From Detroit News Dot Com
Reality TV, economic woes polish image of pawn shops
Brokers luring deal hunters, credit-starved
By BRIAN J. O’CONNOR / Detroit News Finance Editor
The pawn shop is ready for its close-up.
After centuries serving as the gritty urban lender of last resort for the unemployed, unlucky and untrustworthy, pawnbrokers are moving upscale, online and out to the suburbs, attracting a new clientele of bargain hunters and credit-starved suburbanites.
The makeover comes courtesy of the worst economic downturn in 80 years and two increasingly popular reality television shows.
First, the recession clamped down on credit and amped up financial distress for consumers of all classes. Then a pair of cable shows introduced the world of pawn to a new breed of consumer who needed to borrow or was eager for second-hand bargains.
“It’s cool to go to the pawn shop now,” says Les Gold, owner of American Jewelry and Loan, the Detroit shop on truTV’s “Hardcore Pawn” reality show. “It’s changed the perception of what pawn shops used to be.”
While the perception of hock shops has changed for people who have never relied on them, Gold concedes that the basic business of pawn shops is still the same — acting as the credit card for people who can’t get one from MasterCard or Visa. What’s changed is that since 2007, more people have joined that group, and many of those who do still have credit cards can’t use them.
As of 2009, 25.6 percent of all American households depended on alternative credit sources, such as payday lenders, rent-to-own stores and pawn shops, according to an FDIC survey. In Michigan, it was 23.4 percent of households. Many of those people have always been pawn shop customers when they need to borrow.
Now add the number of people who used to have credit but lost it during the recession. Between August 2008 and December 2009, credit card issuers cut the credit available to cardholders by nearly $1 trillion — a 32percent reduction. By the end of last year, available credit on plastic still was $724 billion less, down 25 percent from the credit bubble. The amount of home equity consumers could tap shrank by $226 billion between March 2008 and June 2011, a drop of 31 percent, with only a slight improvement by December from that low point.
All told, more than $900 billion of available credit vanished from the economy in three years, leaving a lot of consumers looking for new sources of borrowing. And if they hadn’t thought of pawn shops before, all they had to do was turn on their TVs.
“There’s a void to fill,” said Tony Aubrey, who owns four Motor City Pawn Brokers stores. His two established stores are in Roseville and Warren, but since the Great Recession he’s added pawn stores in suburban Livonia and even in trendy Ferndale.
The increase in demand is being met with an increase of pawn options, including brokers who specialize in high-end goods and online pawn services targeting jewelry and watches.
The number of brick-and-mortar pawn shops in the U.S. has increased by more than half in the past five years, said Emmett Murphy, spokesman for the National Pawnbrokers Association, including three Texas-based publicly traded pawn chains that control about 13 percent of the industry. From fewer than 6,400 pawn stores in 2007, the total is now about 10,000.
“We’re seeing a new type of customer,” Murphy said. “I credit the change in the image of the pawn industry to the success of the television shows.”
The new pawn customer is often looking for unusual items, such as the oddities and collectibles featured on the History Channel show “Pawn Stars,” or deals on second-hand items, including the jewelry that makes up 80 percent of business for many hock shops.
There’s another type of customer showing up at Greenfield and Eight Mile now that “Hardcore Pawn” spotlights American Jewelry and Loan: tourists.
“Now we have people from Australia, Alaska,” says Seth Gold, Les’ son and partner. “We even had a guy from Florida drive straight through just to meet us.”
Last summer, luxury tour buses unloaded 125 people at a time into the store. A corner dedicated to “Hardcore Pawn” features posters, pictures and T-shirts, including one that shows a grimacing Les, flanked by Seth and his sister, Ashley, over the words, “I got kicked out of American Jewelry and Loan.”
Les Gold signs pictures and autographs while conducting business.
“It’s all day long, sometimes 200 people at a time,” he says, including other pawn shop owners. “Pawnbrokers come in to thank us when they’re on vacation.”
Two other couples visiting are former Michiganians Debbie Coley, 62, a retired nurse, and her husband, William, 60, a retired trainman. They are visiting Mike Smiatacz, 63, a retired city worker from St. Clair Shores, and his wife, Jan.
“My sister is an avid fan and asked for a picture,” Debbie Coley says. “I think it’s great, it’s a boost. Detroit is always getting a bum rap.”As a souvenir, she buys a necklace for her sister. “It’s a good deal,” she says, showing it off.
After getting Les Gold to pose with them for a picture, like all the other tourists who visit, both couples turn to leave.
There’s one more thing they’ve got in common with all the other tourists — they’ve never been in a pawnshop before.