The rising cost of living and wars in Europe and the Middle East have battered sales at high-end fashion brands and jewellery outlets around the world. The same factors are proving to be a boon for a less glamorous subset of retailers: pawnbrokers, which buy and sell secondhand watches and jewellery.

Heightened gold prices, fuelled by Middle East tensions, and inflationary pressures are pushing more people to borrow cash—using jewels and watches as collateral—or sell them outright, according to chief executive officers of the UK’s leading pawnbrokers. Also rising is interest in buying secondhand luxuries, which are often seen as being better value and more sustainable. Clothing reseller RealReal Inc. last week reported third-quarter sales and margins that beat analyst expectations.

The combination has driven a dramatic increase in revenue for the UK’s two biggest listed pawnbrokers, H&T Group and Ramsdens Holdings Plc. Their share prices have risen 60% and 28%, respectively, over the past two years, even as global luxury houses from LVMH, which owns Tiffany & Co., to Richemont, owner of Cartier, report slowing or falling sales. Demand for diamonds has plummeted so harshly that De Beers Group recently took the unusual step of letting buyers look and leave without buying stock.

“Pre-owned is very, very strong within an overall market that is struggling—a bit because it’s better value for money, and partly the environmental side of it, because the carbon footprint is lower,” says Chris Gillespie, CEO of H&T Group. “We benefit a bit from the systemic shift from my generation, who bought new, to younger generations, who are buying pre-owned.”

Rising supply and demand

Pawnbrokers typically source their stock from people who are selling items or using them as collateral to borrow money but failing to pay the money back. Because the amount offered for jewellery is typically linked to its potential scrap value in gold, spikes caused by Russia’s invasion of Ukraine and conflict in the Middle East have made it more attractive to sell. The price of gold has risen 10% over the past year.

More people are pawning, too. The total value of H&T’s pledge book, which represents loans from hocked goods, hit £114.6 million ($143 million) in June, up 35% from a year earlier. At rival Ramsdens, August was a record month for new lending. This is hardly a phenomenon confined to the UK: In October, Texas-based pawnbroking giant FirstCash Holdings Inc. reported third-quarter revenue of $786.3 million, exceeding analyst expectations with a 17% increase from the same period in 2022.

Stress on borrowers and sellers is only half the story. There’s no point in lending or buying record amounts in exchange for goods if you cannot sell them. “We’re absolutely seeing growth in customers, both in-store and online,” said Lachlan Given, chief executive officer of EZCorp Inc. during an August earnings call. The company had just reported revenue of $255.8 million for the three months ending June, 18.5% higher than in the same period a year earlier. “As you can see from our quarterly results here, the numbers are doing some serious momentum.”

To be sure, secondhand jewellery remains a subset of the broader luxury market. But interest in it is growing, as are new ways of converting pre-owned fashion. This tracks with growing interest in sustainability in fashion. Some 12% of survey respondents cited in McKinsey & Co.’s State of Fashion 2022 report listed sustainability as the industry’s biggest opportunity, that figure rose to 16% for its 2023 edition. In 2021, the consultancy predicted that by 2025, as many as 30% of all fine jewellery purchases would reflect sustainability interests.

Ramsdens’ gold purchases rose 50% during the 12 months ending in September 2023, and many of its jewellery sales come from pieces that are a mix of old and new. Precious stones are harvested by Ramsden artisans from secondhand items before being reset into freshly cast and hallmarked settings.

“Around 40% to 50% of the stock that we buy is actually refurbished and resold, and the other half of what we buy gets melted down,” says Ramsdens CEO Peter Kenyon. “There is a vast amount of gold that people have put away in their drawers that they never wear.”

This is part of a trend that extends beyond luxury sales. The global secondhand apparel market is set to nearly double, to $350 billion, by 2027 and is expected to grow three times faster on average than the overall market, according to the 2023 thredUP Resale Report.

“As consumers in the US are challenged with inflation, we would expect resale to shine because people will flock for value,” says Poonam Goyal, senior industry analyst at Bloomberg Intelligence. She adds it is unlikely that high-end luxury brands will be willing to cut prices at the risk of damaging their brand. “Jewellery has a more natural bias for (resale) because a 24 karat gold bracelet is unlikely to be any different to buying new,” she says.