Pawn Shops
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 10,600 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 5-6 workers and generates $8.6 million in annual revenue.
- There are about 10,600 pawn shop establishments in the US employing 57,300 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
Recent Developments
May 8, 2023 - Interest Rate Increase Intensifies Recession Concerns
- The Federal Reserve voted to raise interest rates by another 0.25 percentage points on May 3 despite concerns about a possible recession later this year. Pawning activity may increase if a recession, combined with high inflation, make it more difficult for some people to meet recurring expenses. "It's as if the whole country takes a pay cut,” said David Rosenberg, president of Rosenberg Research and former chief North American economist at Merrill Lynch. The latest rate hike is the 10th in a row since the Fed began its program of quantitative tightening in March of last year.
- Supplemental Nutrition Assistance Program (SNAP) Benefits decreased for millions of recipients on March 1 due to cuts in the 2023 Omnibus spending bill. Some states ended their EAs in 2022 but more than half maintained the supplemental benefits into the new year. Every household in the 32 affected states, Washington, DC, Guam, and the Virgin Islands receives at least $95 per month less now that enhancements to the Supplemental Nutrition Assistance Program have ended, according to the Center on Budget and Policy Priorities. Some households will see a loss of $250 or more in benefits based on their incomes. The number of items brought to pawn shops may increase as people struggle to keep food on the table and meet other essential expenses.
- About 4.5% of households nationwide were unbanked in 2021, according to a survey by the Federal Deposit Insurance Corporation (FDIC). That’s the lowest rate the agency has recorded since it started the survey in 2009. At least 30 million unbanked or underbanked American households use pawnshops each year, according to the National Pawnbrokers Association. The coronavirus pandemic may have played a role in lowering the rate. One in three households that added a bank account since March 2020 said that they did so because of an incoming government benefit payment. Those could include unemployment benefits or a pandemic stimulus payment. The pandemic may also have contributed to account closures, however. The FDIC survey found that one in five recently unbanked households closed an account since March 2020 because someone lost or quit a job, was furloughed, had hours reduced or had a significant loss of income.
- Climbing interest rates and prices are putting pressure on people’s finances but most people aren’t getting big loans from their local pawn shop. The average is about $150, according to the National Pawnbrokers Association (NPA). Industry experts have noted a pattern of people buying items when government subsidies were helping out, and then coming in to use those items as security for loans as the economy tightened and everything got more expensive. About 30 million people who don’t have a bank, or access to bank services, use pawn shops every year, according to the NPA.
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