The short answer is Yes… and you will almost always lose money selling a used diamond. Here’s why.
Jewelers are in the business to make money.
When jewelers buy diamond rings from dealers, they often have agreements in place to consign diamonds in the jeweler’s store in exchange for a commission when the goods are sold. This results in very low risk for the jeweler. Since the jeweler and distributor or dealer have an established working relationship, the dealer can offer favorable payment terms to the jeweler such as 90 day accounts payable. Cash flow is vital to a business. The longer a jeweler can delay paying his suppliers and the sooner he can collect from his customers, then the longer he can survive.
Think of cash flow as the lifeblood of a business. When a jeweler buys a used ring from someone walking into the store, he must offer full cash up front to the seller with no previous relationship. This is a dent to his cash flow, while he holds on to more stock until someone else comes along to buy the ring. That time period is unknown to the jeweler so he must carry more risk while holding inventory.
The jeweler will always seek to maximize his profit.
A jeweler is opening a business to earn a profit. So, the jeweler would not purchase a used ring without a built-in markup for resale. This is where the valuation of a diamond comes in. Unlike gold, which has publicly listed spot prices, the market value of diamonds are quite arbitrary even though there is a diamond index. This is due to large variations in the quality of diamonds with respect to condition, brilliance, fire, and inclusions.
The appraisal method (cut, color, clarity, and carat weight) determines the diamond’s quality and thus price. Even if you produce the jeweler with an independently appraised report, the jeweler is entitled to his own appraisal, which could differ from the independent appraisal, or he may simply reject the appraisal.
Emotional factors
Selling used diamonds is a tricky business, and often the seller is strapped for cash, so would take any price offered by the jeweler, and it will almost always be less than the original purchase price.
Remember that the jeweler is running a business with overhead and operating costs? He would only buy the ring from you if he thinks he can resell it at a higher price. This is where the markup comes in.
Case scenario
For instance, if you bought a new diamond ring for $1000 and the jeweler normally makes $250 off of it, then what is the amount the jeweler would pay for your used diamond ring in order to maintain his normal profit? Definitely never more than $750.
Furthermore, when you are in the desperate position to take any price. Remember a business owner is in the business of profit maximization. In addition, the jeweler has to give you all cash upfront compared to more favorable payment terms with the distributor with whom he normally deals with. Now considering all this, how much do you think the jeweler would offer you now?
As long as there are buyers of diamond rings, there most certainly will also be jewelers who will buy used diamond rings, but just be aware that diamonds are not an investment so do not expect to flip rings for a nice profit.
References