The business model of the pawn shop dates back over 3,000 years and remains largely unchanged: A customer in need of some cash gets a loan from a merchant, using a personal possession as collateral. The pawn shop holds the property for a predetermined amount of time, charging interest on the loan. If the customer can pay his debt before the deadline, he gets his property back. If not, it's the pawn shop's to resell.
While the basic transaction is much the same as it was in ancient China, the reputation of the pawn shop industry has fluctuated wildly. Pawn shops have often been portrayed and viewed as vaguely threatening stores located in seedy parts of town, where only desperate customers would dare venture to.
Today, the modern pawn industry has become something else entirely. Many of these shops, which also operate like small banks, are publicly traded companies and are becoming cultural phenomena. The embodiment of the new era of the pawn shop is Rick Harrison, star of History Channel's monster hit Pawn Stars and author of the book "License to Pawn". Harrison, who runs the Gold & Silver Pawn Shop in Las Vegas, Nevada recently sat down with Breakout to discuss the economy, misconceptions about his business, and the endless number of curios he comes across when dealing with the 3,000 to 4,000 customers coming through his shop every single day.
Harrison immediately addressed the lingering perception of pawn shops preying on the down-and-out, or especially in Las Vegas, desperate gamblers down to their last chips. Despite the tough times, nearly 80% customers reclaim their goods; meaning a pawn shop transaction is more like a bridge loan for the roughly 25 million Americans without a traditional bank account, rather than a legitimized loan sharking operation.
Which isn't to say the pawn shop business is impervious to the economy. Most assume the stores do better in a weak economy; but they don't. Harrison explains that it's the nature of buying and selling that changes based on economic conditions.
"When times are good, I'm buying less stuff and I'm selling more stuff. When times are bad, I'm buying at lot of stuff but it isn't moving like it used to," says Harrison. Reflecting the building slump in Vegas, there's a glut of construction-related goods coming into his shop, but very little demand from buyers. As any student of economics will tell you, too much supply and little demand means lower prices. "At this point, we have just stopped taking construction tools altogether. That's how bad construction is in Las Vegas," says Harrison.
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