Thursday, September 20, 2012

"Does It Work?"

Pawn Broker - Installment III

In stores one of the most common questions is: Does it work?

Of course it works. We do not even consider taking in an item without making sure it works. We would not want a broken item as much as you would not want a broken item. No pawnshop is willing to pay hard earned cash to attain something they could find in a junk yard; moreover, no pawnshop is willing to pay hard earned cash for something they couldn’t turn around and get rid of through selling.

Majority of merchandise found in pawn shops on sales floors are pre-owned, this does not mean that they are worthless items. The pawn shop is the ideal place for economics majors. At one point this floor item was either bought by the pawn shop, or the loan was left outstanding for a substantial amount of time. An item may be pre-owned but the longer the store sits on the item, the longer the store clerks allow the item to depreciate or in the case of gold recently appreciate. They’re going to price an item when it goes on the floor for what they think it is worth to the average customer. If a customer comes in and the clerks have been sitting on the item for awhile, they are probably more likely to sell the item at a cheaper price; however, the store owners are usually (and understandably) not willing to go lower than what they took it in for.

It’s a hard concept to explain to a customer when they’re asking, “How come you’re loaning me a dollar when you can turn around and sell it for three?” Well, the two dollar difference pays for utilities, storage, postage, payroll, accountants, etc. but most importantly, security of your item. Those two dollars just got stretched a long way… and of course you expect the pawn broker to make enough to get by, so they can continue giving out loans. The economics of the business holds the pawn brokers accountable, almost to the point of saying they are more honest than the average bank that is backed by the government with empty hands.

Well, how about an item that doesn’t really devalue? Like Jewelry. “I paid thousands for this ring, I expect thousands for it now.” Thinking it devalues or appreciates, is not the way a pawn broker looks at items on the loaning side of the business. The pawn broker determines what they believe the true value is. Brand name items might sell in the store, but a pawn shop could never find another customer readily willing to pay what it was initially worth. So what is jewelry really worth to the pawn broker? Weight in gold? Clarity of Diamond? All Jewelry is based on 4 Cs: Cut, Clarity, Color, and Carat. Every diamond that comes in to a pawn shop is tested, even unmarked gold is tested. Gold is paid for usually within a percentage to the gold rate on that particular date. 

The real question the pawn broker asks himself in the end is: What good is one more ring to me? The answer is: none. The pawn broker is there to serve the customer and receive a small percentage skimming over the top to eventually help the business’ bottom line. If the customer is selling or trying to acquire a loan on an item, it is always best that they come in with a price in mind. Not just saying, “I want to get rid of it, what will you give me for it?” As aforementioned, the answer would be: nothing. A pawn broker becomes a packrat of sorts filling rooms with items that they personally do not want or need. It is always better if the customer comes in for a loan thinking realistically, knowing the pawn broker doesn’t really want their item, saying, “I really am trying to acquire ___$ can you help me with that” and then go from there. The customer will get much further in negotiating than if just asking “what will you give me for it.” It’s a yes or no, and if taking out a loan, that’s what it is all about.

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