As American brick-and-mortar jewelers struggle to maintain
their footing in an increasingly online world, there’s one category of buying
and selling that’s hard to do online, and even more difficult to manage without
a jeweler’s knowledge and experience.
We’re talking, of course, about the “recycled” jewelry
market. Although official figures on its size are difficult to nail down, it is
estimated to be, worldwide, a multi-billion-dollar industry. Encompassing
everything from unsold inventory to the gold, diamond and gemstone jewelry that
gets sold back to jewelers, pawnbrokers and auction houses, the recycled
jewelry industry will be an increasingly important part of retailers’ business
in the coming years due to demographic changes.
More recycled jewelry is expected to enter the marketplace
as the jewelry-loving baby boomers relinquish their gems to the next
generation, the millennials — a group whose buying habits have been known to
give retail analysts pause, as their loyalty to diamond jewelry remains unclear.
Retailers may keep some of the signed and estate pieces they acquire, and sell
them “as is”; other pieces will be broken down, their gold and platinum melted
and refined, their diamonds and gemstones cleaned, recut, and resold loose to
wholesalers and jewelry manufacturers.
For jewelers, winning a part of the “recycled jackpot” means
a willingness to learn everything they can about what’s hot in estate jewelry
and what’s not — and to let go of whatever they can’t sell.
Here’s a look at two of the most popular categories on the
recycled market, and how jewelers can get in the game.
One of the most visible and glamorous segments of the
secondary jewelry market is estate jewelry. A favorite of fashion editors and
jewelry bloggers alike, this broad category encompasses everything from a
two-year-old diamond ring to a signed Cartier brooch from 1928.
Research shows an increase in jewelers selling estate
pieces. Jewelers of America, in the “Product Pulse” poll it conducted with
National Jeweler at the end of last year, found that 58% of jewelers were
selling estate jewelry, and 60% of those retailers reported a gross margin of
41% or higher.
In other words, healthy margins make this category an
enticing one for jewelers who want to build profits. But like other
merchandise, it has to sell. How long a jeweler is prepared to keep it in the
case can make the difference between profit and loss.
Auction houses are also reporting healthy sales of
extraordinary gems and estate jewelry with exceptional provenance. Some say the
uptick started after Sotheby’s 1987 auction of the Duchess of Windsor’s
personal jewelry collection, which brought in $50 million — more than seven
times the original estimate. The worldwide concentration of wealth has likely
also contributed to the growth of auction house sales, as people look for
tangible, appreciating assets.
Though the category slowed slightly in 2016, Sotheby’s
jewelry sales went from $390 million to $571 million between 2011 and 2015, an
increase of almost 50%.
The growth of auction firms like Worthy and of buy-back
companies like White Pine has further contributed to the interest in — and sale
of — estate jewelry. Both companies came into being after the 2008 recession,
when consumers and jewelry stores sold an extraordinary amount of jewelry to
get the extra cash they needed.
Meanwhile, the Las Vegas Antique Jewelry and Watch Show —
the largest of its kind specifically for the trade — has attracted growing
attention over the last few years. With 400 vendors, the event takes place
during show week in Las Vegas. Though organizer Emerald Expositions never
discloses attendance figures, Michelle Orman, publicist for the show, says this
year’s attendance “was robust.” For many buyers, it’s become a beloved
“treasure hunt,” says Orman, a place where jewelers can go to listen, learn and
buy.
In particular, the antique show lets secondhand dealers gain
knowledge about the estate and antique jewelry market — and knowledge is power
in this sector. Unlike raw commodities such as gold or gemstones, a finished
piece has value beyond the sum of its parts, and one’s ability to succeed in
the estate jewelry trade depends on understanding that value. Knowing the
market players that specialize in each type of jewelry — including who can
provide a fair price — can make all the difference.
They may be small, but melee diamonds are a large part of
the recycled diamond business. When old, outdated or broken jewelry undergoes
refining, these diamonds — less than 20 points — are removed from the
precious-metal settings via chemical treatment. And while they may be worth
very little individually — to the point that refiners commonly return them to
the customer after salvaging the metal — they add up quickly; many companies
have made a fortune selling melee stones once they’ve accumulated a certain
quantity of them.
To maximize their value, the diamonds often undergo a
cleaning process, known as boiling or soaking, after they’re removed from the
jewelry. Many retailers then sort the stones into categories based on size,
shape, color and clarity so they have a better understanding of the diamonds
they are selling, and so they can potentially sell the diamonds to buyers that
specialize in each type.
But all that work pays off. The market for recycled melee
has increased substantially over the past few years. Retailers and pawnshops
generally sell their diamonds to wholesale buyers who travel from shop to shop,
ship their diamonds to wholesalers in New York or other markets, or send their
diamonds to one of Rapaport’s monthly auctions. The Rapaport Group also
produces the Rapaport Melee Index (RMI), which recently reported that melee
prices had increased by 13.3% in the first quarter of 2017 after hitting a
seven-year low in December 2016.
“The volume of recycled melee coming to market has increased
significantly in the past 10 years and was highly impacted by increased gold
prices and the market for recycled gold,” according to Ezi Rapaport, director
of global trading for the Rapaport Group. In other words, the more jewelry
scrap, the more diamonds.
“Refineries initially didn’t have the processes in place to
remove the melee from the scrap jewelry,” he says. “But as more diamond jewelry
started coming through and melee prices started rising, refineries had to cater
to customer demands and provide a stone-removal process in order to enable them
to keep buying the secondhand gold.”
Large stones are easily recycled as well. A study by the
Gemological Institute of America (GIA) estimated that between 1.4 million and
1.8 million recycled diamonds of 0.30 carats or more hit the market in 2010
alone. In addition to the wholesale and auction outlets, the retailers who
purchase the jewelry often sell these diamonds straight to consumers.
Torry Hoover, president of Hoover & Strong — a refining
and manufacturing company based in Richmond, Virginia — says the company’s
diamond-removal service has grown over the past few years. It chemically
processes scrap jewelry so it can easily extricate small channel, pavé and
cluster-set diamonds. Once the process is complete, Hoover & Strong offers
jewelers a price for the diamond lot.
But scrap isn’t the only source of loose stones. Hoover says
jewelers need to be on top of what’s selling in their stores and what isn’t, so
merchandise that isn’t moving — whether it’s estate jewelry or new collections
— can be broken down into its component parts.
“Jewelers don’t take advantage of recycling as they should,”
he says. “If it isn’t turning, retailers need to consider their options.”
Image: ShutterstockArticle from the Rapaport Magazine - August 2017. To subscribe click here.