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9 Business Lessons from a Pawn Shop Pro
Friday, August 26th, 2011From Business News Daily Dot Com
With almost 30 percent of Americans possessing no checking accounts or credit resources, pawn shops like the Columbus, Ga.-based Money Mizer Pawns & Jewelers are increasingly becoming a primary resource for small loans. That, combined with the rising price of gold and silver, has made pawn shops as popular today as they’ve ever been.
Money Mizer’s CEO Robbie Whitten has learned a thing or two about dealing with customers in his 30 years in the pawn business. He shares a few of those tips with BusinessNewsDaily readers.
Lesson 1 – Never assume by the way a customer is dressed that he doesn’t have any money. I had a guy come in dressed in overalls, shot-out shoes, hair messed up and smelling like he hadn’t had a bath in three days. He was looking at jewelry and no one wanted to wait on him, so I approached the customer and treated him respectfully, and he purchased a diamond ring for $8,500 and paid in cash.
Lesson 2 – Never take a credit card over the phone from someone you don’t know. I sold a Rolex Submariner on eBay back in the early days of eBay and before PayPal. I took a credit card over the phone. The card went through perfectly so I shipped the Rolex. A few days later I received a call from the credit card company ? come to find out the card was stolen. I ended up with no money and no Rolex.
Lesson 3 – Move inventory around in the store, kind of like grocery stores do. It keeps repeat customers from seeing the same old stuff sitting in the same spot time and time again. Also, if you have some inventory sitting for a while and not selling, mark it down and move it – even if you have to take a loss occasionally. As they always say, time is money.
Lesson 4 – Always treat customers kindly and greet them when they come into your store. Be attentive to their needs (talk to them, for god’s sake), be happy and smile. Why do you think Walmart has greeters at the front doors?
Lesson 5 – Be very careful extending credit to a friend or family member without collateral. I learned this lesson years ago when I extended credit on a purchase to a good high school buddy of mine. He never paid a dime and I haven’t seen or heard from him in over 30 years.
Lesson 6 – Your best advertising is word of mouth. We spend approximately $100,000 a year on advertising and it is very effective. However, your customer’s word of mouth is the best advertising in the world. Keep your customers happy and remember the old saying: A happy customer will tell a friend about your business; an unhappy customer will tell 10 friends about your business.
Lesson 7 – Even though we’re in business to make a profit, be charitable on occasion to customers that are truly desperate. Use your judgment, but when a customer asks for a deal or needs a break, show some compassion.
Lesson 8 – Stay ahead of the game in your industry and always be one step ahead of your competition. Be the one that tries new strategies, new advertising campaigns, keep up with new technologies like social media (Facebook, Twitter, LinkedIn, etc.). These are simple things that could turn into profits and new customers.
Lesson 9 – Learn something new every day. Never think to yourself for one minute you know it all. Not a day goes by – even after 31 years in the pawn business – that I don’t look to others in the industry for new ideas, methods, and information to learn something new and make more profits. I’m not bragging, but you can bet your bottom dollar that my pawn shops make 2-3 times more in profits than competition in my markets.
Money Mizer currently has three corporate-owned locations, in Columbus, Ga., and Phenix City and Dothan, Ala., as well as one franchised location in Auburn, Ala. After launching its franchise program in 2008, the chain expects to sell 10 to 15 franchises in 2011, with 150 locations open by the end of 2015.
At DFW pawnshops, business isn’t all bright and shiny
Sunday, July 24th, 2011From Star-Telegram Dot Com
At DFW pawnshops, business isn’t all bright and shiny
By Jim Fuquay
After Michael Meyer got out of the Marines and then Texas A&M University with a degree in history in 2008, he took a career path less traveled: He went to work for an EZ Pawn store.
By January 2010, he put his experience behind the counter to good use when he and his father, Ken, bought an existing pawnshop on McCart Avenue in south Fort Worth. They renamed it Purple Heart Pawn & Gun, a nod to the medal Meyer received after being wounded in Iraq. Now, if conventional wisdom is right, he’s part of a business built for recession, one that becomes supercharged when other consumer markets run out of gas.
Well, not exactly, Meyer says, though there’s no denying that pawnshops are in the spotlight.
They’ve got their own TV show, the History Channel’s Pawn Stars, now in its second season and one of the most watched cable programs, attracting more than 7 million viewers, according to the Nielsen ratings. The show features three generations of the Harrison family that run Gold & Silver Pawn Shop in Las Vegas, where they attract plenty of bling and valuable oddities.
On Wall Street, the publicly traded pawn chains, including Fort Worth-based Cash America International and Arlington-based First Cash Financial Services, have become the darlings of investors in the past year, with their share prices more than doubling the S&P 500′s 25 percent gain in that time.
And gold’s long run, which saw it top $1,600 an ounce last week, has helped boost pawnshops. Jewelry makes up a big share of their merchandise, and the higher prices have helped to swell the value of inventory and loans.
Is this a guaranteed counter-cyclical business?
“What the public thinks and what I actually see are not the same things,” said Meyer, 27. “Business is good, but contrary to what people believe, we don’t necessarily do great business when the economy is down.”
“Pawn has two sides, selling and loaning,” said Meyer, who got interested in pawnshops after working at one during his senior year at A&M. “In one instance, our loans are up, we’re definitely making more short-term loans. But we’re selling less.”
At First Cash, which operates 646 outlets, “60 percent of our revenue is retail sales” of pawned merchandise, Chief Financial Officer Doug Orr said. “A lot of our inventory is gold jewelry, and that’s a tough sell in this economic environment.”
And while Cash America and First Cash stock have done well in the past year (as well as shares of Austin-based EZCorp, owner of the EZ Pawn where Meyer got his start), they’ve had their rough spots during the financial crisis. Both Cash America and First Cash fell more than 50 percent by the time the market bottomed out in early 2009, and EZCorp wasn’t far behind.
Even the rise in gold prices is not all positive.
“All it does is increase the competition. Everybody and his brother now buys gold,” said Alton Braxton, manager of Trader Jim’s Pawn Shop in east Fort Worth.
The big chains and the rest
The big chains are certainly doing well financially. Just last week, Cash America and First Cash announced higher revenues and profits.
But that’s not necessarily representative of the business in general.
The publicly traded pawn chains “represent about 10 percent of all pawnshops,” said Emmett Murphy, spokesman for the National Pawn Brokers Association, which moved its offices to Keller three years ago.
“Their business models are more complex,” entailing foreign operations and payday lending that most independent pawnshops don’t get into, Murphy said.
For example, Mexico accounts for the majority of First Cash’s business, two-thirds of its stores and nearly all its growth. And Cash America gets slightly more revenue from payday loans than it does from merchandise sales, and nearly twice as much as from pawn fees.
“Most pawn brokers are mom-and-pops, or small chains,” Murphy said.
If the average pawnshop is a small operation, so are the transactions. According to the association, the average pawn loan in 2010 was about $100, up from $80 the previous year.
Meyer said his average loan is around $100, whereas Orr said First Cash’s average is $170 at its U.S. stores and $70 in Mexico.
‘Workingman’s bank’
Murphy said pawn loans tend to be larger in states that mandate lower interest rates and where more of the merchandise is jewelry. New York state, for example, limits pawn loans to 4 percent a month, plus a $10 service fee.
Texas allows rates as high as 20 percent a month, a rate that’s fairly common. The rate comes down as the loan amount rises, a mechanism also used in other states, including Oklahoma.
For example, Texas’ allowable rate falls to 15 percent a month on loans from $189.01 to $1,260, 2.5 percent on loans from $1,260.01 to $1,890, and 1 percent a month for loans above that.
But Texas pawnshops don’t tend to make many big loans, Meyer said.
“We’re the workingman’s bank, where you can get $60 to get a fill-up,” said Jack Stallings, owner of Texas Best Pawn & Jewelry in west Fort Worth.
There’s some disagreement over whether the customers of pawnshops are changing significantly because of the recession.
“We’re seeing more middle-class people, and even small businesses like restaurants,” Murphy said. Meyer also said he sees some more affluent customers than he did when he first got into the business.
But Dan Feehan, CEO of Cash America, said he doesn’t think pawn customers have changed much. If there’s been a change, he said, it’s in the clientele for the company’s payday loans, which are short-term advances backed by a customer’s postdated check, rather than a piece of merchandise, as in a pawn.
“The theory is that folks have gotten squeezed out of more traditional credit markets,” Feehan said. “But our core customer base” in the pawn operation, he said, has remained fairly consistent.
Are Pawn Shop Owners the True U.S. Economists?
Tuesday, July 12th, 2011From Go Banking Rates Dot Com
Are Pawn Shop Owners the True U.S. Economists?
By Casey Bond
Just about every industry took a hit from the recent recession and most businesses are still struggling to rebound. That is, except for pawn shops. Interestingly enough, they have actually been on the upswing ever since our economy took a turn for the worse. In both the good times and the bad, however, pawn shop owners are down in the trenches with their customers–typical Americans like you and I–which may give them the most authentic and uncensored look into the true state of our economy.
So if you’re wondering whether the U.S. is really on its way toward economic recovery or if we’re doomed to keep our belts tightened for years to come, you might want to visit your local pawn shop to get the real answer.
How Pawn Shops Work
Once viewed as a seedy location to unload stolen goods and hock valuables for gambling money, pawn shops have been cleaning up their image and becoming the go-to among middle- and even upper-class Americans for discounted goods and small loans.
Their new found popularity has even sparked a wave of reality shows, including the History Channel’s Pawn Stars, in which viewers can watch the shop’s employees haggle over everything from Superbowl rings to buried treasure. But a pawn store can provide much more than mindless entertainment and there’s plenty these establishments have to offer the everyday consumer, too.
Here’s how a pawn shop operates: Let’s say you need a loan, but don’t have the credit or bank account necessary to get one (or you simply want an alternative). You can take a valuable item you own to a pawn shop and offer it up as collateral. The pawnbroker will then lend you however much he or she deems that item to be worth. You both agree on a term–usually, 30 days–after which you come back to repay the money, plus interest, and have the item returned to you.
Now what if you can’t pay back your loan? The pawn broker can put your valuable item up for sale in their shop with the goal of selling it to recoup the money they loaned you (and hopefully make a profit). You don’t get reported to the credit bureaus or end up with bill collectors on your tail, you just give up the item you pawned.
You can also sell items to a pawn shop if you’re interested in straight cash rather than a loan. These days, a lot more people are interested in both.
Living in a “Pawn Shop Economy”
While there are more than 13,000 pawn shops throughout the country, they are mostly small, privately-owned businesses that do not report their earnings publicly. That makes this industry extremely difficult to track. Even so, the three publicly-traded pawn companies have recently reported significantly increased earnings.
For an industry that thrives on making short-term loans and selling goods at a discount, it’s a strong indicator of the financial times in which we live.
However, it isn’t just an increase in profits that has contributed to the idea pawn shops serve as an economic barometer. Pawn shop employees get a first-hand look at current trends in consumer borrowing and spending, as well as various industry ups and downs.
“We went through two solid years where we had an increase in loans. And I could see the construction business grinding to halt by all the tools on my sales floor,” explains Westside Pawn manager, Susan Sherrod.
A more affluent crowd has been coming through pawn shop doors to join the usual suspects these days, too, hoping to pawn and sell nicer stuff. As Pat Schneider writes for The Cap Times, “unlike payday loan stores, which have the feel of banking branches, a pawn shop’s eclectic mix of items and their owners offers a dramatic window into life during the economic downturn.”
Pawn Shops Serve as Alternative to High-Interest Payday Loans
Payday loans have become much more popularized as a result of the recession, which left a huge number of people with reduced or no income, increasing the demand for short-term loans. Unfortunately, it also left these same people with damaged credit. Combined with tightened lending standards, it has become harder than ever to obtain a loan.
So it’s pawn shops that have come through to serve the needs of the unemployed, unbanked and otherwise down and out.
Additionally, pawn customers can enjoy the fact that there isn’t any credit check involved in getting a loan, and if the loan can’t be repaid, there are no long-term repercussions. Not to mention, it’s hard to obtain a loan for $60.
So whether you’ve hit hard times and need some cash or are simply interested in the fate of the U.S. economy, you may find that what you’re looking for isn’t at a big bank, but the local pawn shop.
Casey Bond has a long professional history in the finance industry. She worked as an assistant in a successful financial planning firm for many years while obtaining her B.A. in English. She then went on to obtain a degree in Publishing and was eager to change career paths.
That’s when Casey joined the Go Banking Rates team, ready to meld her interest in finance with her passion for writing. Now she strives daily to bring readers the most compelling and topical banking information while battling a personal addiction to shoes and handbags. She is making progress and takes it one day at a time.
It’s a Hot Time to Be a Pawn Star
Monday, June 20th, 2011From Newsweek Dot Com
It’s a Hot Time to Be a Pawn Star
Hocking your diamond ring used to be shameful business.
Now everyone’s doing it.
by Gary Rivlin
To gauge the state of our economy, you could talk to the economists and other so-called experts. Or you could attend the annual pawnbrokers’ convention, as I did, held last week at Caesars Palace in Las Vegas. There, I met Lee Amberg, his face sunburned from competing in the annual golf tournament that these days opens every Pawn Expo.
A 23-year industry veteran with a pair of pawnshops in suburban Chicago, Amberg says he could tell as far back as 2006 that hard times were coming. “Suddenly we saw our demographic expanding,” he says. “We had more customers coming to us from middle-class communities and even upper-middle-class communities. We saw the erosion of the economy before you were even reading about it.”
Except, who listens to a pawnbroker? “We have our thumb on the true pulse of the economy,” Amberg says with a sigh, “but we’re laughed at or ridiculed because we’re in the pawn business.”
These are fat times for the pawn industry—in no small part because these are hard times for much of America. Pawnbrokers are lending money to a new breed of customer—the kind who drives up in a sports car, lugging a large flat-screen TV to hock—and it’s not like their traditional clientele are any better off than they were a few years ago. Pawn is even hot in the popular culture, as reality TV has spawned no less than three shows starring pawnbrokers.
At first glance, the Pawn Expo could have been any trade show of its kind: booths for exhibitors selling their wares (diamond and gold buyers, mainly), breakout sessions for the more studious conventiongoer (“10 Successful Steps to Becoming a Watch Guru”), boozy parties at night. And the brokers—1,300 attendees in all—made for a friendly, casual bunch, dressed in resortwear for the 100-degree Vegas heat. Still, most people think of the corner pawnshop as a forbidding place, dingy and depressing and smelling something like their grandmother’s attic. “I would describe image as our biggest challenge,” says Kevin Prochaska, who took over as president of the National Pawnbroker Association at this year’s meeting.
But changing that image is no easy task for these lenders of last resort. “If someone is coming to us, that’s the definition of a bad day,” a pawnbroker named Kathy Pierce told me. Apparently, there have been a lot of bad days for the people living near the two stores she and her husband own in central Illinois. The loan volume at both “is higher than it’s ever been,” she says.
If you’re a fan of the hit show Pawn Stars, you might think that what pawnshops mainly do is buy used stuff. But the vast majority are really loanmakers: that watch or wedding ring (usually the same watch or ring hocked the last time) serves as collateral for a loan that usually lasts from a few weeks to a few months. The amounts borrowed are typically small—$100 or less, just enough to make ends meet until the next payday. Four out of every five customers successfully pay off their loan and retrieve the item they’ve hocked.
But a pawn loan isn’t cheap. The fees charged work out to an annual interest rate of between 50 and 250 percent a year, depending on the state. Prochaska, the association president, defends the high interest rates by noting that “a lot of overhead goes into every loan.” That’s because pawnbrokers must store whatever a customer brings in—jewelry, mostly, in big cities, but plenty of weed trimmers, fishing poles, and power tools in less-urban areas. And there’s no guarantee that the pawnbroker will ever be able to sell the items if the borrower defaults. For some pawnbrokers, the sale of forfeited items has accounted for half their revenue, and a lousy economy means they get stuck with more inventory.
Yet for most pawnbrokers, the spike in loan volume over the past few years—and the corresponding increase in the fees they collect—has more than made up for the decline on the retail side. “It’s an awesome time to be in the lending business,” says Nancy Martin, a pawnbroker from North Carolina who has had her own shop since 1981. “Whether you’re talking about our traditional customers or the new people coming in the door, people are really hurting.”
Groupon Founders Get Into Online Pawn Shop Biz
Friday, June 10th, 2011From Wallet Pop Dot Com
Groupon Founders Get Into Online Pawn Shop Biz
By Barbara Thau
The founders of the nation’s biggest daily deal, group-buying site are getting into the pawn shop business.
Groupon founders Eric Lefkofsky and Brad Keywell, who now run investment firm Lightbank, have partnered with online pawnbroker Internet Pawn to launch Pawngo, an online pawn shop.
The site aims to redefine the old fashioned brick-and-mortar pawn shop in the online space by offering customers “a more practical and affordable option to credit card loans and payday lending to get cash quickly without going into debt,” the company announced in a statement.
Pawngo customers can use the gold, jewelry, watches and valuables they own as collateral to secure a short-term loan. Similar to a traditional pawn shop, customers are also offered the option to sell their valuables for a slightly larger amount without interest payments.
“Financing from Pawngo can help fill gaps in cash flow, [helping consumers] pay for emergency purchases like major auto or home repairs or braces for a child,” Lightbank said in the statement. “Once you’ve paid back the loan, your items are shipped directly back to you quickly and safely.”
Here’s where Pawngo differs from traditional pawn shops: The site offers loans based on an item’s current market value for up to six months at 3% to 6% monthly interest rates — a better deal than brick-and-mortar pawn shops, which can charge as much as 20% interest per month, Lightbank added.
What’s more, Pawngo customers can nab a loan ranging from $250 to up to $100,000 in 24 hours — no matter the state of their current finances or their credit history, the company said. And because the transaction is done online, the pawn shop process is discreet and private.
Indeed, Pawngo appears to have set out to rehabilitate the pawn shop’s sordid image for the online space. The Pawngo system “eliminates the intimidating feeling walking into a brick-and-mortar pawn shop in a seedy part of town,” the company noted in its statement.
Here’s how the site, which has yet to officially launch, works:
Customers go on to Pawngo.com and enter a description of the item or items, send a digital photo of the piece — if available — and enter their contact information. No credit card information or Social Security number is required. Pawngo will send the customer a preliminary loan offer or buy estimate within a few hours.
If the customer accepts the offer, Pawngo users can print an overnight, pre-paid FedEx shipping label to send the item directly to Pawngo’s evaluation lab. Once the item has been received, a Pawngo representative will contact the customer with an exact item evaluation and an offer. If the customer accepts the offer, their item is kept in Pawngo’s vault, and the site wires the customer money to their bank account.
The launch of Pawngo is clearly a sign of the times, Craig Johnson, chairman and CEO of retail consultancy Customer Growth Partners, told WalletPop. The economic downturn, Johnson says, has put that many more people into the “low income or temporarily low income” category, people who could find that this new service is just what they need to get them past the rough spots.
