All this talk of rising silver prices has probably got you wondering about silver jewelry and what will happen with the retail market. It's no coincidence that I have been pondering this very concept, since we sell wholesale on the web and retail in our two brick and mortar stores.

One thing I am very concerned about is how customers will react to prices that are much higher than what they are used to paying. Most customers that walk into our store have an idea what a particular item "should cost." The surroundings help determine that value: an upscale boutique can charge more than a flea market vendor for an identical product.

What I don't want to happen is, when a customer asks to see a ring, that they try it on, see the price, then say "thanks" and walk out. It is vitally important that the customer be educated about the silver market and its ramifications.

If I don't pass on the information about price increases, the customer walks out with the impression that my store is expensive.

After visiting 10 other stores with similar silver pricing, their perception of what that ring "should cost" has probably changed, but their perception of my overpriced store has most likely not been overwritten by the new information. In fact, I may have great prices, but to that customer I am the expensive place, and she tells her friends just that when my store is mentioned.

Alternatively, I could approach the situation proactively and change the customer's perception even if I don't save the sale. When she tries on that ring, I mention how the cost of silver has almost doubled in the last year. I might talk about how difficult it has been to keep retail prices down in the face of rising costs, or make a joke that that I wish I had bought a bunch before the price went up.

Two things happen in the customer's mind when I do this. First, she now has "insider information" from her local jewelry source. She may not believe me, but you can bet she will make a mental comparison at the next shop, and the next. She will also likely offer the information up during drinks if the topic presents itself by way of fashion or shopping conversation.

Second, the fact that I planted the seed with her about the price increase keeps me from automatically being put in the category of "overpriced shop." Again, she will probably check around to see if what I have said is the truth, but once my comments are proven correct she will uncheck the box marked "too expensive" in her mental checklist. With a few simple words I have saved a customer even if I have not made a sale.

And what will happen if, as some predict, silver prices go from the current $12 per ounce up to $20 an ounce? My thought is that silver is still very affordable even at that price when compared to gold. We may lose some demand, but I think the customer that buys moderately priced silver jewelry will still be willing and able to afford it even if the price goes up some more.

Previously in this newsletter, we discussed the concept of "selling with a story." It bears repeating here. When a customer asks about a particular product in our store, we present it to them for examination with a quick little snippet that explains it and makes it more appealing. "That bracelet is hand made in India." "Those earrings are from the Karen Hill Tribe in Northern Thailand. They use high content silver, so instead of 92.5% silver they use 95% - 97% pure silver." We have lots of little point of purchase displays in our store that show photos (often from the internet) of the product being made, and give a little background. With the obstacle of higher silver prices, a little story goes a long way.

For our part, we will continue to search for ways to provide quality products at a reasonable price. We are working with our suppliers to make the jewelry using less silver while still maintaining quality and appearance. On the 11 gram ring shown above, if we can make it using 1 gram less silver, we can potentially cut the price by almost 10% without any outward change in appearance or quality.