Changing Environment for the Pawn Industry and how to Define Your Niche
The Pawn industry has been witnessing some dramatic changes on a global basis and the very ground on which we stand upon is shifting right under out feet.
Prior to Covid we had been witnessing contracting Loan Balances across the US market up until late 2018 and were also seeing steady declines with “instore” retail revenues”.
In 2019 we saw relatively good loan growth as well as movement upward with retail revenues for most in this industry, followed by a big change in 2020.
Loan contraction may best be explained in some cases by what appeared to be a booming economy up until early 2020. Retail revenues had been primarily declining as the popularity and the expansion of online sales continued to explode. As recently witnessed, online sales toppled over 560 billion in 2019 and will surpass 18% of all sales in the USA in 2020. That was a 14% increase in online sales in 2019 over 2018 and was 10.7% of all sales in 2019.
Post COVID EVENT
Post Covid, we saw loan balances diminish between 20 – 60% across the USA in the first two quarters of 2020. Other countries were vastly affected as well dependent upon what may have happened to them from a lock down standpoint or other.
Retail revenues in the USA have been quite solid from the stimulus money and more that was poured into the economy by the FED. This is also what led to the large movement of loans moving downward. Gun sales are in record territory in the USA coupled with COVID, the riots, and many other aspects of social shifts we are witnessing in the country today. See Pending Tsunami of Loans as Predicted by PCG.
AS we move into the 3rd QTR of 2020, we are now starting to see some movement of loan growth once again with steady inclines being reported around the USA currently.
This could change with the next round of stimulus temporarily, but with some estimated 10 million + people formerly employed out of work, that will change the dynamics considerably in my humble opinion for loan and cash demand, some of which we are already witnessing.
It is estimated more than 20,000+ businesses, mostly small ones will close and are failing currently as it relates to the virus and how we have dealt with it overall in the USA.
The growth in online sales will continue to grow and typical brick’ n’ mortar retail operations are in trouble. Amazon indicated Q1 sales in 2020 were 16 billion ahead of Q1 2019. Online sales are spiraling upward at an advanced pace.
52% of the Fortune 500 companies have failed in the last 15 years! Thousands of brick n’ mortar stores have closed up as a result and the fierce online competition will continue to grow in demand and result.
The Pawn Industry overall has failed to make the leap and advance their online presences dramatically by encompassing the vast amount of online exposure that anyone can generate for their businesses online and beyond.
This is also coupled with a less engaged, and far less superior staff typically required in this today to keep moving forward. PCG also offers high-level professional recruiting services, click here.
Pawnshop Closures in the USA and Globally
PCG is estimating that many small mom and pop pawnshops will not survive the next two years with the chaos in the economy and the country currently as many have failed to hold onto to solid cash reserves in this Topsy turfy economy we are currently in during this Pandemic. For the same, many of our clients around the world are experiencing similar, if not more drastic country shut downs and more primarily due to poor capital resources, many are in trouble globally.
Necessity for Changing Business Models
Authentic shopper engagement continues to help retail pawnbrokers compete in this every increasingly competitive environment. This coupled with advanced technology options that are available to pawnbrokers to be more technically savvy and by providing more options for their consumers to shop, make payments, and stay in constant contact with their customers through mobile technology and more is much more consumer friendly and easy.
Customer Convenience and Importance OF
PCG has been involved with on-boarding mobile payment platforms for many of our clients which provides extreme ease for your consumers to make payments, look at their loans and layaway’s, as well as maintain constant contact with your customer base. Customer convenience remains paramount to maintaining/growing your business. For owners who adapt, one of our platforms, with client permissions, allows us to extract KPI data, specific performance data, personnel productivity data and more in real time and can provide constant monitoring of their key data and more for spotting and acting on trends in real time, which is also much more paramount in today’s business environment. Also being offered up at very affordable rates with a host of supportive services to benefit the users.
The retail industry is changing at breakneck pace. Online channels and digital services are shaking up shopping and purchasing trends, prompting newfound emphasis on in-store experiences. With closure of countless large and small stores in recent years, including many pawnshops, pawnbrokers and retailers need to rethink their business models to remain relevant in today’s highly competitive environments in which we contend with.
Pawnbrokers that fail to innovate will have a higher possibility of loosing out to competitors that are nimbler and more aggressive. Businesses must place a focused emphasis to understanding their customers – past, current, future. Mega retailers like Blockbuster and Toys R’ Us weren’t safe from changing demographics and economics.
Our opinion has always been these remain good reasons for always testing new opportunities to strengthen our business and think beyond the way things have always been done. Think outside of the box is the ol’ adage here!
Brick N’ Mortar retailers have a huge opportunity to fundamentally rethink the in-store shopping experiences, especially with the up and coming Gen Z population. It turns out that Gen Z values real-world retail for experience and discovery – with some recent reports showing that 60 percent of the Gen Z crave a different experience every day. While 75% prefer to do as much shopping and related as possible online. 80% look forward to shopping in store when they have time, which happens to be a common misconception.
The rise of pop-up concepts is a prime example of this offline and online convergence, once online only retailers like rent the runway, and bonobos have invested with IRL (in real life) connections via physical storefronts. If businesses can continue to add more personalization to their businesses both online and in-store, it’s not difficult to uncover a variety of opportunities to attract and retain new and old customers.
Boring Retail is DEAD
Do brands live a predictable natural life cycle from to growth to maturity to deterioration to death? No! Brands can thrive consistently, if properly managed is what many of us have witnessed from our worldwide audiences.
When Toy’s R Us announced it was closing its doors for good it marked the end of an era, now followed by Pier 1 Imports, closing all their doors permanently much like their parent company Radio Shack did as well.
It was obvious competition from mega retailers Walmart, Amazon and Target contributed to these companies’ ultimate stumbles. Toy’s R’ Us failed to keep up with changing trends in consumer behavior and childhood play. The stores were simply too large and jammed with inventory Nostalgia, it turns out, this practice isn’t enough to get customers in the door.
This is where many pawnbrokers have failed historically and are failing today. So many stores examined are jammed full of inventory that often falls into a “museum” category. Especially when looking at product that is priced into the stratosphere, or simply isn’t available for sale at all.
So many stores have aging inventory dying on their shelves which does little to attract new consumers into the Brick’ N’ Mortar aspect of our retail pawnshops.
Customer AS King
In this rapidly changing marketplace, nothing is more critical than embracing the power of in-store experiential marketing strategies as a direct means to boost sales of product and loans. There are several examples of traditional retailers that have worked to adapt to consumer demand.
Increasingly we are finding more Pawnbrokers are building or converting their brick’ N’ mortar stores with much more access to e-commerce and social media, all of which the necessity will continue. Increasing customer experience is increasingly important, this is online as well as in-store from what we are witnessing.
Operators that may have an emphasis in musical instruments for example are establishing areas within their facilities where customers can play or examine a wide range of instruments with some supportive staff members who are knowledgeable of the specialty instruments and more.
Some operators may have emphasis in games and game systems, here again, knowledgeable staff members in stores that provide ease of access in demonstrating and testing games and or game systems enhance the customer experience.
Same could apply to many other categories various operators may choose to do business in such as, LOANS, Luxury Handbags, Jewelry, Firearms, Car Audio, Sound Equipment, and other categories. Our shoppers also are content creators for those of us who are paying attention to them.
The Industry leading mantra should be “White Glove Customer Service” is SO important in today’s environment. Your customers have choices, are you doing your very best every day?
Standing Apart from the Crowd
What worked for stores in the late 1990’s and early 2000’s clearly isn’t what is working now. Today’s customers are seeking and want more information on how to get more out of either their pledged goods and or purchases and how to maximize their relationships with a brand or store.
For business owners, often determining how and where to start is the highest hurdle. Beginning this process with an evaluation of your processes which would include, training programs, store layouts and marketing materials to name a few in order to make sustainable and impactful changes. Prosperous pawnbrokers with emphasis on retail constantly reexamine their stores atmosphere and the elements that influence their customers decision making processes. They make their stores inviting and interactive so that no two visits are ever the same!!
This combined with friendly knowledgeable staff can take your customer experiences from dull to exciting and genuine. Every element of the store goes into the customer experience. Going the extra mile will help your business stand apart from the competition and even the big box retail stores in which many of us compete with. Especially in today’s environment or age of always-on consumers who switch between shopping instore to swiping and tapping on their mobile devices!
Retail is far from dead, but boring retail will not survive in this new era of commerce!!
Pawnshop Consulting Group, LLC.