ShareThisPawnshops, once considered the seamy underside of commerce, have become a mainstream destination for individuals and small businesses looking to cope in today's economy.
A recent market report by industry research firm IBISWorld in Los Angeles said the pawnshop industry "has thrived through tough economic times," with a 2.6 percent annual growth rate since 2006.
During that time, industry profit margins increased from 15.5 percent of revenue to 17.5 percent.
IBISWorld forecasts 2011 revenue at $6.1 billion nationwide; it's expected to approach $7 billion by 2016.
IBISWorld's analysis flatly states: "Declining economic conditions, including rising unemployment and falling income, have caused cash-strapped consumers to turn to pawn shops for immediate relief."
The proliferation of pawnshops in the mainstream financial lending/retail sectors has spawned some players decidedly removed from past pawn shop history.
The high-end Boca Raton Pawn outlet in South Florida touts designer handbags, pricey powerboats and eye-popping five-figure watches. In June this year, the founders of the Groupon daily online deal helped launch Pawngo.com, which bills itself as "the first full-service online pawn shop" in the United States.
None of this is a surprise to Stanley Lukowicz III, vice president of Capital City Loan and Jewelry in Sacramento, Calif. His father, Stanley Lukowicz, started the family business in 1992
"We call ourselves the lenders of first response," Lukowicz said. "We were actually seeing things happen in our shops before the recession. We could see that things were getting tougher out there more than three years ago.
"We'd have a small businessman come in and say, 'I need to make payroll,' and we saw more customers who were trying to make it through the tough times."
Items sold in Capital City outlets run the gamut. Pawnshop staples such as jewelry, watches, tools, musical instruments and electronics line the shelves. But they share space with bicycles, video games and toys.
A random sampling of customers looking to pawn or sell possessions reflected the times.
"My wife and I are counting pennies just so we can pay the bills. We're trying to squeeze out every cent we can," said Rick Sylvester, looking to sell a collection of hand-painted Revolutionary War toy soldiers.
"Christmas is coming up, so it's time to sell these, or the kids might not get any gifts," said Anne Kehl, carrying a box of colorful holiday nutcrackers.
The skyrocketing price of gold has produced a flood of customers. Stanley Lukowicz said about 75 percent of loans companywide are now tied to gold.
"Our revenue is up because gold is up," he said.
And unlike cable TV reality shows featuring pawnshops, the overwhelming majority (95 percent) of Capital City's transactions are loans, not shop purchases of customer belongings.
"Most of the time, people need a loan to get by," Stanley Lukowicz said. "And 85 percent of our (pawned items) are redeemed, with interest (paid)."
For a typical 90-day loan of $100, that translates to repayment of $117.50.
As in other states, California pawnshops are regulated. A pawnshop must send notice to a prospective default loan customer four months after a transaction. If the loan is not repaid within 10 days after that, then the shop can legally claim the item.
Regulations also include customer identification, a signature and a thumbprint on new pawns and most buys.
In some locales, transactions are videotaped, and merchandise is matched against missing items in law enforcement databases.
The regulatory hoops are designed to cut down on the once-common practice of thieves moving stolen merchandise through pawnshops.
(Contact Mark Glover at mglover(at)sacbee.com. For more stories visit scrippsnews.com)
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