Pawnbrokers hit pay dirt - Gold is good !

Pawnshop windfall the last few years has never been so good. Gold is good. Gold is great to loan on and the easiest to turn to cash. Most of you have converted to scrap before retail. I don’t believe that this is a wise strategy but some of you have completely abandoned retail all together. It makes common sense, customers are pinched and scraping is easy. Diamonds have become soft and the market to resell is soft as well. I believe there are a lot of issues that we need to be asking ourselves. Where is this business going in the future? What happens when customers run out of gold?  How are you going to react?  How much should you be lending at $1300.00 per ounce?

If logic dictates, your loan portfolio should have gone up 4 times in the last 5 years. The price of gold has. There should be a sizable increase. If 80% of your loans are gold and diamonds and you have not gained one single customer, your loans should at least be three to four times higher. If you added customers you are doing really well. Most pawnbrokers are reporting fewer loans in their safe. Many stores have showed a mild increase. Why do you think this has happened?

One interesting discussion was in the U.K. Pawnbrokers’ magazine discussing total market gold tonnage. Is there as much gold in our customer’s pockets? The jewelry business is down so much, I believe our customers will have less to pawn in the future. Pawnbrokers have 70 - 80 percent of their loans in Jewelry.

Do you believe that lending more wins customers? I believe that good customer service and more money lent on an item wins business more often and that those customers remain loyal. Let’s discuss how jewelry loans works. Let’s start with a plain gold band. First we weigh the item with a scale. We check and test the gold purity. Generally the most common is 10k, 14k, 18k, 22k, 24k, but there is also 20k and 9k. A simple calculation against your "loan price per ounce," and out comes a number. Some of you will lend against the gold based on what you think it will sell for if it defaults.

Does your system calculate the value automatically?  What if this customer has a long record and has never defaulted. Would you loan more? If you had a highly desirable antique ring that would fetch a value greater than scrap value, would you lend accordingly?

Do you change what you lend daily, weekly, monthly? Do you re-price your jewelry inventory to reflect these changes? After all, what you lend is a very important decision and what your prices say on your merchandise sets an important impression as well.

I am a numbers junky and having written a million loans a year, we were able to mine the data through 5 cube views of each loan, purchase and sale. One of the fascinating finds we called psychographics, which were customer habits associated with merchandise. We looked at age, gender, race, and location. We looked at category, manufacturer and model. I was taught that you lent on an item based on what you could get for it. Would you believe that men default on their wedding bands more often than women? Answer is yes. Would you believe that some jewelry items sell in the store for 20% more than scrap in 30 days or less? Answer is yes. Would you believe that in many jewelry categories only 5% default? Answer is yes. Would you believe that many jewelry categories default 90% of the time. Answer is yes. If you had this information for an item you were going to make a loan on, would you consider these factors? The really good system doesn’t tell you what to pawn. A really good system enables you to make better decisions. We standardized the jewelry pawn inventory to 70 categories.

Let me ask you this: if you want to lend 10% more than the basic calculated amount for the plain wedding band based on information that tells you the category defaults only 10% of the time and has a quick turnover, would you lend more? Would you lend 10% more than the basic calculated amount for the plain wedding band based on a 90% default and quick turnover rate? It's your decision.

We applied supply and demand economics. We also looked at turnover rate. I like turning an item 10 times a year. I like items that have slow turnover and high margin. Before we had this system, we were forced to generalize our pawn brokering principals on all categories. This simply allows you to make decisions on the many categories that come in to your shop based on category customer habits.

This is one example of 6 million loans we studied. This information is real time, therefore up to date. As the market changes you need to make better decisions. This powered our business off the charts. We gained more customers because we lent more money every time. In some cases we would lend 50% more per gram. We never lost margin because the items never defaulted. Doesn't this make sense? Now you will have the chance to make better decisions.

I have shared many opportunities with out the need for system assistance.  If you just looked at default history from your current customers, its wise to give them a benefit.  It builds loyality and you have more cash on the street earning you interest.

How to weigh your gold ! You could be losing money

When I was in the business 5 years ago, gold was $350.00 - $390.00 per ounce. I am so pleased at the raise from the days when it was swinging around $250.00. All I can say about today's price is WOW; it's just hard to believe what that raw material is worth. And the way the economy is today, the price of gold is going to stay high for long while. I have something very important to share with you. We discovered this in 2002; and today it is more important than ever.

The stones in a jewelry setting weigh something. A carat is a weight just like ounces. We shouldn't be adding in the stone weight when we are loaning or buying on an item. If we are estimating correctly, we should be evaluating the stones as well. If it is a diamond or a precious stone, there is a higher level of expertise needed just for those stones. If it is a semi-precious, simulant, or imitation stone, the value of the gem is worth very little to zero. Either way, the weight of the stone needs to be subtracted from the weight of the item. Our experience dictated about 3 to 4 percent of miscalculated weight. That can add up at years end; especially taking into account the worth of gold today.

When we developed PRIMA we built a grid with the specific weights of each stone class and category. Size and type of stone weigh differently. As we entered a jewelry item into the system, the loan estimator subtracted the weight of the stones from the gold. Bravo will also have this function.

This can be done manually, but it is very time consuming. The weights of the stones can be found on the Internet.

You will find in my articles a common theme of hidden and small treasures. Little saving here and there, but when the end of the year approaches, real money is saved. I appreciate your following my blog.

Back room space management. One easy decision - saves big $$

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.

How to borrow money from a bank?

Borrowing from a bank today is very difficult. Even before this financial collapse pawnbrokers have always had a rough time borrowing from a financial institution. Most of you have had to borrow from family and friends. Some of you have found money from hard money-lenders, although helpful, it is usually a pretty expensive cost compared to what banks charge. Do banks want to lend you money today? YES THEY DO!!!

There are two reasons why pawnbrokers can't borrow. The first reason: the borrower doesn't know how to present a proper proposal to the banker. The second reason: the bank doesn't understand the pawn business. At some banks, their policies prohibit lending to pawnbrokers. The typical time people give up is when the borrower is required to do both tasks. We expect the bank to know. Yes, you have to educate the banker. This is a very important because you have to find someone that works for a bank that wants to listen and learn. Make sure that you invest in someone that believes in you and likes you, because this will be huge time investment for both parties. I promise you though; it will be a game changing accomplishment if you open the door to regular banking. Today's cost of capital should not exceed 2% over prime rate. Your cost of capital can eat up all of your profits at the end of the year. My traditional banking relationship saved me millions of dollars and allowed me to expand my business beyond what I conceived was available for a pawnbroker. Bottom line: banks like businesses that make money.

Most banks like to see the same information. The information is a timely financial statement. First ask your banker what format he or she prefers. You provide exactly what they request, but also provide detail and substantiation behind the statement. Three statements are required: (1) Income, (2) Balance, and (3) Cash Flow statements. You need to use a credible accounting firm. Your banker can give you list of names. Yes it will cost you more for your statements, but it will save you the big bucks later and don't forget to negotiate with your accountants. Banks handicap the rate they charge based on the credibility of your financial statement.

Do you understand what the true meaning behind a financial statement is? 90% of business owners don't. This is the single reason that small businesses can't borrow money. Spend time with your accountant and ask him what these statements mean in detail. Be relentless with questions. Pick up for small business for dummies book.  Here are some other resource articles.

• How to read a Income statement.
• How to read a Balance sheet.
• How to read a cash flow statement. The most important!

For most business people, reading financial statements isn’t something that comes naturally. But when you grasp the meaning of the numbers, you will really understand your business. If you become proficient, you will really understand how GREAT the pawn brokering business really is. I know that you know the pawn business is a good business. But for the guys that only know finance and traditional banking, when they are presented information in their language and the way they want to see it, the light bulb will go on and you will have an advocate that can really change your opportunity. This will translate into them knowing how good the pawn business is.

One last side note. When reviewing your statements: if you see results that don't look good/correct, ask the accountant the how's and why's. You will find that your business may be turning the wrong way. Statements are incredibly revealing. Use them, appreciate them, and gain from them.

I have banked with several institutions. My financial reporting evolved over time and I made modifications as the bank suggested. I eventually went with fully audited financial statements. As your credit limit rises, the bank will strap on further requirements. Banks don’t care about you just because you pay and are a long-time customer. In fact, it’s bad business. Banks make loans because they want their money back. If something changes and their confidence dissipates, expect the call.

As long as I was borrowing at a competitive rate, (which was as low as .30 percent over LIBOR rate), I was a happy guy. Remember that when banks get stuffy or demanding, it is usually perpetuated from outside forces. This is very prevalent today. Go with the flow. Solid reporting is the key to running your business well. Help your banker make his case.

If you are not showing a profit on your statements, don’t go a banker and ask to borrow money (even if you are actually making a lot of money). Why? It’s illegal. Even more? It sends a message of dishonesty. Which means? A waste of time for everyone involved.

This advice will get you 80% to the finish line. BRAVO has proprietary reports that will get the rest of the way. We have included all of our reporting tools that we used, which will enable you to provide bankers with instant information, which will add an extra layer of due diligence that the banking community appreciates. Bankers show their appreciation by charging you less. They will also put you in the driver’s seat when you need to borrow.

So, go get started! Set up your banking relationship and get the same benefit that all other businesses have access to. You have the information—go grow your business.

Competition is around the corner - get ready !

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.

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!

Stolen Property - Perception - We must become proactive !

The last 2 years, our regulatory risk has reached an all time high. Many of you have engaged actively with our Federal Congressional Representatives. This translates into one-on-one discussions and the development of long-term educational programs. Many of you should be aware that our Industry is at risk if the Federal Government passes laws. This is nothing new. Our business is actively regulated on local levels, but the Federal Government is raising its head. So what can we do? We need to perform at a higher level as an Industry. We know that our business is a necessity to the public. We need to shift the perception of our services from a burden on the public to a supportive participant. We cannot remain viewed as a pariah taking advantage of the unfortunate. We know that this is not true, but in many circles this is a perceptual fact.

I mentioned in my article about store appearance and the simple things we can do. Our stores need to become more main-stream. We can't compare ourselves to other pawnshops. We must compete with the best retailers. We need to look at mature successful businesses as the model to emulate. We are not Nordstrom or Neiman Marcus, but we can look at Wal-Mart or Target. I prefer Target's merchandising. I look to GameStop to get merchandising tips for video games business. Jewelry stores are a great place to learn how to display. When was the last time you looked at your pawnshop competitors and retailers?

We spent a lot of time trying to figure out what advertising worked. Our focus group study revealed that 80% of our business was drive-by. It was our storefront that left an impression. Clean up your storefront and become a part of the business community. Your customers prefer a higher level of experience.

My personal goal with Bravo and Maxpawn.com is to create an Industry solution from perception as well. We have seen software vendors APS and LEADS create a portal for law enforcement integration. This has been a public relations boost, but there are some vendors introducing legislation with fee incentives. In Phoenix the pawn transaction charges are as high as $3.00. This is an attractive method for Municipalities and State legislatures to increase revenues. Read about Flagstaff Arizona.

Bravo will offer a law enforcement portal for FREE. Along with effortless connectivity to law enforcement agencies in all 50 states, Bravo will automatically download your store’s data to your required agencies automatically. As a subscriber to Bravo, your store becomes a proactive participant in the pursuit in fighting crime. But it works both ways? Bravo will import lists of stolen items to advance warning of unwanted property. The community of Bravo participants will also flag undesirable customers. Now we can actively communicate to the pubic about our advanced effort of deterring individuals from pawning in our stores.

Steve Mack

Selling on EBay - making the best from the effort and grow your loans !

We believe that what we learned working with EBay and their history of success, the products we have created utilizing the Internet will change the Pawn industry.

We didn’t know how to react to EBay’s launch in 1998. We didn't know how to react to EBay’s trajectory of success. I became very concerned. Would our loyal sales customers go to EBay before they would come into our stores? Would our customers sell on EBay before they would come to our stores as well? Could America's new found love in purchasing second hand merchandise be a good thing? Could we shut down our stores and sell all of our merchandise through EBay? These are a sample of what we thought through but we never thought at this time that we would partner with EBay.

In 1999-2000 we were embarking on the newest technologies and getting ready to launch PRIMA. Pre-owned, Retail, Internet, Managment, Retail system. I will elaborate more on PRIMA in future blogs. But after spending 2 years of planning and building out a platform for enterprise services, we were well aware that the Internet was going to change the way people could purchase second hand merchandise.

The EBay API developers lab was announced in 2001. We were like all newcomers to EBay, selling stuff and getting money in the mail from someone that you would never meet personally, this was really cool. And in the beginning it was really fun and rewarding. We loved EBay. Fun and rewarding is great, but when you are running a business this activity has to make money. "What do you mean we are losing money on EBay", was my response to Ron Rowan our CFO. These number guys always rain on my parade. How much money are we losing Ron? "I think its more than I currently know". Our direction was to figure it out and learn how to do more volume, and pick up efficiency.
We embarked on a Cost Activity Analysis to figure out where the loses were coming from. For you accounting geeks I am including this link http://en.wikipedia.org/wiki/Activity-based_costing. But for this discussion, we dissected the transaction and tracked every step in the activity when selling an item on EBay.

At the time we were operating 15 stores and we required each store to post 3 items per day. This was hard.  Our store personnel were not as enthusiastic as we were. They thought it was time consuming. I didn't get it. "What's the big deal? Answers! "Wrap Pack and Ship". "We don't have the manufactures box". "We are taking lousy pictures, then cut and paste". "Posting an item on EBay is time consuming". "People ask to many questions". "Customers send back stuff"". Wow, were did the fun go! My personal observation, It was fun to sell on EBay from home, (no rent, no taxes, no license and no overhead). But, I was determined to sell on EBay; We believed that this is where we needed to be. "When they have the customers and we have the merchandise, we need to learn how to sell on the Internet!"

Cost Activity Analysis. So, I know a lot of you are selling on the Internet and you are wondering what this 2 month analysis suggested. It was astonishing $23.00 per item, not including EBay's fee. You could argue that the costs assigned were wrongly calculated, and we did, but my conclusion was even if it were off by 50-70%, we had a rough road to climb.

We were the first company to be assigned an EBay API account with EBay. But first we looked at what we could do better in the stores first. We tried centralizing the EBay selling effort. Facility, picture stations, wrap, pack, shipping stations, new staff, a high volume strategy! "This was a bomb, that experiment was expensive." It didn't work! Our biggest headache was picking up the stuff from the stores, breakage, and we later learned the stuff was selling in the stores fine. Why were we selling it to someone else when we had buyers coming into the stores? The stores lost the revenue. This wasn't looking good.

We had to become a good shipping company. And if we were going to be in this business we had to figure out how to make this easy for the stores to execute. We created a wrap, pack and shipping station with appropriate packing materials. This was created by Anthony Twist, our Internet evangelist at the time, currently V.P. at Cash America.  The shipping station had to be small,  our stores had limited space, and we limited our shipping capabilities to small and medium merchandise, unless we had the original box or case. Step 1, check.

Our cost analysis revealed that most of the cost was associated in selling on EBay was transactional overhead. Our store staff hated pushing paper, collecting money, calling , answering email, and data input. We had no buy-in! A week later, First Cash, a national chain of pawnshops abandoned their ecommerce effort.

After our licensing agreement was finalized with EBay we studied to understand how EBay technology was structured and how we could take advantage marrying our systems to this platform. Our PRIMA design included a configurable category engine. This was similar to the category engine that EBay currently uses. When you sell an item on EBay you select the category to sell in. Items get set in a data silo so items can be found on the web. EBay had the same challenge that we have. They also don’t know what the next item that might come through the door.

We created a marriage between the two engines. We ultimately eliminated 98% of the friction in loading the data, managing email, collecting money, and reinstating inventory when returned by the customer. To post an item on EBay became a single click function. Our teams engineering feat became known at EBay as the "Superpawn Model". EBay's API business group saw such an opportunity; they adopted our approach and eliminated their pricing model. That was a first!

We knew the stores needed help with shipping, so we delayed the launch of our EBay feature and adopted a shipping engine and the FedEx API. This resulted in a 0% error rate in shipping to an incorrect address and again a in store one click function to prepare, notify and print the FedEx label. FedEx would be automatically notified to pick up the item. Step 2, check,

How do you measure results? If your customers like it. If it’s easy to operate. If your employees like it. If the adoption rate is fast. The notorious EBay feedback.  And if the feature lowered the cost to sell. Step 3, check. We LAUNCHED.

We became the fastest power seller in EBay's history. Our first day we posted 3000 items from 25 stores without adding a single employee to the stores. We never had to add employees in order to implement this strategy. We sold out our stores inventories in 30 days. Our employee adoption rate was off the charts. We still had a lot of lifting to ship all of these items, but we eliminated major friction points and the stores staff saw the opportunity. EBay sent out their executive team out to our stores, the numbers that we were posting were unfathomable and unprecedented. "These guys have figured out how to sell on EBay".

Ebay's first case study. Click here

Our submission.  Click here.

Oh yeah..We lowered our activity cost to 25 cents per item. This did not include EBay’s fees between 8 - 15%. We also have a feature ecommerce solution that lowers these costs!

Post Analysis. We learned a lot from that point forward. The straight forward stuff like what sells what doesn’t. What type of auction to set up, etc?

Selling out our inventory became a real issue, but being able to sell everything that quickly and efficiently presented new lending strategies. Excess inventory never hits the radar anymore which translates, we never say no to a customer’s item because we can’t sell it or we have too many of a certain item on the shelves. It’s all a function of how much we can get for it and what we offer. Then we found undiscovered value, items that have extraordinary value on the Web. No brainer.

Data. We saw the transactions and learned more about retailing products than we ever imagined. We created, "Product Knowledge". We had 500 employees at the time and some really knowledgeable Pawnbrokers. I considered myself a pretty good pawnbroker, but when you look at comparable products selling in different stores and then add the Internet Channel. We all learned something. Wow!

Product knowledge was a 1 click display of information of the item that you had in front of you. It showed you what it sold for, (high, low, average), whether in "the stores", on "the Internet". How long it took to sell, how many defaulted, how many the store had in inventory and loans. The information was created in real time. The store operators in the stores were in charge, made decisions faster, more precisely. The in store and online channel to sell merchandise reduced the stores stress in figuring out what to do if the customer defaulted on their loan. We wrote a lot more loans. Our loan balances trajectories rocketed.

We did our homework and analysis. We conducted our focus groups and re-examined our business after launch. We then refined the methods we introduced. Please note: if you are currently selling on EBay and are unaware of your cost activities, you are losing money! If you have to sell the stuff for whatever reason, that’s okay, but know your costs and if you don’t have a relationship of technology between your store system and EBay stay tuned because it’s on its way.

My blog followers to keep your interest the first 5 customers will get this product FREE for the first year!

Thanks for your time today! There is a lot more to share.

Steve Mack

Why you should consider changing systems

Given the products that are available for Pawnbrokers, there is no reason to switch. Some are better than others in quality. They all do a good job with the basic feature package they offer. They are very reasonably priced.

All of these software packages are an emulation of Pawnshop business practices from the 50's - 70's. It is the way my dad ran his business. The coolest invention back then was carbon paper and the Uarco ticket dispenser, that is, until these products became available. I think a majority of Pawnshops today want to operate their business differently, but find it very hard to change. And even more, they don't know why it's so hard? It's impossible because of your current system. Systems dictate an operating philosophy and all of these products emulate the operations of the past. The most obvious question is the Internet. What successful retail or bank today doesn’t have an integrated (in store and online) ecommerce solution. "The Pawn Industry." It is time to look at our business with a fresh perspective. Let's do this together.

Alphapawn.net

pawnwizard.com

dataage.com

pawntastic.com

xpawn.com

pawndex.com

verticalc.com
PPSS software

Data Conversion. Our conversion solutions will be quick and simple. System setup will take less than a day and will require less hardware than ever before. 

SNEAK PEEK AT Bravo

BRAVO MOCK UP
 

We are very excited to show you the advanced mock version of BRAVO.  You can simply click on the image for an enlarged view.  Customer Information - will contain the essential information that is required for all transactions and easily accessible at all times.  BRAVO customer search enables smart technology to minimize duplicate customer records.  BBI - Bravo Business Intelligence is the next generation of useful data compilation.  Users at the customer counter don't have the time to cipher through charts, graphs, and reports.  Users need directives and answers.  Is this a good customer?   How good?  Why are they good?  What areas of the services our store offers do they utilize.  What can I do for this customer to enhance their customer experience and loyalty.   BRAVO will offer a variety of drop in BBI-components in the same manner as Apple Apps.  You get to choose what you want to see.

Employee Feedback - BRAVO will track each signed in employee/user.  There will be 3 levels of participants.  Gold, Silver, and Bronze.  Users will be awarded tokens for superior performance.  Users will be rated against their peers with in your store, company and Global BRAVO community.  Our success is determined by the accurate and participative input each person signs into BRAVO daily.  Each year BRAVO will award cash and recognition to outstanding users.

SMART SEARCH - is a BRAVO exclusive that recognizes Manufactures and Models, UPC codes, Store labels, Inventory Numbers, Receipts, and Reports that takes you to the process associated. Scan a inventory number it will forward you to the Point of Sale.  Type in Canon G11 it will forward you to the "Estimator" for accurate and up to date valuation for a Pawn, Buy, or Trade-in.  Its cool and smart!

JEWELRY ESTIMATOR - Another BRAVO exclusive is a way to no more guessing what a jewelry item is worth.  Hallmarks and Brands will be a breeze to associate to special piece of jewelry with BRAVO.  Select through a carousel of images to identify quality, color, and shape of Diamonds and Colored Stones.  BRAVO turns the novice into a productive identifier of product values saving time and broadening your expertise on the service counter.

Gmail - Integrated Gmail from Google.

Clock - Wow what a novel idea, click on it and "clock in".

Ebay, FedEx, MaxPawn, PayPal - no more double entry.  BRAVO will integrate all of these partners into a seamless accountable process.

We are moving quick so stay tuned and sign up for the newest announcements.

Steve