When it comes to pawn industry trends, my father told me something many years ago that has stayed with me throughout my career:

The pawnshop is one of the best barometers of what is happening in the local economy.

Long before many economic statistics make the headlines, pawnbrokers see changes taking place across the counter.

We see when customers need more money. We see when discretionary spending begins to tighten. We see when people who might ordinarily pawn an item decide to sell it instead. We see changes in foot traffic, retail spending, loan demand and merchandise availability.

And based on what Pawnshop Consulting Group is seeing today, the signals are changing.

PCG analyzes operating and financial data every month from more than three dozen client groups across the United States. While no two markets are identical, the pawn industry trends emerging from this analysis are becoming increasingly visible—and I believe pawnbrokers should be paying attention.

Loan Demand Remains Strong

The good news is that pawn loan demand remains relatively strong.

Across many of the markets we monitor, outstanding loan balances continue to increase. Consumers continue to need access to short-term liquidity, and pawn remains one of the most immediate and accessible ways for them to obtain it.

But we also need to understand what may be driving that demand.

Household budgets are being squeezed by the cost of everyday necessities. Fuel, diesel, groceries, insurance, housing and other expenses continue to consume a greater portion of many family budgets.

That pressure can be especially significant among the working-class and lower-income demographics served by many pawnshops.

When the available money supply inside the household tightens, pawnshops often see it early.

That is why our industry can be such an important economic bellwether within the communities we serve.

The Gold and Buy Cycle Is Beginning to Change

Among the pawn industry trends PCG is monitoring closely is the changing relationship between buys and loans.

Over the past six to nine months, PCG observed buy volume increasing sharply relative to pawn loan volume across a number of our client companies.

One likely contributor was the dramatic movement in gold prices.

As gold values increased, customers who might historically have borrowed against their jewelry had a greater financial incentive to simply sell it. That created increased gold-buying opportunities for many operators.

But that trend is beginning to change.

As gold prices have backed away from their highs in recent months, we are also seeing the incoming flow of gold decline among many of our clients. Correspondingly, the strong upward cycle in overall buy volume has begun to slow.

PCG specifically tracks buys as a percentage of loans made as a key performance indicator.

Why?

Because it can tell us several things.

It helps identify changes in customer behavior and merchandise flow, but it can also provide insight into how effectively our frontline teams are qualifying customers.

Are we determining whether the customer’s real objective is to sell?

Or could that customer have been better served with a pawn loan?

Those distinctions matter.

Retail Sales Are Sending Another Signal

Among the pawn industry trends that concern me most right now is the continued softening of retail sales.

Across a meaningful portion of the PCG client base, over-the-counter and in-store retail sales are trending downward.

In some markets, we are also beginning to see reduced foot traffic.

That should get every operator’s attention.

It doesn’t necessarily mean customers no longer want what we sell. It may simply mean that discretionary dollars are becoming harder to find.

When families are paying more for groceries, transportation, housing and other necessities, purchasing jewelry, firearms, electronics, tools and other discretionary merchandise can move further down the priority list.

So what do we do?

We compete harder—and smarter.

This Is Not the Time to Wait for Customers to Walk Through the Door

When traffic slows, doing the same thing we did yesterday and hoping customers return tomorrow isn’t a strategy.

Pawnshops need to become increasingly proactive about creating traffic.

That means stronger and more consistent social media.

It means better digital marketing.

It means staying visible and involved in the local community.

It means communicating value instead of simply putting merchandise in a showcase and waiting for somebody to notice it.

And it means giving customers more reasons—and more ways—to buy.

Value, Layaway and Inventory Management Matter More Than Ever

Today’s consumer is looking for value.

Pawnshops have one enormous competitive advantage:

We control what we pay for our merchandise.

I have said for decades that pawn is one of the most recession- and depression-resistant industries I know because we have tremendous control over our cost basis.

But that advantage only matters if we use it.

We need to price merchandise intelligently, maintain appropriate margins and, most importantly, turn inventory.

A product sitting on a shelf isn’t producing anything.

This is also precisely why PCG continues to advocate aggressive use of layaway programs, including the 10-10-10 approach we have been introducing to clients for decades.

When discretionary cash becomes tighter, giving a customer an affordable path to ownership can make the difference between completing a sale and watching that customer walk out the door.

The Competition Isn’t Standing Still

Traditional pawnshops are not the only businesses pursuing these customers.

Traveling and roaming gold buyers, jewelry buyers, online marketplaces and other competitors are fighting for many of the same transactions.

We cannot assume that decades in business or a familiar sign on the building will automatically earn the customer’s business.

We have to outshine them.

We have to out-value them.

And we have to out-service them.

That means combining competitive lending, intelligent buying and value-priced merchandise with something that competitors cannot easily duplicate:

Exceptional, white-glove customer service.

Know your customers.

Qualify them properly.

Follow up.

Create relationships.

Give them reasons to return.

Make doing business with your pawnshop noticeably different from doing business with everyone else.

Pawn Industry Trends Change—But Pawn Has Always Adapted

I have spent more than five decades in this industry, and I have watched pawn businesses operate through recessions, inflation, changing interest rates, changing gold markets, technological disruption and dramatic shifts in consumer behavior.

The industry adapts.

That’s one of its greatest strengths.

Industry education, collaboration and advocacy also remain important resources for operators through organizations such as the National Pawnbrokers Association.

The pawn industry trends PCG is seeing today deserve our attention, but they shouldn’t create fear.

They should create action.

Watch your numbers.

Know your KPIs.

Understand what your loan balances, buys, inventory turns, retail sales and customer traffic are telling you.

Listen to your community.

Market aggressively.

Create value.

Raise the level of your customer service.

And never forget that when the economic environment changes, the pawnshop often sees it before almost anybody else does.

The signals are changing. The opportunity is still there.

The pawnbrokers who recognize those signals early—and act on them—will be the ones best positioned for whatever comes next.

Outshine. Out-value. Raise the bar.

Jerry Whitehead
Founder & Senior Strategic Advisor
Pawnshop Consulting Group, LLC