requirements for reporting new hires, so familiarize yourself with your state’s specific rules. In most states, you’ll also need to secure worker’s compensation insurance to cover any workplace injuries. Last, you’ll need to adhere to federal and state labor laws, which cover everything from minimum wage to workplace safety.
Related: Guide for hiring in each state
Step 8: Create a Marketing Strategy
Marketing your jewelry store is an intricate dance between understanding your target audience and reaching them effectively. Start by going back to who your customers are – whether high-end clientele or budget-conscious young adults. This basic understanding should guide all your marketing decisions.
Your brand is not just a fancy logo; it’s the entire customer experience, from the atmosphere of your store to the look and feel of your website. A unified, appealing brand identity is crucial for setting yourself apart. On the digital front, a robust online presence, especially on visually rich social media platforms like Instagram, helps you stay competitive. Your website should be as inviting as your physical store, drawing in online visitors just like you would entice window shoppers.
Speaking of window shoppers, your window displays are prime real estate. These should be updated frequently to keep the look fresh and exciting. Highlighting new collections, using bold colors or props, and illuminating the display at night can draw the attention of passers-by, potentially converting them into customers.
Localization should also be a focus. Ensure your store shows up in local online searches by optimizing your Google My Business profile and gathering customer reviews. These actions not only improve your search rankings but also help establish trust among potential customers.
Hosting or sponsoring local events, such as trunk shows or jewelry/art fairs, is another excellent way to connect with the community. These events can help you showcase your products, engage with potential customers, and establish your brand within the local market.
Don’t overlook the power of cross-promotions by partnering with complementary local businesses like florists or wedding vendors. Creative partnerships can benefit all parties involved by expanding their customer base and offering unique value to customers.
Step 9: Prepare to Open!
Starting a jewelry store is an exciting venture, but it’s crucial to ensure all the necessary steps are taken care of before you open your doors. Here are some key areas to focus on:
Business insurance: Jewelry stores deal with high-value items, making business insurance essential to protect against theft, damage, or other unforeseen incidents. Consider getting insurance that covers your inventory, liability, and property.
Bookkeeping: Setting up a robust bookkeeping system is vital for managing your finances. This includes tracking income, expenses, and tax obligations. You may want to hire a professional accountant or use accounting software to help with this.
Business bank account: Opening a separate business bank account is important for keeping personal and business finances separate. This can make tax time easier and give your business a more professional appearance.
Grand opening: Last, plan for your grand opening. This could include special promotions, a launch event, or other activities to attract customers to your store.
Common Questions When Starting A Jewelry Business
How much does it cost to start a jewelry store?
The cost of starting a jewelry store can vary widely, but on average, you could be looking at around $50,000 to $150,000 in initial expenses. Let’s break down these costs for a more detailed look at where your money will go.
Location: Renting a retail space will be one of your largest expenses. In a popular shopping area, rent can easily range from $3,000 to $15,000 per month. On top of that, most landlords require a security deposit, often equivalent to one or two months’ rent.
Inventory: This will be another significant cost. Fine jewelry isn’t cheap, and you’ll need a diverse selection to meet customer needs. You might spend $20,000 to $50,000 initially on inventory alone.
Store setup: This includes display cases, signage, and lighting specifically designed for jewelry stores, which can be quite specialized. Setting up your store might cost between $10,000 and $25,000.
Initial marketing: Creating a website, branding, and initial advertising can cost around $5,000 to $10,000. While ongoing marketing costs will be a part of your operational expenses, this initial outlay is essential to get people through the door.
Business registration: Registering your business, getting the necessary permits, and legal fees can add up. Budget around $2,000 to $4,000 for this.
Insurance: An initial payment for comprehensive insurance coverage can run between $2,000 and $5,000, depending on the value of your inventory and the location of your store.
Software and hardware: Point-of-sale systems tailored for jewelry stores, like Lightspeed or Jewel360 can cost up to $1,500 initially.
Miscellaneous costs: From office supplies to cleaning materials, allocate around $1,000 to $3,000 for various startup necessities.
In addition to these expenses, it’s a good idea to have three to six months of operating costs set aside as a financial cushion. This will help you navigate any unexpected bumps in the road and keep your business running smoothly, even if initial revenues are lower than expected.
How profitable is a jewelry store?
On average, a jewelry store owner can expect to make a net profit of around 2-4% of total revenue. This is based on typical industry metrics:
Average annual revenue for a jewelry store is about $2 million. The cost of goods sold averages around 60%, which would be $1.2 million. Gross profit is revenue minus COGS, so for a $2 million revenue store, that is $800,000. Operating expenses like payroll, marketing, insurance, rent, etc. average around 35-40% of revenue, or $700,000 – $800,000. That leaves a net pretax profit of around $50,000 to $100,000 for a store doing $2 million in annual sales.
With a pretax profit of $50,000-100,000 on $2 million in revenue, the net profit margin is 2.5-5%. Industry average net margins range from 2-4%, so a jewelry store generating $2 million in sales could expect a net profit in the range of $40,000 to $80,000 typically.
Of course, profit margins can vary widely depending on factors like inventory costs, store location, and operational efficiency. But generally speaking, the math illustrates that a jewelry store with $2 million in annual revenue could reasonably expect to produce a net profit of 2-4% of sales, or $40,000 to $80,000 annually. With good inventory management and cost controls, some jewelers do achieve higher than average profit margins.
What skills are needed to run a jewelry store?
Starting a jewelry store doesn’t require a business degree, but certain skills and experiences can make the process easier and increase the chances of the store being a success.
Jewelry industry knowledge: Previous experience in or knowledge of the jewelry industry is important. Customers want to buy from informed jewelers, so a store owner who is highly familiar with the industry will be at an advantage.
Attention to detail: Detail is everything in this industry. From assessing the quality of pieces to designing attractive displays, a store owner needs to be detail-oriented.
Awareness of jewelry trends: A store owner who is knowledgeable about changing jewelry trends can make wise purchasing decisions and develop an inventory full of pieces that customers want to buy.
Customer service skills: A store’s reputation is quickly built on customer service, so a store owner should have great interpersonal and customer service skills.
Management experience: When it’s time to hire employees, experience in hiring, training, and managing staff is helpful.
What is the NAICS code for a jewelry store?
The NAICS code for a jewelry store is 448310.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?