Nov

20

Pawnshops, from Don Chu

November 20, 2009 |

 Both Mr Millhone’s and Mr Sears’ remarks about pawnshops are revealing:

“Am sure these people could care less about the DOW today. Likely would sell their gold if they had any.”

“Others like me got some below melt value deals on silver and gold in jewelery and coins. ”

The secondary/buy-back market in gold, silver and jewelry had long been the domain of the neighborhood jeweler and standalone pawnshop. But in the past year, some larger establishments have been muscling into the local scene:

"The number of pawnshops here has grown 20 per cent since 2005 and in June numbered 122 stores, according to the Pawnbrokers’ Association. Some outlets compete for business in the same area — when Moneymax’s Toa Payoh store opens later this year, it will compete with both Maxi-Cash and SingPost in the neighborhood. Both Soo Kee Group and Aspial pointed out that their jewelery and pawnbroking businesses are operated independently, and customers should not fear that pawned items might be ‘recycled’ through their retail jewelery stores.”

Someone at the jewelers has apparently been keeping an eye on the diverging trends of the rising precious metal prices and dwindling cash assets of the working classes. This is one small business that seems mighty attractive right now: for want of a better term, socioeconomic arbitrage.


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  1. Steve Leslie on November 21, 2009 8:47 am

    Pawnshops in Florida are ubiquitous. They are truly great businesses to own if one knows how what they are doing. They are essentially retail stores that provide financing. Properly run and organized, they have a fantastic business model and profitablilty. Don't let the tattoos fool you the true pawnshop owners do very well financially. So much of the business is cash that it is beneficial to the owner in so many ways. I go to Pawnshops to get tools and lawnmowers, weed wackers, and anything else that can be used around the home. I am sure there is a proliferation of these goods in stock due to the small business owners who come to Florida to start up a landscaping business or auto repair and soon find that business is not as easy as it seems. And, there is so much jewelry due to people pawning them and not returning for the goods. In Florida recovering stolen merchandise is nearly impossible from a pawnshop even if one can prove ownership. In my view, it as near to a perfect business model as one can want. Buy a ring for 10-15% on the dollar and sell it for full retail. Where are you going to get margins like that. Just as auto parts stores, Dollar General stores and pawnshops do well in traditional economies, they also do better than most businesses during recessions.

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