3 minute read
INDUSTRY NEWS
Sell Your Gold Scrap
Let’s start out with a quiz—Name a type of retail store in which the sales associates are the buyers, rather than the sellers? That’s right, “cash for gold scrap” stores.
The spot price of gold has risen from $277 per ounce in January 2002 to about $1,770 per ounce as of this writing. In a monument to the meteoric price rise, the world’s largest gold coin, weighing more than one ton, was handcrafted at the famous Perth Mint in Australia. The largest gold bar, weighing one-quarter ton was minted in Japan.
The Retail Gold Rush
In the past several years, we have been bombarded with radio, print, television, and Internet advertising cajoling us to part with our unwanted gold, silver, and platinum jewelry and coins for some easy cash. Alternatively, another bevy of advertisements extol the virtues of owning gold and silver coins and bullion (bars or ingots). Did you know that there are even gold dispensing ATMs in places like Macau, Las Vegas, and Germany, among other places?
In the past conventional jewelry stores and coin hobby shops operated on both the buying and selling side of the business. Recently, cash-for-scrap-gold stores have popped up in every town, even in major national malls. There are also thousands of these stores throughout India and Pakistan because of the strong cultural bias for saving gold.
There are a few good-sized retail chains here in the U.S. Gold Max, headquartered in Atlanta, boasts of over 200 locations in five states, including over 90 stores in the Chicago metropolitan area. Gold Rush Stores has opened about 200 locations, predominantly in California. Most of these locations are franchised.
When customers bring their unwanted gold into these stores, the sales associate sorts the scrap by metal type and carat weight, and tests some or all of the pieces for authenticity. Aside from a visual inspection, an “acid test” can be used (the kits are available on the Internet for under $20). The evaluation leads to a price estimate, which is routinely paid in cash. After the sale, the scrap is placed in a vault.
LP and Security Issues
Store owners encounter the typical security issues faced by most other retailers, including locks and key control, burglar/fire alarms, video surveillance, and background and drug screenings on prospective employees. There are a few critical safety protocols that require a higher level of attention similar to that of a conventional jewelry store, such as cash/scrap control and storage, safe and secure shipping methods to send the scrap to refiners, and, above all, continuous safety for the employees during business hours.
The cash-for-scrap-gold business ebbs and flows with the spot prices of precious metals. In the spring of 2012, spot prices for silver and gold soared to extremely high levels, and the waiting lines tended to be long. With gold selling for close to $2,000 per ounce, the cash requirements are significant. Store owners routinely boasted about daily sales in excess of $25,000 for several days in succession. Virtually all of these transactions involved cold, hard cash. If a store runs out, they are essentially out of business.
The collected scrap must be shipped directly to a refiner or to a middle man. Returning to our example of $25,000 in sales, a day’s “receipts” of scrap might weigh quite a bit, especially if the bulk is silver, which is valued at approximately $40 per ounce. Scrap dealers try to make shipments look as nondescript as possible. I doubt that you would see a bright gold and green Gold Max logo on the carton. That would be a recipe for a diverted shipment.
by Robert L. DiLonardo
DiLonardo is a well-known authority on the electronic article surveillance business, the cost justification of security products and services, and retail accounting. He is the principal of Retail Consulting Partners, LLC (www.retailconsultingllc.com), a firm that provides strategic and tactical guidance in retail security equipment procurement. DiLonardo can be reached at 727-709-6961 or by email at rdilonar@tampabay.rr.com.
Retailers in the cash-forscrap-gold business need strong loss prevention programs. Let’s hope they are taking advantage of the expertise LP professionals can offer.
Employee Safety
Not all of these stores are located in modern, brightly lighted, major indoor malls with plenty of common-area security. Therefore, the safety and well being of employees can be an even tougher challenge. As one
