Cash4Gold scraps for gold in European market push

By Lorraine Turner

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.

FOOLS GOLD?

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?”

(Editing by David Holmes) ((lorraine.turner@thomsonreuters.com; +44 20 7542 9597; Reuters Messaging: lorraine.turner.thomsonreuters.com@reuters.net))

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