Record-breaking jewelry sales are on the rise, but it is not the usual luxury retailers that are benefiting. Pawnbrokers, who specialize in secondhand watches and jewelry, are reaping the rewards of increasing living costs and conflicts in Europe and the Middle East. The soaring prices of gold, driven by tensions in the Middle East and inflationary pressures, are prompting more individuals to borrow cash against their jewelry or sell it outright, according to leading pawnbroker CEOs in the UK. Moreover, there is a growing interest in purchasing secondhand luxury items, which are perceived to offer better value and sustainability.
This shift in consumer behavior has resulted in a significant revenue increase for the UK’s two largest publicly listed pawnbrokers, H&T Group and Ramsdens Holdings Plc. Over the past two years, their share prices have risen by 60% and 28% respectively, while global luxury powerhouses like LVMH and Richemont have reported slowing or declining sales. The demand for diamonds has plummeted to the point that De Beers Group even permitted browsing without purchase obligations.
According to Chris Gillespie, CEO of H&T Group, the rising popularity of pre-owned luxury items is driven by factors such as better value for money and environmental sustainability. Younger generations are particularly drawn to pre-owned items, contributing to a systemic shift away from purchasing new. Pawnbrokers typically acquire their stock from individuals who are either selling items or using them as collateral for loans, but then failing to repay the loan. The recent increase in gold prices and supply has made selling jewelry more appealing, leading to a larger customer base for pawnbrokers.
The total value of H&T’s pledge book, representing loans from pawned items, reached £114.6 million ($143 million) in June, marking a 35% increase from the previous year. Ramsdens also saw a record month for new lending in August. This trend is not limited to the UK, as Texas-based pawnbroking giant FirstCash Holdings Inc. reported third-quarter revenue of $786.3 million, surpassing analyst expectations with a 17% increase from the same period in 2022.
While borrowers and sellers are facing challenges, the growth in customers for pawnbrokers is promising. Lachlan Given, CEO of EZCorp Inc., revealed that they have seen growth in both in-store and online customers. This is reflected in the company’s revenue of $255.8 million for the three months ending in June, an 18.5% increase compared to the previous year.
The rise in interest for secondhand jewelry aligns with the growing demand for sustainability in the fashion industry. McKinsey & Co.’s State of Fashion reports have indicated an increase in respondents recognizing sustainability as the industry’s greatest opportunity. In their 2023 edition, 16% of respondents viewed sustainability as the industry’s biggest opportunity, up from 12% in the previous report. McKinsey also predicts that by 2025, 30% of all fine jewelry purchases will reflect sustainability interests.
For instance, Ramsdens has experienced a 50% increase in gold purchases during the 12 months leading up to September 2023. Many of their jewelry sales involve a mix of old and new pieces, with precious stones from secondhand items being reset into newly cast and hallmarked settings. Approximately 40% to 50% of the stock they acquire is refurbished and resold, while the remaining pieces are melted down. This trend goes beyond luxury sales, as the global secondhand apparel market is expected to almost double to $350 billion by 2027.
As consumers face inflationary challenges, resale markets are expected to thrive due to their value proposition. High-end luxury brands are unlikely to reduce prices and risk damaging their brand image, making jewelry a prime candidate for resale, as a 24-karat gold bracelet, for example, is no different from buying new. With the appeal of better value and sustainability, it is no surprise that pawnbrokers are observing record jewelry sales while luxury giants struggle.
Links:
– BBC: Pawnbrokers profit from high gold prices
– Vogue Business: Sustainable consumers are flocking to the secondhand and resale markets
