So, when you go into a pawn shop to buy something, there are a lot of things that may cross your mind. This is even more true when we are talking about buying diamonds from a pawn shop.
A lot of people see the prices that pawn shops sell their diamonds for and wonder if the diamonds that they are selling are actually real.
After all, how can diamonds costs thousands of dollars in big chain retail jewelry stores and yet just hundreds or maybe even less at pawn shops?
It’s a fair question and I get it. I understand why some people might thing that the diamonds that pawn shops sell are fake. This is particularly true when you consider the price that pawn shops are selling the diamonds for.
The truth of the matter is that the diamonds the pawn shops are selling so inexpensively aren’t fake.
They are real diamonds, just like you would buy from any normal jewelry store.
The reason that they cost so little by comparison is because all of the profit margin that jewelry stores make when they
rip you off sell you a diamond is already removed from the transaction.
When you buy that diamond at a pawn shop, you are actually paying something much closer to it’s actual value in most cases. Sure, there may still be a little markup involved, but it’s not a huge gap like it is when you go to one of those national jewelry chains that are in every mall in America.
How Can Pawn Shops Sell Diamonds So Cheaply
Well, much like I said, most of the profit margin that jewelry store make is immediately sucked out of the transaction when a ring is pawned.
You see, the profit margin on diamond jewelry at retail stores is huge. It’s absolutely enormous.
Think about it, those jewelry stores may only sell one or two pieces of jewelry a day and yet they have to pay the huge amount of rent to be in the mall (think $15,000 or $20,000 a month or more), pay for the employees to be there, their benefits, the bills, the staff at the home office, everything…
When you have to pay for that much overhead and sell that few items, these stores have to make an absolute killing on the jewelry when they sell it just to stay in business and keep the lights on.
But, when you turn around and take that ring to a pawn shop, the pawnbroker doesn’t really care about any of the made up profit margin that the jewelry store made when they sold you the ring originally.
It just doesn’t matter to them. All they care about is how much the diamond(s) and gold would sell for on the open market – or in other words – they only care about the REAL value of the stones and metal.
It’s largely why people think that pawn shops “Pay so little” for jewelry but the truth of the matter is that they are paying a very fair price for what is actually there versus what may people assume is there just because they way over paid when they initially bought the jewelry.
When the pawn shop then turns around and sell those items, they are able to do so at a huge discount versus the jewelry stores. They aren’t trying to build that huge profit margin back into the jewelry, it’s already gone.
Can Pawn Shops Sell Any Fake Diamonds
With all of this in mind, sometimes pawn shops will have a specific CZ or ‘Man-made’ diamond section in the jewelry cases where they will display some fake diamonds. This is pretty common, although not always the case.
However, if they are displaying fake diamonds, you can be assured that they will be well labeled as such as pawnbrokers don’t want to be commonly associated with the reputation of doing anything potentially unethical or questionable.
It’s actually for this reason that most pawn shops will completely avoid these stones altogether or at very least, avoid reselling them completely.
It just allows them to side step any potential confusion or wrongful accusation.