The days of over-inflated jewellery valuations are over – or at least they should be. But I have come to realise much of the industry doesn’t realise it. The result, for my store at least, is a situation where the valuation service is destroying rather than adding to my business.
Jewellery valuations have been a hot topic of late but what most don’t realise is that changes have already been made to the system of valuation to deal with many of the issues that are contentious. I was taught these changes using a great analogy. It begins with the question: “How much do you pay for a can of cola?” The answer is that you could pay 30 cents if you buy it in a multi-pack from the supermarket or you might go to the local, upmarket hotel in the city and pay $5, and of course there is everything in between too. Jewellery mark-ups work in exactly the same way and so, therefore, does valuation.
The analogy illustrates the utmost importance of two key pieces of information when it comes to valuation: ‘purpose’ and ‘function’. The National Council of Jewellery Valuers (NCJV) now teaches that valuations should take into account these two crucial factors; in other words, why we are valuing the piece (eg, for second-hand sale, retail replacement, probate, etc), and where the piece is to be replaced (eg, a bricks-and-mortar jewellery store, online trader, etc).
All values must now be based on the market defined by the purpose and function, meaning that valuation is achieved using market research rather than the traditional fixed price lists and mark-ups. This system is the most effective way of ensuring ‘fair’ valuations. The problem is that most of the jewellery industry, and the consumer, are unaware of these changes and many valuers are still using the old methodology.
As a new valuer this has caused nothing but problems for me and my business. The costs of $1,000-plus that I incur each year to keep up my NCJV membership and insurance are becoming unobtainable as I fight a battle that no one really wants won. In my short year as a valuer I have valued for trade, almost all of whom will no longer deal with my company because my valuations are too ’low‘ and I value diamonds at today’s price rather than that listed on Rapport.
The valuations I have completed for the public have led to endless phone calls demanding to know why their valuation is not more than what the piece was valued for in, say, 2003. All explanations in regards to the new valuing system, the Australian dollar versus American dollar, and so on, fall on deaf ears. Ultimately, people want to feel like they have got a bargain. In instances such as this, I go on to explain that over-inflated valuations equal higher insurance premiums, but this doesn’t seem to be an issue for the customer!
One time, I explained this to a client and they said, “It is ok, because the insurance company are going to let me insure it for what I paid for it.”
So why pay $60-plus for a useless valuation? The simple answer is that it makes them feel better about their purchase. Technical merit and a fair valuation are not a factor.
Now, before I will even consider completing a valuation I make the client read an information sheet I have created that explains the changes to the valuing system, and why their value may be less than it used to be. Only when they have read this do I ask whether they are still happy to proceed.
The jewellery industry as a whole must take responsibility for this valuation quandary. Valuers are all aware of the changes – it is more time consuming and has led to a backlash from clients – but valuation still needs to be done using the new system with purpose and function stated clearly on the certificate and a price reflective of current market value.
If we present a united front, there is no other option for the consumer. The retail sector needs to be aware of the changes and staff trained to use the new information when talking to clients. The NCJV have forms that retailers can buy from the NCJV’s offices which can be used in-store to help educate both staff and customers. Industry bodies could also do their bit by widely publicising the changes that have taken place.
Only then will we no longer have to worry about valuation being used as a selling tool, because the value will be representative of the day of sale.
Giselle McKenna is principal of GeoGem Consultants in Western Australia