Back in 1980 I had five stores on Canal Street (1) in lower Manhattan buying gold from the public. Gold in January of that year hit a high of $850 an ounce - in today's money that's over $2250 an ounce.

One of the biggest worries in the gold scrap business is getting ripped off. I'm not talking about someone trying to palm off fake gold as genuine, although that is tried quite often; the real worry is paying out tens of thousands of dollars only to have the sellers pull out a gun and take both the money and the gold.

I had been alerted to this by a Al P., a business partner of mine who owned Eagle Jewelers on Canal Street (I eventually bought the store from him). He told me that two men came in one day and showed him about $15,000 in gold. Al offered $12,000 which was the going price in the Chinatown area. They said OK and asked if he had enough cash to make the purchase - they didn't want a check.

Although he had the money in a drawer in the back, he felt something wrong and so he told them that he ran out of money entirely, but that if they would accompany him to the bank across the street he would pay them the money there. Thus, if they thought he didn't have any large amount of money on the premises then it wasn't worth the risk of getting a gun charge on top of robbery for little payback.

They said they couldn't wait and left.

I have to say, that if someone really wants to sell something, a one-minute walk to a bank is not an inconvenience.

But that's the problem. If someone brings in a hundred thousand dollars worth of gold, how do you keep both the scrap and the money from being in the same place at the same time. If you present the seller with a hundred grand and his gold is still in your store, it becomes very easy for a criminal to pull a gun and demand his gold back and run off with both.

Of course, if our stores were set up as strictly gold-buying stores we could have put up plexiglas teller windows as they have in certain high crime areas. However, it would have been a turn-off for many customers in Canal Street, expensive, and not suitable for me anyway because my gold-buying area was usually in the back of the store while I rented the front area to other jewelry retailers. They would not want to be in a store where my employees were protected while they were exposed to robbers who could threaten their lives unless my people gave up the money.

I never kept more than a few thousand dollars in any one location. Every time we ran low I would dispatch a courier to the bank, have him pick up money and deliver it to the store that needed it. However, for large amounts of money, say $20,000 to a hundred thousand bucks, it was not prudent to send one person with so much money while the gold was still in the store.

Keeping Customers Busy for Two Hours

Here is how I generally handled it. I'm changing the names for convenience. One summer day in 1980 when gold was $666 per ounce, Joe and Tim came in to my main store at 203 Canal carrying more than 4,000 pennyweight of 10, 14 and 18 kt gold rings, bracelets, and other scrap. This was worth that day about $50,000 in cash and would take about two hours to test to make sure it was genuine gold.

I suggested to them that rather than sit and wait while their scrap was being checked that I'd take them to a spa where we could while away the time in a steam room and sauna and perhaps enjoy a relaxing Korean massage.

I never had anyone turn down my offer. So I took Joe and Tim to the Chop Sticks Massage Parlor on 17th Street and 5th Ave, two blocks north of the Barnes & Noble bookstore at 105 5th Ave.

An hour massage at that time cost $30.00 and for not too much more one could obtain a very happy ending, if they so desired. First, you put all your property into a locker and were then brought into a shower area that contained a massage table where the scantily-clad (or if you requested, no clad) young maiden would proceed to wash your entire body with her soapy hands. Once you were sparkling clean, you were ushered into a steam room where you could sit for up to ten minutes if you liked. Then to the sauna for drying off.

After the sauna, you were ushered into a very small room with a massage table and barely enough room for the masseuse to navigate around. Depending on your negotiation, you could get any kind of sex you wanted. Any kind.

I had an arrangement with the owner of the parlor who would make sure for me that after I brought customers to her place, she would check the lockers to see if they were packing any heat. Of course, I wasn't worried that they would try to rob me at the spa, it was just so I would know what kind of people I was dealing with, for future reference.

After the "massage" we could, if we so desired, shower again, steam and sauna again and then retire to another room where, wrapped in robes, we would drink champagne and relax. This whole exercise normally took close to two hours and by then the gold was already tested. The procedure was that the gold would be removed to a safe location and the money would be waiting for Joe and Tim when we returned to Canal Street. And jewelry that was not gold would be returned to the sellers.

Joe and Tim never saw where the gold was taken nor who brought the cash to the store, nor, after the massage, did they care.

Now I'm not saying that every person I brought to Chopsticks took advantage of the extra services, but I paid the masseuses $150 each so that Joe and Tim never had to ask how much for this or that service. The girls kept the money whether extra services were requested or not. It was my treat for my customers and I never asked the girls what services were performed. For all I know, Joe and Tim enjoyed the best massage in New York City and only a massage.

Massage as Marketing Tool

I should mention that although the initial purpose of this was to keep the seller separated from the gold and the cash at the same time, this treat turned out to be quite a marketing gimmick and I obtained good word of mouth (no pun intended) for my gold business.

After a year or so, there were many, many, many days when I brought people to Chop Sticks two or even three times in one day. In 1981 alone I believe I personally received over 500 hours of massages that year. No matter what you may think, you can never get too many massages. And yes, if you are doing the math, that means I probably spent more than $150,000 on massage treats for my customers that year.

Let me mention that Chop Sticks also gave haircuts and shaves for no extra charge.

If you are wondering what I did with women customers who brought in more than $20,000 worth of gold to my shops, to tell the truth, I never had that problem: in all my years on Canal Street no woman ever came in with more than $5,000 worth of gold to sell.

At one time I toyed with the idea of actually investing in a massage parlor. I could have made money just on myself.

Do I Still Do That Today?

With rapid melters based on electromagnetic induction and relatively inexpensive (~$25,000) XRF (X-ray fluorescence) analyzers, one can melt and determine the purity of $1,000,000 worth of gold in 15 minutes. However, this has made it easier for inexperienced people to get into the business and so if you visit 47th Street in New York you can easily find more than a hundred companies who can buy rather large quantities of gold in a very short period of time. And for safety, they usually have double doors and plexiglass barriers for unknown customers.

Due to the enormous proliferation of gold-buying outlets, it has become rather unprofitable for me to compete against them so I have gone into other related niches such as buying silver-plated and gold-filled scrap which very few people have gone into and which takes a certain expertise which rapid melters and XRF analyzers are not suitable for. So no, I don't take customers to massage parlors anymore. I only go once or twice a week for myself only and only for massage.

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ENDNOTES

(1):

Planck's Constant Blog, Competition is Good - But I Won`t Open a Jewelry Store in the Libyan Desert

After I started my first store at 203 Canal Street in 1980, I opened up 4 more at 235, 199, 179, and 149 Canal Streets all within a block of each other. In this manner, operating 5 out of the 10 stores buying gold, I ended up with more than half of that business in downtown New York.