Most jewellery businesses start from passion. However, many business owners question whether continuing self-production is the best approach as the company grows, due to the time commitment. Manufacturing is an essential part of any business that sells a product. When it comes to these decisions related to production, there are many elements that come into play when a jewellery business is in the decision process.
Let’s break down two options for production, including the benefits of each and additional costs associated with them, and the types of distribution for your jewellery business.
- Pros and Cons with Production
- Pros and Cons with Merchandising
- Which one is good for you? What are the factors you should consider as you choose one?
- Distribution - FBM, FBA, Dropshipping. Pros and Cons of Each
1. Pros and Cons with Production
Manufacturing a product in-house can mean making it in a spare room, if your business is small enough, or renting a large space. The jewellery business is responsible for purchasing the equipment needed to make the jewellery, whether that be tools or machines. Let’s look into the benefits and downsides of this method of production.
Here are a few of the pros associated with in-house production.
- Product quality is in your hands. Because you are involved with every step of the production process, the quality of your jewellery is in your control. You will be able to notice all the small details. Manufacturers will have many other clients they are working with so they will give as much attention to your order as they are to others. If you happen to have a proprietary process to make your jewellery, that will be protected too. Your unique jewellery designs can continue to shine without you having to worry about a manufacturer you are working with create look-alikes.
- You are given flexibility. If any last-minute changes appear in your jewellery designs, you can easily follow through without having to spend time waiting for approval from the manufacturer. The worry of late shipments will be eliminated as well. Experimenting with new product ideas is possible, and you are given the ability to react to market changes more quickly.
- It may prompt improvements in your public relations. Some customers avoid companies that outsource production, as there can be a negative image for using manufacturing companies outside of your country. These customers see the production process and products as being low-quality. Producing in-house can give you a competitive edge as customers that strongly support this type of production will purchase from you.
Here are a few of the cons associated with in-house production.
- It is a huge time commitment. Whether you are making products yourself, working with a team of jewellers, or using machines, a large amount of time is going into making your jewellery. You could be focusing on things your business is great at or improving other aspects. Also, you will need to spend time finding your own high-quality raw materials to be used in the production process.
- Production can be expensive. There are expenses that come alongside in-house production. Some additional costs include raw materials, equipment, equipment maintenance, storage costs, labour, and any disposal of byproducts from the production process.
- You need to be skilled and knowledgeable. To ensure proper production, you need an understanding of how to design and make jewellery. If you lack expertise in this area, it may be best to hire employees to produce the goods or consider outsourcing.
If you are wanting more flexibility with your jewellery designs and to ensure your products are produced in excellent condition, your business should consider in-house production, even if it takes a lot of time.
2. Pros and Cons with Merchandising
When your successful jewelry business reaches the point where you are experiencing high demand for identical products that are selling out quickly, the time has come to consider outsourcing your production. In order to sell hundreds, thousands, or even millions of your company’s most demanded jewellery pieces, your solution will have to be contract manufacturing. With contract manufacturing, your business will work with a manufacturer that specializes in mass production of goods. This process will allow you to receive large quantities of your jewellery designs to keep up with customer demand. Let’s look into the benefits and downsides to this method of production.
Here are a few of the pros associated with outsourcing production.
- You can invest time in other parts of your company. Rather than using your time designing and making the jewellery, you can focus your attention on what your company is good at or additional tasks like improving your customer service, strengthening your brand following or working on marketing strategies. However, some manufacturers do offer assistance with marketing and selling of the jewellery, if there is an agreement constructed. Drop-shipping can be offered, as well, but typically manufacturers deliver to a warehouse where the jewellery business will take care of the shipments and proceed with business from there.
- It can save your business money and increase profit. With economies of scale, as the quantity produced increases, the price of each item will decrease. Rather than investing in special machinery that is needed to produce the jewellery, you can work with a manufacturer that already has the equipment, facilities and trained staff. Although there are some additional costs like shipping fees, taxes and any fees with storage of the products and labour for taking to storage, the production is still cheaper. Because of this, you will be able to mark up your prices, leading to a greater profit.
- Products are produced more quickly and at a larger scale. An established manufacturing company’s speciality is producing large quantities of goods so there is no question they already have an efficient assembly process. They will be able to introduce innovative technology and equipment more quickly than companies producing in-house, leading to faster and even better production. In addition, you may have first started your jewellery business by making identical pieces that took hours or even days to make. With this speedy method, products can get to customers more rapidly than before.
Here are a few of the cons associated with outsourcing production.
- There can be a lack of quality control. Because you are not present every step of the way to provide direction, you lose control overproduction. The possibility of defects can appear, and your needs may not be met entirely. The manufacturer may prioritize quantity over quality, leading to poorly made products.
- Unethical practices may take place. If your jewellery business has a top-secret process to make your jewellery or a unique style, there is the probability of losing your speciality. There have been cases with unethical manufacturers sharing these ideas with others.
- Communication issues can arise. Depending on the location of the manufacturer, ineffective communication may be present. If they do not speak the same language, orders requests and deadlines can get confused. Time zones can also confuse shipping deadlines, and internet connections may not be reliable. Having effective communication will allow business transactions to run more smoothly for both parties.
Consider contract manufacturing for your jewellery business, if having someone else produce your jewellery is reasonable for your business to grow. For a price, contract manufacturing relieves your jewellery company the burden of hiring production staff, purchasing machinery, and much more.
3. Which one is good for you? What are the factors you should consider as you choose one?
Manufacturing is a large, essential section of any business that will shape how the business will run. You must consider your own business and product needs when deciding whether to self-manufacture or contract manufacture.
There are important factors you must consider.
- The time commitment. Do you want to focus time elsewhere in the business or spend time making products yourself?
- The costs. Are you willing to spend the money to invest in the equipment to make your own products?
- Materials needed for production. Are you able to find sources for your materials?
- The level of demand for your jewellery. Are you able to keep up with high demands with your own production methods?
Partnering with a manufacturing company can bring many benefits and will allow you to expand your business. As your jewellery company is going to be in business long-term, it is essential to find a reliable manufacturer you can build strong relationships with and depend on for years to come.
Here are several points to look for in a contract manufacturer, if you plan on working with one.
- Make sure the manufacturer demonstrates experience. Look for years of experience in manufacturing so production is a seamless process from beginning to end. The company must also be qualified to work in their industry and follow any local, state, and national regulations.
- Create a contract with the manufacturer. There is nothing worse than having your original ideas being used somewhere else without your permission. You do not want the company to commit any unethical behaviours.
- Flexibility for new product designs and keeping up with increasing demand is a must. With consumer jewellery taste constantly changing, you want your business to satisfy these needs to retain happy customers and a strong brand following. A manufacturer that can adapt to new designs with deadlines will allow you to deliver the best to your customers.
- As with any business, financial stability is important. What if there is unexpected equipment failure? Make sure the manufacturer has the funds to repair it in a timely manner so your jewellery will arrive on time.
- Fast production and delivery are essential to staying on top of orders. This relates back to keeping up with the increasing demand. The sooner your jewellery is made and the shipment arrives, the sooner these pieces will get into the hands of your customers. Your business should strive to accomplish on-time delivery, as it is an important element that leads to higher customer satisfaction and customer loyalty.
- Providing samples and design services can be helpful. The main reason you may be outsourcing production is due largely to the fact that you do not have the ability to design your own jewellery. If this is the case, custom design services will be useful. When placing a large order for the first time, it can be stressful if you have not seen the finished product in-person. With samples, you are able to see the true quality, colour and size of the product and make any changes before placing the large order. Inventory is a large investment for companies, so having it fit exactly to your specifications will make your expenditure worthwhile.
Both methods have their advantages and disadvantages that balance each other out. It will be your company’s decision when deciding which route to take.
4. Distribution - FBM, FBA, Dropshipping. Pros and Cons of Each
Distribution is the activity of delivering your jewellery products to consumers, and it is one of the biggest decisions for your business. You must plan your business in terms of these operations. Here are a few options for distribution channels and their descriptions.
Direct distribution or if you are selling on Amazon, fulfilment by the merchant, is the method of distribution where the merchant handles all aspects. Products are shipped directly to the buyers from the merchant. Businesses must consider parts like storage and management of inventory, product packaging, and shipping. Once you receive an order, an employee must collect the products, package them up, and ship them on time. You will need to provide adequate packaging so your jewellery is not damaged during the shipment process.
Advantages of direct distribution
- Your business will be in charge of every aspect so you can fix problems as they occur.
- The intermediary expense will be eliminated because there is no need to pay additional fees to a company in between.
- Products will get to your customers faster and there will be direct interaction with customers.
Disadvantages of direct distribution
- You will not be able to sell as many of your products on your own due to smaller size and lack of expertise compared to established distribution businesses.
- There will be more workload because you will not be working with an intermediary that would complete the task.
- Costs related to processing orders and distributing your products will become present. Expenses like postage, storage for inventory, product packaging, and any additional shipping fees will arise.
Indirect distribution relies on intermediaries to help with the process of delivering products to consumers. With this method of distribution, orders will be placed from your business and another company will complete the distribution. When selling on Amazon, there is the option of having Amazon helping with your distribution, which is referred to as FBA, fulfilled by Amazon. Depending on your chosen intermediary, shipping times will vary. Amazon offers faster shipping with Prime, but another company may have slower processing and shipping rates,
Advantages of indirect distribution
- If selling on Amazon, your products can be found more easily and shipping costs will be lower.
- The burden of shipping your jewellery is no longer on you.
- This will come in handy if you have a large demand for products and are not capable of completing orders on time.
Disadvantages of indirect distribution
- There is no direct interaction with customers so establishing brand loyalty is more difficult.
- There may be a lack of attention for fulfilling orders because intermediaries will be working with other businesses.
- You will not have control over your inventory, so you must trust that the distributor will fulfil orders correctly.
With dropshipping, orders are placed from you where they are then shipped from a third party. You are not involved with the production or distribution process and do not have to keep up with inventory. With this method, you must trust your jewellery will be produced like the descriptions and arrive on time and in great condition to your customers.
Advantages of dropshipping
- The need for keeping up with inventory is eliminated.
- It is easier to scale your business because most of the workload will be put on suppliers, rather than on you.
- The overhead costs are low because there is no need to pay for storage, labour, and inventory.
Disadvantages of dropshipping
- Excellent customer service is not guaranteed, and your business will face the burden if there is any damaged jewellery or late packages.
- There can be issues with making sure products are stocked because they will be handling other company orders too.
- The convenience of not having to handle your inventory and processing orders comes with lower profit margins.
There you have it, we know this is quite a lot of information to process, but we wanted to provide an exhaustive description of all of the options available. Let's now move on to our conclusive remarks.
Production and distribution are important components of your jewellery business. There are many factors to consider when deciding your jewellery company’s methods. Are you willing to commit to the huge time investment that accompanies making the jewellery designs yourself? Instead, are you looking to save money by outsourcing? Selling direct to consumers will allow your business to control all aspects of distribution and ensure they are done to your standards. There are so many questions to be asked and not just one right or wrong answer as to which method is leading. Ultimately, it is up to your jewellery business to decide what is best for the company.