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Pawnbrokers see booming business in flailing economy
Published: July 13, 2011
Certain industries tend to do their best business during tough times. Grocers prosper during famines. Police get overtime during crime waves, firefighters during fires, roofers after bad storms.
And today, years into the Great Recession, pawn shops are doing their best business in years. Local pawnbrokers told The McDowell News this week that hard economic conditions and the higher profile their industry has earned through such popular television shows as “Pawn Stars” and “Hard Core Pawn” have brought new customers in.
Marshall Grant of Silver Dollar Pawn on Rutherford Road said he sees increased traffic from regular customers and more desperation these days, too.
“We see it all. We see everyday professionals — teachers — who need money to get them through the month,” he stated. “We also see the worst of the worst.”
Marshall’s father, Sandy, agreed.
“We’re a necessary part of the economy,” he said. Twenty years ago, he continued, “There wasn’t the need. You could go to your finance company and borrow $500. Banks don’t want to do personal loans anymore.”
Pawn shops are licensed in North Carolina to issue secured loans — the borrower must hand over collateral to the broker — at a fixed interest rate. Not only does state law set the rate but the various service charges and storage fees and the duration of the loan (three months) as well. With little flexibility in charges and terms, pawnbrokers compete by establishing good relationships with their clients.
Jim Holtzclaw, owner of Arizona Pawn on Baldwin Avenue, said repeat business is the heart of his store’s success.
“We’ve got the best customers in the world,” he stated. “We get a tremendous amount of repeat business.”
Asked if repayment of loans or resale of defaulted collateral is the bigger part of his revenues, he said it was “about 50-50.”
Holtzclaw and the Grants said the recent wave of TV reality shows have attracted a new clientele who might have bypassed pawn shops before.
“We are definitely seeing a lot of antique items you normally don’t see in a pawn shop,” said Marshall. “But as a rule of thumb it’s hard to deal with collectible items.”
“They bring in old stuff now,” said Sandy, “old clocks or antiques.” He added he has to be pretty careful about accepting them, lest he get stuck with something.
“Anything collectible is hard to sell right now,” said Sandy. “The market is touchy, so it’s hard to make a safe investment.”
He said public perception of pawn shops was inaccurate. Reality shows portray the “glamorous” end of the business — the heirs of a collector trying to unload an antique or rare item. The reality is borrowers trying to make ends meet. Holtzclaw said much the same thing.
“That’s more like Antiques Road Show,” he said, asserting that the customer visits on the show are staged. Success or failure in a real pawn shop depends on willingness to be flexible with borrowers.
“If someone pawns a gun he paid $1,000 for, we lend him maybe $400 or $500. He’s got 90 days to either pay off the loan or roll it over by paying the outstanding interest,” said Holtzclaw. “He doesn’t want to lose it. If we haven’t heard from him (when the loan matures) we give him a call, try and work with him about getting caught up.”
Sandy called that “compassion and sympathy for what some people are going through.” He said the reputation for fencing stolen goods is undeserved. Pawn brokers have to write a ticket for every transaction and make those available to law enforcement. Now brokers list all their collateral on a national database, searchable by law enforcement everywhere.
Thieves trying to turn over hot items is a very small part of his traffic, he said, “maybe one-tenth of 1 percent,” and they are easy to spot.
“They have to lay down their ID every time they pawn anything. Most thieves don’t want to do that,” he stated. “Usually if they are from out-of-county that’s a red flag.”
Sandy said pawn shops extend credit to borrowers who otherwise would have no options.
“Without pawn shops, you’d see more people breaking the law,” he said.
The increased business at pawn shops can be seen in the gains in shares of publicly traded pawn shops.
Profits at pawn shop operator Ezcorp Inc. have jumped by an average 46 percent annually for five years. The stock has doubled from a year ago, to about $38. And the Wall Street pros who analyze the company think it will go higher yet, according to The Associated Press.
Commentary from Jerry Whitehead – As I have been witnessing and saying all along, these are the BEST times to be in our industry today. All the public companies are in record territories with their growth and valuations, the industry is exploding with growth outside the USA, and I am happy to report that 99% of our extensive client base is in record territories with their businesses today!
Pawn Shop Consulting Group, Inc.