Business is business. It can be… well let’s just say, competitive. For those of you that compete in markets where the three big corporate pawn operators are located, it is a different playing field. They behave in ways that we don't understand, and many times, create opportunity because they appear to get in their own way. They have to operate differently because they are big, but don't ever let your guard down. They are smart, deep pockets, which have resources. Independent operators are there target. They want your business. We want their business!
Our team is extremely competitive and since we are developing BRAVO for you, we are aiming for the bull’s eye. We view our product’s success on not just being better than other software providers, but providing a product that propels your store opportunity to levels you have never experienced. We want you to win.
Our winning Pawnbroker philosophy business practices are based on 3 principles.
1. We must deliver great customer service!
2. We must lend more money than anyone else!
3. We must sell merchandise quickly and profitably!
Some of you may be thinking, “Yeah duh, I already know this,” but I want to reinforce each of these statements and discuss how to approach each concept differently. What is both fun and challenging is that there are multitudes of ways to be successful in pawn brokering. Your ideas and success should not be discounted. Two heads are bigger than one, so let’s just think together.
• We must deliver great customer service!
The simplest philosophy that I believe is, "Let the customer win." Say yes to the customer. Never say no.
When you first start out in business this is easier to deliver. Later on, you get accustomed and have a few bad experiences and this becomes a way of doing business. Throw it all out the door and be nice. We are pawnbrokers... We are in business to help people.... Don't forget this statement because it is the essence of what we do every day. Outsiders chide us because we make a profit. Great surgeons save people and get paid. The same is true for us; we are fairly paid as well. But we must be reminded that, like doctors, we have a social responsibility. We are the bankers of our customers—the public. Treat this and teach this to your employees. A privileged business comes with a responsibility. Be patient, be a good listener, and offer your customer choices. Outsiders don't understand the significance that we provide for our community, but we are an important layer that supports the community. I think this is tantamount to our existence as an industry.
This was a philosophy that really worked for me. It was also easy to communicate to my team. It was easy to get behind such a reasonable philosophy and it never got stale. Over the years, we had customer evangelists within our organization that insured us that, as we became successful and grew, we never ditched this way of thinking. Ultimately we delivered great customer service. Who could argue with us!
• We must lend more money than anyone else!
This is the double edge sword, which has to do with the legal statutory interest rates that you are able to charge. Let’s get back to philosophy. I believe that when a customer needs money, no matter how loyal of customer they may be, when they need money for a doctor let’s say, they will go to your competitor. Don't give them the chance to consider this. We need to figure out how to rationalize; we need to figure out how to give more.
Wal-Mart sells for less. They sell for less because they are smart and have figured out a way to sell for less. And they haven’t stopped. They still continue to find ways to deliver merchandise to its customers for less, every day. We need to figure out how to lend more everyday.
When I heard that a competitor was lending more, my first reaction was, “let that dumb dumb lend more,” followed by, “I am doing just fine.” Well, when your customers are telling you this on their way out the door, who is winning? I should have been thinking, “hey dumb dumb, what did my competitor just figure out.” Have you ever heard the saying "arrogance is bliss?" Let’s not let our arrogance let the competition win. So… how do we lend more?
Sell your merchandise for more. If you can figure out how to get more, then you should figure out how to lend more? We used to sell our jewelry for more than any pawnshop in the U.S. We polished to new condition and priced to sell. We trained our sales people to be knowledgeable in selling jewelry. It was 80% of our loan portfolio and became our single most important retail category. It was hard, it was extremely profitable, and it enabled us to lend more on jewelry. Today lending on jewelry is silly easy. Gold is better than cash. If someone gave you a $100.00 bill, what would you lend on it? Gold is worth more today than our U.S. currency. Lend more.
Lending is a function of how good of a retailer you are. If you can figure out a method to increase your ability in selling something for the most, you have found your niche. Selling for more means that you can lend more! You win two ways. First you will lend more money thus increasing your loan portfolio earning more interest. Pawnbrokers who know how to say yes at the loan counter win more customers. By winning business you end up with more inventories and because you know how to sell, this effort converts to selling profit. Second, expand your effort in selling more categories. When it blows off the shelf, you will need more merchandise. Think like a retailer, but obviously your supply of inventory come from customers on the street. How do you get more stuff? The answer is, pay more and let the word get to the street! This really enhances the store opportunity and creates the kind of buzz that makes this business so much fun.
In today's gold market and the economy, jewelry is not what it used to be. If you can't afford to carry inventory, selling into the scrap market is the way to go. I will tell you that putting money into your loan balance is the very best place for your cash, but the second best place for your money, is inventory. Jewelry is a major category to invest. So showcase your sellable merchandise and be selective. This creates a strong image that conveys the message: my store can offer huge savings to the public. Show your price comparisons. More jewelry in your case brings more jewelry to your loan business. The public likes to pawn items that they can see within the store. Your margins in Jewelry retail should be 30 - 40% more than scrap. If you can turn your showcase inventory twice a year, you are doing fantastic. One last thought on Jewelry: Merchandise, display and polish your jewelry like a retailer. All you need to bring your jewelry to life is a polisher, ultrasonic cleaner, and steamer. You can purchase really nice used jewelry displays from the local jeweler in town. They would be delighted to off last year’s display for some quick cash. If not try EBay.
I will have a lot more on retailing throughout my blog, stayed tuned.
Lending more to good customers. It is a wise choice. Just based on the track record of your customers, I suggest that when they redeem an item; promise them more money on their next loan. I referred to interest rates in my opening comment. In states that charge more than 12% per month on loans, there is a tipping point. The holding period matters as well. 30, 60, 90, or more term limits, can create a scenario that in the end of the term, costs the customer more than the item is worth. Be careful. You don't want to turn a good customer into someone that can't pick up his or her item. You will end up with the merchandise and eventually lose the customer. This equates into a huge loss. Spend time listening to the customer and explain the charges. In some cases, you are better off letting the customer sell the item. This is a win, win. The customer will not have a defaulted list of items in their record, and you won’t have to hold the item in loan. Customers that have no intention of picking up their items in loan are a huge expense to pawnbrokers.
If you charge lower interest rates, take off the brakes and lend to the default rate. What I mean is, if you have a customer or a category that has a low default rate then why not lend the max. If you have a 0% default then there is no risk. Test the results for each rate of default percentage and see what I mean. Do the math!
Quick example: conservative assumptions.
• 100k loan portfolio at 10% per month assuming 0% default - 100 x 120% = 120k
• Assumption - increase the same loans by 10% and increase default rate by 2%.
• 110k loan portfolio at 10% per month assuming 2% default - 102 x 120% = 122.4k + (8k loans defaulted x 40% margin) = 125.6k. If your borrowing cost for the extra 10k is 10%, then you made an extra $4,600.00 on the same loans.
Cool??? Cool!!! The numbers can be different in reality, but the results are positive and lending more keeps customers coming back to borrow.
• We must quickly and profitably sell merchandise!
I have touched on selling as a way to lend more, but the pawn brokering business is a ying and yang thing. We need to be a great lender and a great re-seller of loan collateral. As we think of loaning money to the public, we are different than banking because we have to be good at selling the stuff that we lend on. Banks focus on lending money to people that pay back with minimal risk or no defaults. If a bank charges 6% and they right off 2% to bad loans and the cost of money is 1%, they are good with a 3% or 50% margin. Yes, if they charge 6 and their cost is 3, the gross margin is 3 or 50% margin. Banking is a great business when making million dollar loans but since our average loan is about $100.00, we need our fat margins to make it work. Banks write off loans, they don't care. It’s all a part of their plan. Our plan must be different.
There are categories that we lend on with very little to no default; but in most cases our default rates are 8 - 30% (sometimes more). If our rates were as low as banks, then everyone would be in our business. The reason why people stay out of your business is because it is hard. The burdensome regulatory requirements, that cost us on average $6.00 per transaction, are a huge responsibility as well. Selling used stuff is really hard. But since we do it every day, over time it becomes a part of the business. Comparative to regular retail though, this stuff is much harder to handle. So let’s clap and pat ourselves on a job well done.
Everything that we can do to sell stuff for more and faster translates to larger and more productive loan portfolios. The number one reason why pawnbrokers will lend less on something is because it is hard to sell. If it is hard to sell, we offer less. If we have never sold it before, we lend less. If we had a bad experience with this item yesterday, we lend less today. On the other hand if we just sold the item yesterday and it sold in 3 days, we lend more. We do this every day, but it’s hard to really think this through for every event. Selling fast in our business is not just because it is priced low. Sometimes it is because, on that day, someone was looking for it and you had it. Luck! I like the idea of getting more and selling it faster at the same time. I will tell you how and if you want to know why, just ask in the comments below.
Generally speaking, in order to sell for more and faster, you must merchandise your inventory. It's just like ordinary retailing. It has got to look good on the shelf. Use your imagination. Move your merchandise around every 60 days. Change generates business. Read my rap cords article.
Our team is extremely competitive and since we are developing BRAVO for you, we are aiming for the bull’s eye. We view our product’s success on not just being better than other software providers, but providing a product that propels your store opportunity to levels you have never experienced. We want you to win.
Our winning Pawnbroker philosophy business practices are based on 3 principles.
1. We must deliver great customer service!
2. We must lend more money than anyone else!
3. We must sell merchandise quickly and profitably!
Some of you may be thinking, “Yeah duh, I already know this,” but I want to reinforce each of these statements and discuss how to approach each concept differently. What is both fun and challenging is that there are multitudes of ways to be successful in pawn brokering. Your ideas and success should not be discounted. Two heads are bigger than one, so let’s just think together.
• We must deliver great customer service!
The simplest philosophy that I believe is, "Let the customer win." Say yes to the customer. Never say no.
When you first start out in business this is easier to deliver. Later on, you get accustomed and have a few bad experiences and this becomes a way of doing business. Throw it all out the door and be nice. We are pawnbrokers... We are in business to help people.... Don't forget this statement because it is the essence of what we do every day. Outsiders chide us because we make a profit. Great surgeons save people and get paid. The same is true for us; we are fairly paid as well. But we must be reminded that, like doctors, we have a social responsibility. We are the bankers of our customers—the public. Treat this and teach this to your employees. A privileged business comes with a responsibility. Be patient, be a good listener, and offer your customer choices. Outsiders don't understand the significance that we provide for our community, but we are an important layer that supports the community. I think this is tantamount to our existence as an industry.
This was a philosophy that really worked for me. It was also easy to communicate to my team. It was easy to get behind such a reasonable philosophy and it never got stale. Over the years, we had customer evangelists within our organization that insured us that, as we became successful and grew, we never ditched this way of thinking. Ultimately we delivered great customer service. Who could argue with us!
• We must lend more money than anyone else!
This is the double edge sword, which has to do with the legal statutory interest rates that you are able to charge. Let’s get back to philosophy. I believe that when a customer needs money, no matter how loyal of customer they may be, when they need money for a doctor let’s say, they will go to your competitor. Don't give them the chance to consider this. We need to figure out how to rationalize; we need to figure out how to give more.
Wal-Mart sells for less. They sell for less because they are smart and have figured out a way to sell for less. And they haven’t stopped. They still continue to find ways to deliver merchandise to its customers for less, every day. We need to figure out how to lend more everyday.
When I heard that a competitor was lending more, my first reaction was, “let that dumb dumb lend more,” followed by, “I am doing just fine.” Well, when your customers are telling you this on their way out the door, who is winning? I should have been thinking, “hey dumb dumb, what did my competitor just figure out.” Have you ever heard the saying "arrogance is bliss?" Let’s not let our arrogance let the competition win. So… how do we lend more?
Sell your merchandise for more. If you can figure out how to get more, then you should figure out how to lend more? We used to sell our jewelry for more than any pawnshop in the U.S. We polished to new condition and priced to sell. We trained our sales people to be knowledgeable in selling jewelry. It was 80% of our loan portfolio and became our single most important retail category. It was hard, it was extremely profitable, and it enabled us to lend more on jewelry. Today lending on jewelry is silly easy. Gold is better than cash. If someone gave you a $100.00 bill, what would you lend on it? Gold is worth more today than our U.S. currency. Lend more.
Lending is a function of how good of a retailer you are. If you can figure out a method to increase your ability in selling something for the most, you have found your niche. Selling for more means that you can lend more! You win two ways. First you will lend more money thus increasing your loan portfolio earning more interest. Pawnbrokers who know how to say yes at the loan counter win more customers. By winning business you end up with more inventories and because you know how to sell, this effort converts to selling profit. Second, expand your effort in selling more categories. When it blows off the shelf, you will need more merchandise. Think like a retailer, but obviously your supply of inventory come from customers on the street. How do you get more stuff? The answer is, pay more and let the word get to the street! This really enhances the store opportunity and creates the kind of buzz that makes this business so much fun.
In today's gold market and the economy, jewelry is not what it used to be. If you can't afford to carry inventory, selling into the scrap market is the way to go. I will tell you that putting money into your loan balance is the very best place for your cash, but the second best place for your money, is inventory. Jewelry is a major category to invest. So showcase your sellable merchandise and be selective. This creates a strong image that conveys the message: my store can offer huge savings to the public. Show your price comparisons. More jewelry in your case brings more jewelry to your loan business. The public likes to pawn items that they can see within the store. Your margins in Jewelry retail should be 30 - 40% more than scrap. If you can turn your showcase inventory twice a year, you are doing fantastic. One last thought on Jewelry: Merchandise, display and polish your jewelry like a retailer. All you need to bring your jewelry to life is a polisher, ultrasonic cleaner, and steamer. You can purchase really nice used jewelry displays from the local jeweler in town. They would be delighted to off last year’s display for some quick cash. If not try EBay.
I will have a lot more on retailing throughout my blog, stayed tuned.
Lending more to good customers. It is a wise choice. Just based on the track record of your customers, I suggest that when they redeem an item; promise them more money on their next loan. I referred to interest rates in my opening comment. In states that charge more than 12% per month on loans, there is a tipping point. The holding period matters as well. 30, 60, 90, or more term limits, can create a scenario that in the end of the term, costs the customer more than the item is worth. Be careful. You don't want to turn a good customer into someone that can't pick up his or her item. You will end up with the merchandise and eventually lose the customer. This equates into a huge loss. Spend time listening to the customer and explain the charges. In some cases, you are better off letting the customer sell the item. This is a win, win. The customer will not have a defaulted list of items in their record, and you won’t have to hold the item in loan. Customers that have no intention of picking up their items in loan are a huge expense to pawnbrokers.
If you charge lower interest rates, take off the brakes and lend to the default rate. What I mean is, if you have a customer or a category that has a low default rate then why not lend the max. If you have a 0% default then there is no risk. Test the results for each rate of default percentage and see what I mean. Do the math!
Quick example: conservative assumptions.
• 100k loan portfolio at 10% per month assuming 0% default - 100 x 120% = 120k
• Assumption - increase the same loans by 10% and increase default rate by 2%.
• 110k loan portfolio at 10% per month assuming 2% default - 102 x 120% = 122.4k + (8k loans defaulted x 40% margin) = 125.6k. If your borrowing cost for the extra 10k is 10%, then you made an extra $4,600.00 on the same loans.
Cool??? Cool!!! The numbers can be different in reality, but the results are positive and lending more keeps customers coming back to borrow.
• We must quickly and profitably sell merchandise!
I have touched on selling as a way to lend more, but the pawn brokering business is a ying and yang thing. We need to be a great lender and a great re-seller of loan collateral. As we think of loaning money to the public, we are different than banking because we have to be good at selling the stuff that we lend on. Banks focus on lending money to people that pay back with minimal risk or no defaults. If a bank charges 6% and they right off 2% to bad loans and the cost of money is 1%, they are good with a 3% or 50% margin. Yes, if they charge 6 and their cost is 3, the gross margin is 3 or 50% margin. Banking is a great business when making million dollar loans but since our average loan is about $100.00, we need our fat margins to make it work. Banks write off loans, they don't care. It’s all a part of their plan. Our plan must be different.
There are categories that we lend on with very little to no default; but in most cases our default rates are 8 - 30% (sometimes more). If our rates were as low as banks, then everyone would be in our business. The reason why people stay out of your business is because it is hard. The burdensome regulatory requirements, that cost us on average $6.00 per transaction, are a huge responsibility as well. Selling used stuff is really hard. But since we do it every day, over time it becomes a part of the business. Comparative to regular retail though, this stuff is much harder to handle. So let’s clap and pat ourselves on a job well done.
Everything that we can do to sell stuff for more and faster translates to larger and more productive loan portfolios. The number one reason why pawnbrokers will lend less on something is because it is hard to sell. If it is hard to sell, we offer less. If we have never sold it before, we lend less. If we had a bad experience with this item yesterday, we lend less today. On the other hand if we just sold the item yesterday and it sold in 3 days, we lend more. We do this every day, but it’s hard to really think this through for every event. Selling fast in our business is not just because it is priced low. Sometimes it is because, on that day, someone was looking for it and you had it. Luck! I like the idea of getting more and selling it faster at the same time. I will tell you how and if you want to know why, just ask in the comments below.
Generally speaking, in order to sell for more and faster, you must merchandise your inventory. It's just like ordinary retailing. It has got to look good on the shelf. Use your imagination. Move your merchandise around every 60 days. Change generates business. Read my rap cords article.
Shrink-wrap. I love shrink-wrap. I saw a Home Depot associate shrink wrap an article one day and I asked why? The associate told me it was because it made the item look like new again. So we started! And over time we found that if a small item was in a show case, behind the counter with accessories included, it was home run. It was a real time saver, because if you kept the accessories behind the counter or somewhere else other than with the item, it was hard to find them when you were in the heat of a sale. We had mountains of cords left over before the shrink-wrap campaign. And guess what? You get more for the item when you have all of the accessories.
Your store needs to look good. Paint is good start. Also, a good smell is always helpful. It’s fun during Christmas to have spice in the air; and it turns on the subconscious spending machine. Used merchandise has an odor, it just does. Over the years it gets really really gross. So… spray each day or go to a supply store and get your favorite smell-good release can. It really works.
If you want to take it up another notch, then an in store image campaign is very important. Again, let’s start with a Christmas campaign and let’s get jolly. Decorate your store with a tree, decorations, and get into the spirit. Take your time and don't get tacky. Watch your customers respond.
A general in store campaign can be pictures of merchandise in a frame. Also include pictures of people shopping and people traveling. People that look like your customers having a good time. I believe that customers come into our stores for a need. The best thing you can do for them is put them into a scene that is positive. This is easy to do with 6 - 15 images about 28" x 34" framed. It’s has a big impact for very little. This really sets off the store.
Guarantee your merchandise. Test the merchandise before they leave and give them a 30-day guarantee. Selling stuff as-is, sales are final, sends a bad message and a cautionary flag that simply discounts your merchandise. If you test the merchandise while taking in the item you will have a 98% perfect product to sell. Guarantee your stuff and believe in what you sell. Remember: if an item comes back, do whatever is right in the customers eyes. Make them happy even if it costs you a few bucks. You win. Clean up your store - sell for more - sell your stuff faster.
• Dialogue
Competition is going to get tougher. In California, specifically the Beverly Hills district, the numbers of pawnshops went from 4 stores to 13 stores in one year. This is happening in many cities. Cash4gold business has drawn awareness to gold scrapping’s lucrative nature, and this business interest is drafting into the pawn business. I said earlier that pawn brokering is hard, but an all-gold pawnshop liquidation model is a no brainer, which is why we are seeing so much interest.
I bring this up because many of you are drifting to the scrap business model and your ability to retail is what may be your lifeline in the future. I believe that gold will go down in the future and these new entrants will fold up, but the survivors will be the ones who know how to sell. I also think that if you focus on Jewelry sales, you could capture the local wedding business (because of the number of local jewelry stores that have shut down). When the economy hits Main Street, gold will go down and there will be a demand for Jewelry. Get ready and continue to develop your selling skills.
BRAVO will assist in delivering information and choices so that you have the edge in your lending and sales business. Our eCommerce platform will extend your inventory and create options for you to sell more vibrantly and enable your customers to your store 24/7. BRAVO will offer online services for your loan customers so they can renew and redeem their items. Stay tuned to our blog so that you can become familiar with the future features that you will soon be able to offer your customers through BRAVO.
Thanks for reading and remember, as a pawn broker:
1. You must deliver great customer service!
2. You must lend more money than anyone else!
3. You must sell merchandise quickly and profitably!
Your store needs to look good. Paint is good start. Also, a good smell is always helpful. It’s fun during Christmas to have spice in the air; and it turns on the subconscious spending machine. Used merchandise has an odor, it just does. Over the years it gets really really gross. So… spray each day or go to a supply store and get your favorite smell-good release can. It really works.
If you want to take it up another notch, then an in store image campaign is very important. Again, let’s start with a Christmas campaign and let’s get jolly. Decorate your store with a tree, decorations, and get into the spirit. Take your time and don't get tacky. Watch your customers respond.
A general in store campaign can be pictures of merchandise in a frame. Also include pictures of people shopping and people traveling. People that look like your customers having a good time. I believe that customers come into our stores for a need. The best thing you can do for them is put them into a scene that is positive. This is easy to do with 6 - 15 images about 28" x 34" framed. It’s has a big impact for very little. This really sets off the store.
Guarantee your merchandise. Test the merchandise before they leave and give them a 30-day guarantee. Selling stuff as-is, sales are final, sends a bad message and a cautionary flag that simply discounts your merchandise. If you test the merchandise while taking in the item you will have a 98% perfect product to sell. Guarantee your stuff and believe in what you sell. Remember: if an item comes back, do whatever is right in the customers eyes. Make them happy even if it costs you a few bucks. You win. Clean up your store - sell for more - sell your stuff faster.
• Dialogue
Competition is going to get tougher. In California, specifically the Beverly Hills district, the numbers of pawnshops went from 4 stores to 13 stores in one year. This is happening in many cities. Cash4gold business has drawn awareness to gold scrapping’s lucrative nature, and this business interest is drafting into the pawn business. I said earlier that pawn brokering is hard, but an all-gold pawnshop liquidation model is a no brainer, which is why we are seeing so much interest.
I bring this up because many of you are drifting to the scrap business model and your ability to retail is what may be your lifeline in the future. I believe that gold will go down in the future and these new entrants will fold up, but the survivors will be the ones who know how to sell. I also think that if you focus on Jewelry sales, you could capture the local wedding business (because of the number of local jewelry stores that have shut down). When the economy hits Main Street, gold will go down and there will be a demand for Jewelry. Get ready and continue to develop your selling skills.
BRAVO will assist in delivering information and choices so that you have the edge in your lending and sales business. Our eCommerce platform will extend your inventory and create options for you to sell more vibrantly and enable your customers to your store 24/7. BRAVO will offer online services for your loan customers so they can renew and redeem their items. Stay tuned to our blog so that you can become familiar with the future features that you will soon be able to offer your customers through BRAVO.
Thanks for reading and remember, as a pawn broker:
1. You must deliver great customer service!
2. You must lend more money than anyone else!
3. You must sell merchandise quickly and profitably!
