Rapaport Magazine


August 2008

By Mordy Rapaport
RAPAPORT... With gold prices rapidly increasing and many American consumers facing liquidity troubles, the jewelry resale market in the United States has the potential to boom. Unable to receive additional credit from banks, consumers are increasingly choosing nontraditional outlets to exchange their hard assets for capital. For many, their budgets stretched by the higher costs of oil, food and other necessities, obtaining additional sources of income has become a necessity. Along with other durable goods, jewelry is a luxury product that many are willing to forgo, even at prices below their initial investment.

One segment of U.S. consumers turning to this solution is the portion of the population born during the post-World War II years 1946 through 1964. These so-called Baby Boomers have traditionally maintained key roles in the economy and have accumulated substantial amounts of jewelry. Uncertainty, monetary difficulties and the fulfillment of certain aspirations are prompting them to resell their diamonds and jewelry.

So what avenues, if any, are realistically available to consumers interested in realizing the value of their diamonds and jewelry? As the traditional retail jewelry segment is averse to buying back diamonds from customers, pawnshops are now being seen by some consumers as a viable option. While previously perceived to be rundown locations fortified with bulletproof glass, pawnshops in many rural and urban communities across the country have become a retail source selling a large mixture of merchandise at affordable prices, making them a more palatable choice for selling off jewelry. Although sellers may only receive 20 to 25 percent of the original cost of what they sell at a pawnshop, the capital is provided upfront, offering immediate use of the money.

While reselling jewelry may help to provide consumers with an economic fix, the fact that they have to do so at a fraction of the price at which these items were purchased might end up costing the industry down the road. How are diamonds and jewelry going to be perceived by the younger generation if they see their parents taking such losses? In today’s competitive environment, with various alternatives to diamonds and jewelry competing for consumers’ disposable income, our product’s real value in the resale market is of critical importance.

Our industry must stand behind the products we sell. Consumer confidence is a key issue we are bound to face in the near future. Aside from fulfilling our society’s need and desire to gift, our product has zero utility. My father often mentions that if we did not have diamonds, we would need to create them. Diamonds’ perceived value and what they represent are the key components of their continuous demand. When diamonds and jewelry are no longer considered a worthwhile investment, the sustainability of our entire trade becomes questionable.

Our industry must not ignore one of the most established marketing slogans of the twentieth century: “A Diamond is Forever.” While that message was meant to position diamonds as a symbol of everlasting and unconditional love, the phrase also can be used to demonstrate an economic reality. Once removed from the ground, diamonds can be continuously bought and sold.
America has traditionally maintained a dominant role in the consumption of diamonds and jewelry, but today’s marketplace is undergoing unprecedented change. Wholesalers, retailers, pawnshops and consumers all have the ability to resell polished diamonds and jewelry. The price realized in these transactions is what will ultimately determine the confidence in our product and the long-term sustainability of our trade.

Article from the Rapaport Magazine - August 2008. To subscribe click here.

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