Lots of negative feedback from our post the other day on Cash4Gold’s amazing growth and profitability. This year, their third year of operations, they are on track to make $160 million in revenue and $50 million or so in profits. All from encouraging people to send in gold jewelry in exchange for cash.
A handful of comments pointed out the very funny Onion spoof on the company where the U.S. government uses Cash4Gold to pay down the national debt. But many of the rest say the company is a scam.
Example: “They offer people significantly less money than their gold is worth and prey on people’s ignorance and desperation. If those profit margins are right, they’re basically stealing from the uninformed. Search online and you’ll find a ton of scam stories about them. It is a very, very shady business…”
Another: “There must be a difference between doing business and stealing from people. I can not believe that this company is still in business. goverment should bring some regulations and monitoring to this industry. due to the recession people are desperate and this company is taking advantage from people. how the owners can sleep at nights. they are taking advantage of people in need of money.”
And: “It appears they are litigious scammers. Running scams is a great way to rake in money.”
The chief complaint is that the company offers customers too little money for their gold compared to the spot price at any given time. My understanding is the company aims to pay no more than 50% of the spot price to sellers. The rest, after operational and substantial marketing expense, is profit.
And there is certainly nothing wrong with a company making a profit. They are offering a convenient service to consumers (they send you the prepaid envelope to ship your gold, pay insurance, and ship the gold back to you if you don’t take their offer). If you don’t like what they offer to pay you, use another service. The site even tells you that pawn shops, local jewelers and online services like eBay and Craigslist may fetch you a higher price.
Overall I don’t see any serious ethical issues at all with Cash4Gold, with one exception. If the company is in fact not sending back jewelry promptly to customers who have declined the offer, that needs to be fixed. But hard bargaining and lowballing offers to consumers isn’t evil. It’s just a business decision.
There are no ethical issues here that you don’t see with Google’s business model that generates obscene profits. Or the Windows/Office franchise. Or the exorbitantly priced hot dog vendor at the baseball stadium. Or $30 wifi in a hotel.
I’d personally like to see them make a flat out promise to pay some percentage of the spot price of gold – say 50% or 66%. That way people can have a better idea of what they’ll be offered. Given how many competitors there are in this market, I wouldn’t be surprised for something like that to happen eventually anyway.
But let’s save the “this is evil” comments for the really insidious stuff. Like Jigsaw, who continues to make a killing of the sale of our personal information. Or the Intelius scam we reported on last year where consumers were being automatically signed up to useless credit card subscriptions.
Making obscene profits may make you jealous, but it isn’t evil. There’s a reason so many people are using the Cash4Gold service – it’s easy and convenient. They don’t make promises on their website that they don’t keep, and they aren’t tricking or scamming people. They are simply buying low and selling high, and that’s capitalism at its finest.