Pawn Shops

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 11,100 pawn shops in the US provide secured loans to individuals, using items of personal property as collateral. Firms earn interest and service fees on the loan, with interest rates charged varying by state. Pawn shops also generate revenue by selling used merchandise obtained from unpaid loans. They may also sell new and used items purchased from consumers or businesses.

Federal, State And Local Regulation

Pawn shops must comply with a number of federal regulations, as well as state and local regulations that vary widely from state to state.

Dependence On Gold Prices

A substantial portion of most pawn shops’ loans are secured by gold jewelry.

Industry size & Structure

The average pawn shop operates a single location, employs 6-7 workers and generates $8 million in annual revenue.

    • There are about 11,100 pawn shops in the US employing 72,600 workers and generating $42 billion in annual revenue.
    • According to the FDIC, 5.6% of unbanked US households and 1.1% of banked households used pawn shop loans in 2019.
    • The industry is concentrated, with the 50 largest firms representing 78% of industry revenue.
    • The two publicly-traded pawn chains are EZCorp and FirstCash (formerly First Cash Financial and Cash America), and they account for about 22% of retail locations.
                              Industry Forecast
                              Pawn Shops Industry Growth
                              Source: Vertical IQ and Inforum

                              Coronavirus Update

                              Apr 27, 2022 - Demand may Decrease If Federal Aid Program Program Renewed
                              • Expanded Supplemental Nutrition Assistance Program benefits are also set to fully expire once the Biden administration declares the COVID-19 public health emergency over, which could come as soon as this summer following the latest 90-day extension starting on April 16. Experts say that millions of families would be forced to choose between keeping food on the table and meeting other essential expenses if these programs aren't renewed or if new programs aren't established to replace them. Continuing food aid could help families that have struggled financially due to the pandemic and reduce the number of items brought to pawn shops.
                              • Some shops extended pawn loan terms from 30 days to 60 days to help customers during the pandemic. Shops could stay open to provide consumers with quick options for obtaining cash and paying bills during lockdowns earlier in the pandemic in states where pawn shops were recognized as essential businesses or financial institutions.
                              • President Biden signed the $1.9 trillion American Rescue Plan Act in March 2021. The plan’s direct stimulus payments to consumers, further extensions of federal unemployment benefits, and advance child tax credit payments may have reduced demand for pawn loans. The effects of government aid may have ended, however. Three key programs that helped put a dent in poverty - stimulus checks, supplementary federal unemployment benefits, and child tax credits – have run their course. As many as 4 million children may have fallen back into poverty in January after the child tax credit payments expired in December 2021, according to the Center on Poverty and Social Policy at Columbia University. Demand for pawn loans may increase with most aid programs ended and many workers’ savings exhausted.
                              • The pandemic could drive gold-based pawn shop transactions. Gold prices dipped in late March and early April of 2000, then rebounded and remained somewhat tepid for most of 2021. Gold prices remained resilient amid stock market volatility early in 2022. Demand for gold has gone up in early 2022, however, as investors use it to hedge against inflation and stock market volatility. Gold prices were slightly higher year over year in early February 2022 – about $1,835 per ounce. Bank of America analysts forecast in February that the average price of gold in 2022 would be $1,925 per ounce.
                              • Some shops reported significant upticks in gun sales since the onset of the pandemic. Gun demand moderated in January 2022, however, as sales decreased 42.6% year over year, according to Small Arms Analytics & Forecasting (SAAF). Gun sales were nearly on par with those in the pre-pandemic month of January 2020, however, suggesting that overall demand is still strong.
                              • Banks cut back on credit card, auto loans, and other kinds of personal loans at the onset of the pandemic amid worries of massive waves of default. The feared defaults never occurred, however, due partly to government stimulus efforts. Lenders are loosening up their lending standards as the economy improves, which may result in loans to consumers who could not get them earlier in the pandemic, according to The Wall Street Journal. Nearly 30% of banks lowered their underwriting standards in the first quarter of 2021, according to the Federal Reserve. Banks further eased underwriting standards in the second, third, and fourth quarters of 2021. Some banks are reducing their credit-score requirements and offering more generous loan deals. Looser lending standards among banks could reduce demand for alternative lending options, including pawn loans.
                              • Billions in federal rent aid have had trouble reaching those who need it, according to The Wall Street Journal. The US Treasury Department administers the Emergency Rental Assistance (ERA) program but processing aid applications and dispersing the funds has fallen on local governments and charitable organizations, many of which have been overwhelmed by the volume of demand. Manually vetting and approving the applications is time-consuming, and some local governments and organizations had trouble hiring enough staff and drafting funds distribution rules. Treasury required local governments and other organizations that haven’t disbursed at least 65% of rent relief funds by September 30 to submit an improvement plan for expediting payments. The Treasury Department is redirecting unused rental-assistance money from some states and localities to others that had backlogs of aid requests, according to The Wall Street Journal.
                              • The Biden administration announced in August 2021 the largest permanent expansion of the Supplemental Nutrition Assistance Program (SNAP), or food stamps, in the program’s history. Average benefits increased 25%. Expansion of SNAP is the result of legislation passed in 2018 that required the Agriculture Department to review basic program assumptions about the nutrition required for a healthy diet. Additional food aid could help families that have struggled financially due to the pandemic and reduce the need for pawn loans.
                              • Pandemic-related supply chain disruptions and strong consumer demand have driven inflation to highs not seen in 40 years. The producer price index was increased 7.5% year over year in January, marking the biggest jump in prices since February 1982, according to the Bureau of Labor Statistics. January was also the eighth consecutive month when inflation was above 5%. Some of the most significant January price increases were for housing, food, and electricity. While a strong labor market has increased worker pay, wage growth has not kept pace with inflation, eating into consumers’ savings. In January, Fed Chairman Jerome Powell told lawmakers of inflation’s impact on consumers, “particularly for those less able to meet the higher costs of essentials," such as food, housing, and transportation. If vulnerable consumers feel their budgets pinched, they may turn to pawn loans to make ends meet.
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