If I could offer one way to save thousands of dollars per year, I would suggest space planning. One of the costliest, most neglected areas is the back room for loan storage. We often think that since we are making up to 30% per month in interest on each loan, storage for that item is not of concern. We ask ourselves: why spend money or effort for storage?
I often thought it was a shame that we are required to pay the same price for storage than we pay for the retail floor space. The reasons vary from local regulations that require on site storage to the basic convenience of being able to deliver a timely redemption. Most stores need an ample size store to accommodate loan storage, which means that you have to sacrifice your choice of location to a tier 2 or 3 site. With retail property being way higher than traditional warehouse space, finding a balanced property is very challenging. Most pawnshops are not found in premium locations. Fully planning your space supports a smaller footprint, maximizes your spend for rent, and in many cases can reduce the number of employees required to operate. Today with real-estate prices hitting the bottom, many of you are contemplating moving to better locations (or at least re-negotiating your leases). My advice, RETHINK YOUR BACK ROOMS!!!
One of my best friends, Greg Westover, is one of the leading logistic managers in the country. He came to work with us at Superpawn and was drawn to our team because of our systematic approach to "just in time” (JIT) inventory management. We had introduced this methodology in 1996. The right merchandise. In the right store. At the right time.
The idea came from both my accounting background and a tight inventory management practice. I did not want jewelry back stock in the stores. I felt it was costly to have inventory sitting in the back room, plus you never know when an item might sell in another location. When we sold a jewelry item in a store it was automatically re-ordered through our system. A bar coded item tag was left in the jewelry slot. A very similar piece of jewelry would be sent to the store from a central jewelry refurbishment facility, bar coded, and indicating where the previous jewelry item case location. Both tags would be scanned and processed at the store notifying the system that a complete item transfer had taken place. All of the accounting was automated. Greg freaked out when he saw this. For years he had been in managing inventories for Fortune 500 companies, but when he saw this at SuperPawn, he wanted to help with other logistic opportunities.
THE FIX Greg brought in Gary Fisher and Rob Hutson. Planning out a back room is like designing a home, but done well, this planning stage will reduce your back room requirement by 25 - 40%. These are important savings that you can take advantage in the planning stage of a new store, and is worth the analysis in an existing store. So if your back room is full, or you want to create some space for other uses, seek out a logistic expert. If you want to call up Rob Hutson, it will be a very productive introduction. You will find that specialized rack shelving WILL be a part of your solution. You can find used shelving all over the internet.
So you do the math. 250 - 1000 square feet x $1.00 - $1.50 per month x 60 months (average lease term). The savings on one store over a 5 year period is $12,500 - $75,000.00. Other cost savings can be found in careful layout design and can even make your store more efficient, even to the extent that you can save man hours. Think about where your everyday effort is spent and plan your store with intent.
