October 31, 2014

COVER STORY

Cash4Gold's Rush

A Pompano Beach company has emerged as one of the country's highest-volume gold dealers by capitalizing on many consumers' desire to turn their jewelry into cash.

Mike Vogel | 5/1/2009

‘American lexicon’

Aronson, 36, grew up in Brooklyn, earned a bachelor’s in communications in 1993 from Staten Island University and moved to Chicago, where he learned the metals business at Mar-Cor Environmental Services, a company that reclaimed silver from film processing. In 2001, he launched his own company, Albar Precious Metals Refining, which melted scrap from pawnbrokers, dental labs and others. He relocated it to Pompano Beach in 2005 and grew fast. Albar made the Inc. 500 list in 2006 and again in 2007, the same year it made Entrepreneur magazine’s Hot 500. Aronson said the economy changed, crimping his margins so that it “was impossible to run business at that rate.” As he tells it, one night in bed, poked awake by one of his children’s purple crayons, a new idea came to him: Cash for the masses, cash for gold. He started Cash4Gold in March 2007.


GOLD STANDARD: Customers mail in their jewelry. Cash4Gold employees weigh it, photograph it, assay it and send the customer a check. Customers have 12 days to ask for their jewelry back if they’re not happy with the price. [Photo: Newscom/Palm Beach Post]
He timed it well. In his first year, the recession started and the spot price for gold jumped from $650 to $1,000 per troy ounce. Others flocked to the gold-buying business. Meanwhile, jewelry stores inverted their business models. “People aren’t visiting the stores so all the jewelers became buyers instead,” says Brian Fabrikant, a Boca Raton jewelry buyer whose family has been in the business for four generations.

Aronson’s strategy: Buy gold direct from the public. Customers mail in their jewelry in the company’s prepaid envelopes; Cash4Gold employees weigh it, photograph it, assay it and send the customer a check. Customers have 12 days to ask for their jewelry back if they’re not happy with the price. After buying and melting the gold, Aronson’s company sells the ingots.

Cash4Gold’s customers, Aronson says, are disproportionately from rural areas, female and college educated. Quantcast, an internet traffic monitoring group, reports his site is a top 10,000 site (ranking 5,213th nationally) and that 64% of its audience is female, disproportionately African-American, lower income and less likely to have a college education. The company says that profile doesn’t match its customer surveys.

Aronson says he’s proud to have opened people’s eyes to their ability to monetize their mismatched earrings and unused jewelry. “Look at all the copycat companies all over the place. I mean, we’ve spawned an industry,” he says. “The real story is this incredible entrepreneurial company that is now employing (about 300) people, doing a massive business, created an industry, is the first direct-response company ever to do a Super Bowl ad in history, has now become such a household name that at least once or twice a week, Jay Leno, David Letterman, Jon Stewart talk about Cash4Gold in their monologue. We have become part of the American lexicon.”

Along the way, Aronson picked up venture capital financing from General Catalyst Partners and Highland Capital Partners, according to PEHub, a private equity forum that reported the company got $40 million, a figure Cash4Gold says is inaccurate. Aronson says the company was “vetted by the bluest of the blue chip VCs in America.”

As traffic grew toward the nearly 800,000 transactions Cash4Gold has handled since its inception, consumer complaints surfaced. The Better Business Bureau of Southeast Florida, which had a total of 332 complaints as of March, describes a “pattern” of allegations by consumers: Valuables that they shipped but Cash4Gold never reported as arriving; checks arriving by mail too late for them to cancel a transaction; offers that consumers said weren’t as high as what they’d been led to expect from the company’s ads.

The BBB, which rates both non-members as well as companies that belong to the organization, eventually revoked Cash4Gold’s membership. The BBB placed an “F” rating on the company last year and gave it a “D” in March. The company says it has addressed the complaints against it; in April, it had an “NR” — no rating — ranking from the BBB and says it expects a better rating after the bureau finishes reviewing its record.

The company has also taken heat on the internet. The first 10 results of a Google search on the company on March 31 had the company as the first non-advertiser link. The next five links were to sites that disparaged the company, with the remaining four links positive for the firm. Aronson says the online criticism and other news reports documenting how Cash4Gold made lower offers for jewelry than its competitors have had no impact on his business.

Some mistakes are inevitable, Aronson says, at a company that receives 15,000 to 20,000 packages each week and has 3 million pieces of jewelry on its processing floor. The company has acted in good faith to resolve every complaint, he says, explaining that Cash4Gold has changed business practices that generated complaints — it extended, for example the original 10-day cancellation period to 12 days. “I think out of 800,000 transactions, 300 complaints is infinitesimal when you compare it against GE Appliance, when you compare it against some of the largest companies in the world. Our ratio is unbelievable. That’s less than 1/25th of 1%.”

Cash4Gold also ran afoul of the Agriculture Department’s Division of Standards. During an inspection in December, the division found that only two of 56 scales — one not working, one accurate but with a broken seal — met standards as “legal for trade.” Aronson says the company relied on a state-certified scale service and the scales, while not meeting the state’s specifications, were accurate. The company replaced all the scales with legal-for-trade scales immediately.

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