Reuters today published an article heavily focused on the European expansion of mail-in gold buyer Cash4Gold. The story drew heavily from an interview that Cash4Gold CEO Jeff Aronson gave a London-based journalist from the news agency.
The article broke the news of the upcoming launch in Germany and also mentioned the company’s recent expansions into the Netherlands, Canada and Great Britain.
Below is the full text of the article. You can also read it at Reuters.
Cash4Gold scraps for gold in European market push
LONDON, Oct 21 (Reuters) – Cash4Gold, one of the largest U.S. buyers of cast-off jewellery, is eyeing UK sales of 50 million pounds ($82.7 million) a year as precious metals prices soar and consumers fall on hard times.
The private company, which launched in 2007 and is now one of the largest direct-response advertisers on American TV, is taking on the pawnbrokers in Britain by offering cash for cast-off precious metals via its website and ad campaign.
“I woke up with the idea of going direct to the consumer to purchase their material … so they wouldn’t have the inconvenience of going to a pawnshop where they might run into a friend,” Cash4Gold CEO and founder, Jeff Aronson, told Reuters. “It’s been a very, very strong and intense growth,” he added.
After starting out as a spin-off from metal refinery Albar Precious Metals, the company has expanded out of its home market to Canada and the Netherlands as well as Britain.
It will begin operations in Germany on Monday and plans to launch in another six countries in the EU, to bring the company to the “one billion dollar mark” in three years, said Aronson.
Cash4Gold, based in Pompano Beach, Florida, receives tens of thousands of packs per week in the United States, containing defunct wedding rings, single earrings or broken chains in gold, silver or platinum.
The business model looks buoyant as the gold price continues to rise, with spot gold topping a record high of $1,070 last week.
In a bid to raise its status as a household name in the United States, Cash4Gold aired an advert during this year’s Super Bowl featuring rapper M.C. Hammer and TV host Ed McMahon.
Aronson said it will bring the same high-profile media campaign to the UK, with its advertising budget accounting for up to 90 percent of total start-up costs and Cash4Gold processing over 30,000 transactions since launching in July.
The company, which will also unveil a high-end jewellery buying service within a few months in the UK, is targeting sales of 40 to 50 million pounds for the year in the UK, he added.
“We’ve paid a couple of million of pounds out already with somewhere in between 70,000 to 80,000 packs requested,” he added. Each pack is typically worth around 50 to 70 pounds.
UK-listed pawnbrokers H&T and Albemarle & Bond have a headstart over new market entrants.
H&T introduced gold-purchasing in its stores in 2007 and now has 54 gold-buying stands in shopping malls across the UK, helping lift first-half profits by nearly a third.
It is targeting 100 Gold Bar stalls by Christmas.
But some analysts warn the gold bonanza will not last. “We expect reduced gold purchasing volumes in 2010,” said Robert Sanders, analyst at Arbuthnot Securities. “There are only so many pieces of broken jewellery.”
Moreover, the fortunes of new, online operators will run out first, if gold prices falter.
“These companies offer cheaper solutions, yet come with the problems involved in a postal transaction … many of these companies are likely to fade away as the gold price drops,” added Sanders.
Yet Aronson argues there is still an untapped market of Internet savvy customers.
“I refer to ourselves as a disruptive technology, meaning 10 years ago, nobody would ever think of doing anything else than going to a bookstore to buy a book. Now today, is there anyone who wouldn’t buy a book from Amazon?”