Diamonds Are Forever… Being Pawned


Diamonds fascinate us. We stare into them, read about them and bestow them as tokens of love. The very concept of the time and geological pressure it took to transform a lump of coal into a dazzling diamond is both confounding and compelling. Or, as young copywriter Frances Gerety wrote while daydreaming over ad copy for diamonds in 1947: “A Diamond is Forever.”

But diamonds can be complicated and difficult to value. Even pawnbrokers who believe they are familiar with the 4Cs –- color, clarity, carat weight and cut –- can find themselves in over their heads,

“In the hundreds of pawnshops I’ve been in, the biggest surprise I’ve encountered is the lack of solid, accurate knowledge of diamond grading and evaluation at the wholesale and retail levels –- which I say tongue-in-cheek, since there really isn’t any retail diamond market anymore,” says Steve Krupnik, a veteran of the pawnbroking business and author of Pawnonomics.

Most pawnbrokers’ employees can tell a diamond from moissanite, cz or quartz, but that’s about as far as it goes, Krupnik says.

“So some pawnbrokers put a policy in place where if it’s 10 points or less, you loan 50 cents a point. If it’s between 10 points and 33 points, you loan a dollar a point, and if it’s over that you can loan $1.50 a point, that sort of thing.”

That may cover the basics, but the pawnbroker with at least one person on staff who can at least reasonably grade a diamond is at a huge advantage over the competition, Krupnik points out.

“Let’s say I have a diamond come into my shop, just a regular solitaire setting, and I have someone that can look at it that knows it’s 93 points, ideal cut, VVS2/Ecolor,” he says.

“Not knowing that, my competition might lend $100 on that stone, while I would be very comfortable loaning a thousand dollars on that stone, because I know how to turn it. I know what it is, and how to liquidate it if it isn’t, in fact, redeemed.

“And more times than not, a stone of that high grade is redeemed.”

Knowledge Crucial

One area where pawnbrokers often fall down is cut, says RB Grampp of Bluestone Trading Co. “You can have two diamonds that are the same weight, the same color, and they can be worth significantly different amounts because of the cut grade.”

Knowledge makes all the difference. “You can’t have too much education in any subject that you’re putting your money into,” Grampp says.

Build Relationships

Pawnbrokers can turn a tidy profit on high-grade diamonds regardless of their market area. “If you have a walk-in trade to retain such diamonds, that’s great. Send them out to a lab, get a certificate on the stone and call the customer that knows the difference,” Krupnik says.

If you don’t have that kind of walk-in trade, that’s not a problem. “Put it in a box and send it to a diamond wholesaler you know and trust, because you’re going to turn it quickly and it’s going to draw so much more than it would in a pawnshop setting,” Krupniok says.

“Or join some jewelers’ network that has dealers who know the market well and are not only willing to pay premium for these stones, but are actively seeking them out.”

Grampp says that diamond dealers make the process simple. If a customer brings in a diamond they want to sell, the pawnbroker can place a call and get a price range.

“If that sounds interesting to the customer, we can arrange to have that diamond picked up the same day by Federal Express or UPS and have it fully insured,” Grampp says. It will reach them the next day, when they make an offer to the pawnbroker, who then makes an offer to his customer. If the customer likes the offer, Bluestone Trading can overnight the check. The pawnbroker makes a profit and takes no risk. Other diamond dealers work in a similar way.

Krupnik points out that solid relationships with diamond dealers are important for both buying and selling. One way to build these connections is by attending trade shows. “The diamond dealers that do the pawnshop trade shows are just on the cutting edge of this stuff,” Krupnik points out.

Why bother? Well, if a customer walks in looking for a carat-and-a-half round brilliant cut for an anniversary gift, a relationship with a dealer can mean the difference between the losing the sale because there isn’t such a gem in stock and being able to offer the customer a choice.

Krupnik suggests saying, “Y’know, I don’t have one in the store but I believe I’ve got several in my vault. Can I make an appointment to show you these stones right after I get a chance to go to my vault and get them out?” They customer usually is glad to cooperate.

The next step, Krupnik says, is to call up a diamond dealer and say, “Hey, I’ve a customer for a carat-and-a-half RBC, SI1 or better grade, can you send me two or three on memo?” The next day the three stones arrive, the pawnbroker calls the customer, says he was just in his vault, and makes an appointment to show the customer the stones.

Keep Aware

Pawnbrokers also have to be on top of changes in fashion. In the late 20th Century, a pawnbroker could go through an entire career handling only a scant handful of natural color diamonds. But along with the 21st Century came a surge of interest in natural color diamonds.

“Natural color diamonds have gone up tremendously in the last decade,” Grampp says, adding that Bluestone Trading deals in them all the time. “The problem for the pawnbroker, unless they have the right education, is that they may not be able to tell a natural color diamond from a treated, colored diamond.” Con artists treat diamonds with radiation or heat to change their color. “My advice to pawnbrokers is that when they see a colored diamond, they should assume it’s been treated.”

But the fact is that educated pawnbrokers who know the value of diamonds can do quite well.

“Pawnbrokers must have someone on their staff that can identify high grade diamonds,” Krupnik insists. “As long as you keep one eye on the market and one eye on the jewelry business, it’s very lucrative and very low risk for pawnbrokers.”

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