Reprinted with permission of Paul S., Hit and Run Media
Originally Published: 18th May 2009
There has been much talk around the water cooler lately about a rapidly growing phenomenon- selling old broken or unwanted jewelry to companies over the internet for fast cash. Many are said to be using services like these to pay their car payments, to help with their mortgage, or even to buy groceries because the unemployment checks ran out or they received a furlough notice at work. In any event, people are more desperate than ever, and the commercials by gold buyers on TV offer hope for one more month. Our initial thought about these companies was just like what we assume everyone first thinks- that all internet gold buyers are scam artists. After all, the CEO of the largest company in the bunch was recently seen on a national news program where he admitted that his company generally pays people about 20% of the market’s ‘spot price’ for their gold jewelry. We thought that sounded pretty bad, but not nearly as bad as internet postings from a disgruntled former employee of that same company. That employee all but called their ex- employer a band of criminals, suggesting a litany of common practices that all sounded pretty dicey. But we knew of many people who had had very good experiences selling their gold jewelry, so we decided to not let one company with a black eye deter us from getting the whole story.
A search on gold buyer reviews led us to a Consumer Reports Blog where people shared their experiences with these companies. We had heard reports and seen YouTube videos of investigative local news channels that performed blind tests on many of the larger gold buyers. Their investigations almost always ended with company executives either dodging their phone calls or later writing letters of apology and/or explanation to try and smooth things over before the final pieces of tape were on the cutting room floor. While these revelations all support the widespread preconception that all the internet gold buyers in the industry are con artists, we realize that news producers don’t care anything about airing their reporters’ stories if they are less than shocking. We were also pretty sure that by now all internet gold buyers had heard about these investigations, so we decided to take advantage of the scenario for our own investigative work.
In January we decided to call internet gold buyers and leave messages for company execs telling them that we were a news station from their area and that we would like to talk to them about a check we received for some gold jewelry we sent them. We felt confident we would have everyone’s attention; however, we only got one response from the five executives we contacted. Augustus Gold and Silver, headquartered in Kansas City, was quick to call back. Augustus Co-founder, Jerry Nelson, was eager to return the call to see if we were happy with our check. Mr. Nelson sounded a little disappointed to hear that we didn’t really send in a package. We told him that out of five nationwide internet gold buyers he was the only one to call back. He didn’t seem surprised, but said that he would have called us back earlier that day, but that he had been helping process packages since nine that morning, and when the mail came, there were enough packages to keep them busy until nine the next morning! When I suggested that it sounded like business was good, Nelson just responded, “Well, we try not to brag about it because the reason we’re doing so well is because the economy is so bad…
“People need money more than ever, and we knew this would be a great opportunity for us to get into this business- to level the playing field a bit and help people not get taken advantage of by the predatory buyers out there. But all-in-all, it’s really not hard- I mean, we say what we mean, and do what we say!” He went on to offer us half a dozen strong reasons that his company is better than competitors, even the larger ones. I was definitely interested in hearing more and jokingly suggested that he come to meet with us in New York for a formal interview. He said, “Yeah, in a couple of weeks we do expect things to slow down for a little while because people will start receiving their income tax refund checks.” We agreed on the date of our meeting, and told him we would pick him up at the airport.
When we finally met Mr. Nelson face-to-face, we expected to be picking him up in a private hanger where a fancy chartered jet would deliver him… So we were a little surprised when he emailed over his travel itinerary. He asked me to meet him at the baggage carousel that corresponded to his flight on United. He had flown Coach with a layover in Chicago. Our secretary had made dinner reservations for us at Gotham Bar and Grille, but Mr. Nelson was tired and just wanted to get to his room- dinner for him: McDonald’s Quarter Pounder w/cheese, minus pickles, two apple pies for a dollar, and a large Diet Coke. “That’s about all any of us have time for lately around the shop,” said Nelson. Although he would not reveal the secret location of the Batcave, we do know there is a McDonald’s somewhere nearby. So after a quick bite, Nelson asked if we could drop him off at The Courtyard. He declined our offer to go out for drinks, saying that he had done plenty of drinking in his days, but that it never contributed to his success. “Besides, I have to send ‘Welcome’ emails to all our new customers,” the people who had submitted inquiries on the Augustus site that day. He admitted that they still service all their customers individually, adding that, “We’re still saving up for a big fancy website that’s totally automated. My partner told me that Costco still takes inventory with pencil and paper, and they have over 500 warehouses today- we figure what we’re doing for now is working, and when we do implement the new site it will be more for our customers’ convenience, not ours.”
The next morning after a quick Continental Breakfast down in the lobby, one of our interns picked up Mr. Nelson in front of his 3-Star hotel. It was the morning of our big interview. Our staff was excited to hear the secrets behind Augustus Gold’s fast success. We settled into our conference room with a 12pk of Red Bull and two dozen hot glazed donuts.
HAR Media: So, tell us about you- and you said you have a partner? What did you do before Augustus Gold- were you in the jewelry business?
Nelson: No, not at all. My partner, Ray Holley, actually spent over 12yrs in retail management with companies like Costco, Wal-Mart, and Home Depot, and I was vice president of my family’s business for 18yrs where I oversaw operations and client relations. We were both satisfied that we had helped those people about as much as we could and that they would have to try and make it without us. We already had a Holding Company, and had been doing the research on this business for almost 2yrs. It always looked like it would be good, but we got in at just the right time!
HAR Media: So wait- you mean neither one of you guy ever had anything to do with metals or jewelry before?
Nelson: Well, my partner all the time jokes about how he used to be in the metals business- he stocked the nail aisle at Home Depot for a while [laughs]. In all seriousness, we know a lot of our competitors have been in the business for decades or even generations, but we’re not convinced that that kind of background is an asset in this business- it could be filled with paradigms and practices that may not necessarily put customers’ best interests first. A lot of them are downright shady! Let’s be real honest, though- what we do is not rocket science. A group of Jr. High School kids could learn to test and weigh gold and put the numbers into spreadsheets and invoices. Ray and I have extensive experience working with very demanding clientele, and we know that as long as we put them first it will guarantee our success. We bring a new level of integrity to customers who obviously need that and deserve it.
HAR Media: So what kinds of shady practices have you noticed you competition engaging in?
Nelson: Well, I guess they could be divided into two groups. First you have local gold buyers, pawn shops, and some jewelers. About 99% of these people won’t tell you how much they pay for gold per net ounce; they say you have to bring it in so they can actually see it. They may suggest that they have to see the condition so they can determine the resale value on it or see if the style is the kind of thing they’re looking for. The truth is that what they really want to see is YOU. They want to know if the customer looks like they have any idea what they’re doing to give them an idea of how little they can get away with paying. In the majority of these cases we’ve seen these buyers paying anywhere from 18-35% of the spot price for the net weight of gold. These are the guys who will “stab you in the front!”
Nelson: Yeah, then there is the second group who buys precious metals over the internet similar to Augustus. We have even more issues with these, our primary competitors, because they “stab you in the back- hard!” Most of these buyers pay anywhere from 20-50%, but almost never post their prices like we do. They also tend to sit on a customer’s items for a few days while looking for a dip in the price to mark their strike price. One thing that is great about our company is our commitment to getting customers an offer on their items within 24hrs of receiving them. We mark the strike price for each package at the moment we open it. Very few of the small companies pay anywhere near as much as we do, and unfortunately, the largest buyer in the business pays about 20%, and their volume is greater than most of the rest of us put together. We’re on a mission to stop them…. So if anything happens, and you don’t hear from us anymore… [Laughter], you’ll know what happened!
HAR Media: Well, tell us about what kinds of things you guys buy- is it all precious metals?
Nelson: No, not all…. Mainly Gold and Silver. We would also buy Platinum and Palladium, but only if the right circumstance presented itself- a large quantity of something like that in a one-time buy. We have already discussed it, though, and we will never turn our processing center into a junkyard where we spend all day cutting up mufflers or to salvage a couple of grams of Platinum or Rhodium. But on our website, we go into great detail about what specific things we take and don’t take- for instance, we don’t buy any plated items. We show people how to identify their items by the hallmarks, and how much gold or silver is in each grade. We pride ourselves as one of the top-paying gold buyers in the industry, but when it comes to Silver, we pay more than anyone we’ve heard of. Most buyers in the industry don’t want to mess with Silver because it isn’t worth much these days…. But we think the metal is significantly under-valued. We are in the camp with James Cook, Ted Butler, and Jason Hommel when it comes to Silver… That’s why we pay so much more for it than Gold, in spite of it costing us five times as much to refine.
HAR Media: So how much do you guys pay?
Nelson: Well, for Gold we pay at least 55% of spot and 65% for Silver, but our prices are posted live on our website for everyone to check out. We explain on our site exactly how we calculate the payout so people can estimate what they have and to be helpful to anyone who received one of those teeny, tiny checks from another company who may be asking themselves if they should call and ask to have their items sent back. The answer is ‘yes,’ by the way, you should call to get it back if you still can, and send it to AugustusGold.com for a much higher payout!
HAR Media: That’s a pretty big difference- how do you guys do it?
Nelson: Well, we try to keep our overhead as low as possible, and we treat people right…. employees and customers. There is something special about working in a place where everyone loves their job. So Ray and I both employ practices we learned in previous work to improve morale. The new guy feels good when he sees that the boss is not too good to take out the trash, and we work hand-to-hand with our people as often as we can. We think it’s important that we share our profits and make them feel like ‘owners’ rather than ‘operators.’ It helps develop an environment where people are less likely to steal, too. We also have a ‘no metal’ policy in place with our employees that work in the processing facility, so it would almost have to take an act of occlusion among two or more employees to pull off stealing anything- and who would go up to one of the ‘owners’ and ask them to help steal something? So theft just isn’t an issue in our company…. And we don’t know if it is in others, but we suspect that if they treat their customers that way, they probably don’t treat their employees much better. And as far as customers go, we get repeat business all the time, and this is a business where that would not be expected. We have speculated that there may be a lot of customers out there who don’t want to take the risk of parting with all their gold items at once, and we think that’s perfectly understandable, given that our competition has a reputation that precedes itself and casts a cloud of doubt over the entire industry. Those customers probably don’t want to put all their eggs in one basket, and once they have sent in a package to us and see that we really do do what we say we do, then they send in the rest.
HAR Media: So have you figured out the cost-cutting formula to do what you said- to put those large companies down for the count?
Nelson: Don’t get me wrong- I don’t think we can save our way to the top… But we are confident that we’ve created both a work environment that people crave and a business model where every aspect of our business smokes the competition. It should be apparent to everyone who really looks over our site that we pay more, pay fast, and call with an offer before sending a check- and that’s more than any company in the industry can say.
