GO
Loading...

Making a List, and Taking It to the Pawnshop

Photo: Image Source | Getty Images

Children in San Mateo, Calif., whispered their wish lists to Santa Claus this weekend at Best Collateral, a pawnshop in a strip mall about 20 miles south of San Francisco.

And if their parents didn’t mind discounted gifts — well, to be realistic, used or hocked ones — they did their shopping there, too.

Christmas this year has come to the neighborhood pawnshop — and business is booming like never before.

Sue Gallagher, 54, is one shopper who now works through her Christmas list at a pawnshop before heading to Wal-Mart or Target .

She recently bought a television for her daughter at Tom’s Pawn Shop in Lake Jackson, Tex., a “decent-sized flat-screen TV for less than $100.” She described the experience as festive, with “garlands and tinsel and some music playing in the background.”

“I didn’t feel like I was shopping in a pawnshop,” said Ms. Gallagher, who works for a nursing service.

Tom’s is not the only pawnshop that is thriving. At the Pawn America chain of stores in the Midwest, the founder Brad Rixmann said his business was up 50 percent this holiday season over last year. In San Diego, Yigal Adato, a co-owner of CashCo Pawn, said customers were showing up with Christmas lists, desperate to save money.

“We’ve had a couple of customers who say, ‘You know, if it wasn’t for you guys’ prices, my kids wouldn’t be getting anything this year,’ “ Mr. Adato said.

While some customers have always bought Christmas gifts at pawnshops, only recently has the idea gained widespread acceptance, said Emmett Murphy, a spokesman for the National Pawnbrokers Association. So far, this holiday season has been the best one yet, he said.

Many pawnshops, in turn, are embracing holiday shoppers like never before, offering promotions long deployed by more traditional stores, like “25 Days of Deals,” “Black Friday” specials— even visits from Santa. It underlines how the recession has hit those at the bottom of the economic spectrum, for whom even Wal-Mart can be too expensive.

“We want people to think of us as an alternative to Target, Best Buy,” Mr. Rixmann said. “You can buy stocking stuffers for next to nothing.”

The gloomy economy is the most immediate explanation, but industry experts also point to the success of television shows like “Pawn Stars,” which have attracted a more mainstream audience to the stores.

“People look at it now as a place to find stuff and find a bargain, where before they may have been afraid of it or figured it was all stolen,” said Mark J. Perry, an economics professor at the University of Michigan, Flint.

Pawnshops get their name from the fact that customers can “pawn” merchandise as collateral in exchange for a loan. When the money is paid back — with interest of course — pawnbrokers return the merchandise.

If the customer doesn’t pay back the money, however, the pawnbroker keeps the merchandise and resells it.

In the years since the economy has soured, pawnshops have been making more loans than ever, and the average amount of a loan has grown from $80 in 2008 to $150 today, said Mr. Murphy. In addition, pawnbrokers were flooded by customers looking to sell gold jewelry when gold prices soared this year.

On the retail side, sales had been more tepid before the holiday surge, because many customers are flat-out broke. Owners of pawnshops melted down much of the jewelry in stock because there were so few buyers, Mr. Murphy said. But the tide has turned, at least for some pawnshops. Sleek chains that resemble mainstream, big-box retailers and offer a much wider range of merchandise, some of it new, are replacing mom-and-pop shops. As the industry consolidates, the number of pawnshops has fallen to roughly 10,000 from 12,500 in 2008, Mr. Murphy said.

Mr. Rixmann of Pawn America said his own trajectory illustrates the trend: his first store was 700 square feet; and one of his newest stores, in Madison, Wis., is 35,000 square feet in a former Circuit City.

Mr. Adato of CashCo Pawn said about 60 percent of its sales started on layaway, because “people might need a paycheck or two to pay it off.” And he offers even deeper discounts around the holidays. December sales include half off diamond jewelry, 30 percent off electronics and 40 percent off tools.

La Familia Pawn and Jewelry, a chain of shops based in Florida, threw a “Why Wait Wednesday” event the day before Thanksgiving, trying to get an edge on stores like Wal-Mart that offered Thanksgiving specials. Revenue over Thanksgiving weekend rose 40 percent from a year ago, La Familia’s co-founder and chief financial officer, Woody Whitcomb, said.

Other pawn stores have a way to go before shoppers feel the warm glow of the holidays. Richard Sears, 43, who owns the Jazzy Dog Cafe in Orlando, Fla., said he was shopping more and more at pawnshops now because his “restaurant is getting clobbered.”

While they have put up holiday decorations, the shops he frequents are “in the really worst parts of town,” he said.

“They try,” Mr. Sears said, “but it’s hard to be festive when you’re putting garlands on burglar bars.”

Don Bellville, the executive vice president of Best Collateral, a group of pawnshops in California, said his stores had embraced the holidays in the last two years by offering deals, bringing in Santa and putting some snowflakes in the windows. But he acknowledged there were limits on how far any pawnshop could go.

“Macy’s we are not,” he said.

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Don't Miss

U.S. Video