As retailers like Tiffany & Co., Saks Inc., Best Buy Co. and Wal-Mart Stores Inc. vie for last-minute holiday sales, customers are being drawn away by a growing crop of competitors: pawn shops.
From Las Vegas and Los Angeles to Orlando, Fla., pawn shops appear to have shed their stigma and become a holiday-shopping destination. “We are seeing good traffic for the holiday season,” said Dennis Weese, chief operating officer of publicly traded Cash America International Inc., which has 800 stores in 23 states. “We have a broad spectrum of customers that come in for the holidays.”
No longer are such outlets focused solely on lending to low-income consumers in downscale neighborhoods. Many pawn shops are expanding in more-affluent areas and increasingly are seeing white-collar and higher-income shoppers - who not only may borrow money, but also buy new or used jewelry, luxury watches, game consoles and electronics, often at deep discounts compared with regular-priced retail merchandise.
“The new customers are coming from all segments of the population. What’s central to all of them is getting a good deal,” Weese added. “The consumer is very value-oriented today regardless of socioeconomic status. They put us in the consideration set the past three or four years. The stigma associated with used merchandise has gone away.”
To better compete with mainstream retailers, Cash America has its own holiday-layaway program and stages its own annual customer-appreciation event on the first Friday of December, which Weese said “gets bigger every year.” Demand for that day serves as a good indicator of its sales for the month.
In addition, the company is running commercials in markets such as Las Vegas and New Orleans, touting things like electric guitars and a diamond ring that it said are up to 70 percent off retail. To make sure its products are priced competitively, it scours website prices along with local circulars.
“The composition of customers in the last three to four years has changed,” Weese said. “It’s a very sophisticated shopper. That forces us to be very competitive. We research what everybody is doing in the marketplace.”
Pawn shops traditionally have been seen as a last-resort source of financing for those barely making ends meet (or worse) in the U.S. economy. Yet the recession stemming from the housing bust and the financial crisis of 2008 led many middle- and upper middle-class shoppers to visit pawn shops for the first time, mainly to seek financing. That’s how they discover there are good deals to be had there, according to pawn-shop operators. Meanwhile, shows such as History Channel’s “Pawn Stars” have helped lower the negative impression that consumers may have about shopping at such stores.
The National Pawnbrokers Association estimated there were about 10,000 pawn shops in January, up from about 6,400 in 2007, when the most recent U.S. Census data were available. As evidence of their broadening acceptance, many of the new pawn shops are being opened in more-upscale neighborhoods across the country, the trade group’s spokesman Emmett Murphy said.
Cash America’s Weese, for instance, said the company also has gone “more upstream” and targets new store openings in “good locations” where it can. These factors have combined to lure bargain shoppers seeking holiday deals.
“Last year, we saw a huge trend in customer traffic over Christmas,” Murphy added. “People are interested in finding that unique item.”
Some pawn shops may not afford consumers the same kind of generous return and refund policies of established retailers. Cash America, for its part, says it backs everything with a receipt for 30 days, adding that if for any reason a product needs to be returned, the company will give a full refund, replace it with an item of comparable value or offer store credit.
More broadly, an improving economy and job market may pose challenges for pawn operators, because fewer people may see the need to sell or hock their luxury items or other desirable merchandise, creating inventory risk.
People in the pawn-shop business provided examples of actual shoppers that underscore their growing retail focus. Quentin Caruana, owner of a company that sells preowned designer goods, recently drove four hours from Laguna Beach, Calif., to a Las Vegas pawn shop to buy his wife a $10,000 piece of diamond jewelry for Christmas - a purchase he said would have cost him $30,000 at regular jewelry store. That wasn’t his first time; he’s bought designer handbags, jewelry and other accessories at pawn shops before, with the knowledge of his wife.
“I don’t see any difference about buying there versus at a department store that’s maybe (having a) sale,” Caruana said. “Most of the diamonds and jewelry, they get shined up like brand-new. A lot of times they also get things new that come in the original packaging.”
About the Author
