Cost Averaging: How Premium Jewelry and Bulk Lots Can Work Together
When buying wholesale jewelry, it is easy to focus on the price of each individual item. But if you are purchasing a combination of premium pieces and lower-cost jewelry lots, the number that often matters most is your average cost per piece.
This is called cost averaging, and it can completely change how you evaluate a wholesale jewelry purchase.
A Real Wholesale Jewelry Order
A CheapWholesaleJewelry.com customer recently purchased several premium jewelry pieces priced at $14 each piece. She also added 3 bulk, lower-cost jewelry lots to the same order.
Her total purchase was approximately:
- Total spent: $442
- Total jewelry received: More than 400 pieces
- Average cost: Just over $1 per piece
At first glance, a $14 wholesale item may seem expensive compared with the other jewelry in the order. But that item does not exist in a vacuum. When the entire purchase is considered, the lower-cost pieces bring down the average cost of all the inventory combined.
How to Calculate Your Average Cost
Use my profit margin calculator and this simple formula:
Total amount spent ÷ Total number of pieces = Average cost per piece
Using this customer’s purchase as an example:
$442 ÷ approximately 400 pieces = approximately $1.10 per piece
Because she is receiving more than 400 pieces, her actual average cost will be slightly lower.
That means she did not simply buy several pieces at $14 each. She created a mixed inventory purchase containing premium jewelry, affordable resale pieces and enough volume to bring her overall cost to just over $1 per item. Once you know your average inventory cost, use my Jewelry Profit Margin Calculator to figure out potential selling prices and your profit margins.
Why Cost Averaging Matters
Most successful jewelry inventories contain a mixture of price points.
Your lower-cost pieces may become:
- Affordable everyday items
- Add-on purchases
- Bundle components
- Live-sale starting pieces
- Promotional offers
- Gift-with-purchase items
Your more expensive pieces may become:
- Statement jewelry
- Premium listings
- Featured live-sale items
- Higher-priced boutique merchandise
- Attention-grabbing pieces that help market your collection
The premium pieces can increase the perceived value and variety of your inventory, while the larger lower-cost lots help reduce your overall average investment.
Look at the Entire Inventory Purchase
Cost averaging does not mean every piece should be priced the same. A premium piece that cost $14 should still be evaluated and priced differently from an item that cost less than $1.
The average simply gives you a clearer picture of how much money you have invested across the entire purchase.
For example, you might sell some pieces for only a few dollars while pricing premium items considerably higher. What matters is whether the complete inventory purchase gives you enough pricing flexibility to cover your costs and generate a profit.
Do Not Let One Higher-Priced Item Scare You
A higher wholesale price is not automatically a bad purchase. The better questions are:
- Is the piece worth the higher price?
- Can it command a higher resale price?
- Does it add something special to my inventory?
- What is my average cost after including the rest of my order?
- Does the entire purchase give me a healthy range of products and price points?
Looking only at the most expensive item can make an otherwise excellent wholesale purchase seem less profitable than it actually is.
Cost Averaging Is a Buying Strategy
Resellers do not always need to choose between premium jewelry and inexpensive bulk inventory. The two can work together.
Premium pieces can elevate your collection. Bulk lots can provide quantity, variety and a lower average cost. When selected carefully, the combination can create an inventory mix that serves different customers, selling platforms and price points.
Before judging a wholesale order by its highest-priced piece, calculate the average.
You may discover that your overall cost is much lower than you thought.
For additional guidance, read How to Price Jewelry for Resale and The Ultimate Guide to Jewelry Reselling