Why Pawn Shops Sell New Jewelry for Less

Looking to buy new jewelry for yourself or that special someone? You might not think of visiting a pawn shop. But pawn shops routinely sell brand-new jewelry at lower prices than traditional jewelry stores. In today’s economy, with prices of essentials higher than they have been in years, saving money where you can is a good idea. But why are pawn shops able to sell new jewelry for less? Is the item lower quality? Nope. But there are many other excellent reasons why Gene’s Jewelry & Pawn can sell you first-rate jewelry at a discount price.

How does a pawn shop work?

When you picture a pawn shop, you might have the Hollywood version in your mind: shady buildings with shady characters swapping stolen goods for cash. But most pawn shops are upstanding institutions, more like banks than the back alley. The goal of pawn shops is to lend money, with interest, to consumers for items the shop holds as collateral. As a customer, you bring in an item, the pawn shop gives you cash value for the item, then they keep the item until you pay back the amount they loaned you for it. If you are unable or unwilling to pay back the cash the pawn shop loaned you, they will keep your item and attempt to re-sell it to recoup the loss of your loan.

Unlike loans from actual banks, pawn shops won’t report your lack of payment to the credit bureau. Defaulted loans are simply sold to recoup the original loan amount plus the interest due. This results in very good deals on merchandise and provides consumers with a low-risk way to sell merchandise and acquire short-term loans.

Why is new jewelry cheaper at a pawn store?

At Gene’s Jewelry & Pawn, we buy items such as jewelry and guns at wholesale prices, just like competing gun dealers and other jewelry stores. We often buy from the same vendors as these other stores, and attend jewelry shows and gun shows. The difference between other stores and pawn shops is a pawn shop has other sources of income outside of their new products.

Markup

Traditional jewelry stores only generate income through the sales and repair of jewelry. This means jewelry is often marked up three, four, five, or six times the original cost. This is why traditional stores can run so many sales advertising “amazing” deals of 75% or more off and still make money. A pawn store has many different sources of income, so they do not have to mark up jewelry as much as a large retailer. This results in substantial savings on a new ring or necklace and still provides an acceptable profit for the pawn store.

Current gold prices

Pawn shops also adjust the prices for their jewelry based on the current prices for gold, silver, platinum, and other precious metals. If the current prices for precious metals are low, pawn shops will reflect these rate drops in their prices. The pawn shop also acquires most of their inventory from local sellers. So they don’t need to include the cost of shipping in their customer prices.

Negotiating price

Additionally, pawn shops allow customers to haggle over prices. If you go to a traditional jewelry store, the price you see on the sales tag is the price you get. The only way to get a lower price is to wait for a sale. At a pawn shop, you can offer a lower price than is listed. The pawnbroker may be interested in taking you up on it or be willing to compromise with you. This enables you to possibly afford a piece of jewelry you never could at a traditional jeweler.

Another reason prices are so much better at a pawn shop? Pawnbrokers loan out cash and buy from the public. A broker never knows how much money he may spend in a week. So, they need to sell products to maintain the ability to accommodate the current demand for cash. This consistent need for cash makes pawn shop owners more likely to sell products at a lower price. Therefore allowing inventory to move quickly.

How much will you get for a jewelry trade-in at a pawn shop?

These lower prices for jewelry means the trade-in value is also often lower. This creates some problems when we are offering loans to customers who have purchased from traditional jewelry stores and paid their marked-up prices.

Since the pawn shop can buy the jewelry at the wholesale price from the same vendor, it bases the value of the jewelry on the wholesale cost, not the retail price. This makes some customers feel like the pawn shop is offering too little, but in reality, the customers just paid more than they should have.