Pawnshops Experience Unexpected Decline in Business During Pandemic
As the country began to struggle during the initial months of COVID-19, many assumed pawnshops were poised for a boom. Unemployment began to increase to record high levels, which led many to assume that items like jewelry, electronics and other valuables would make their way to these shops to free up fast cash.
Thus far, the exact opposite has happened.
Surprisingly, local pawnshops have shared that they are experiencing a record drop in business. Fewer and fewer customers are coming in to pawn their possessions, and more are choosing to pay off their loans and get their items back sooner. According to many shop owners, these changes are nothing they have experienced before.
"My loan portfolio has dropped 50% since Jan. 1, which is unprecedented in the 25years that I’ve been in the business," said David Kaminsky, president of EZ Pawn Corp., a Long Island City-based business that has 15 pawnshops in the New York City metro area, and president of the Collateral Loanbrokers Association of New York, a trade group.
A big factor in the decline has been the government-mandated shutdowns. Before, consumers would often use pawn shops as quick access to cash to spend on entertainment, such as amusement parks and concerts. However, during the months leisure activities weren’t an option (some still aren’t) consumers didn’t need to borrow from their local pawnshop.
Also, it would seem that many customers are using their boosted unemployment benefits and stimulus checks to actually reclaim their belongings they previously used as collateral.
"We’ve been experiencing massive redemptions. Our customers are taking their items out. …. They’re able to get out of debt during COVID," said Rachel Wilen, president of Gem Pawnbrokers, a Brooklyn-headquartered business whose 24 stores include six on Long Island.
Pawnshop Owners Consider Their Options
As some pawnshop owners have begun to struggle, many are looking to what their options are for quick cash. For example, an instant approval merchant account can grant them access to fast cash in as little as 24 hours. As pandemic restrictions drag on, more pawnshops may find themselves in situations where they need a boost of capital to keep their doors open and operations running smoothly.
Other pawnshop owners say they expect business to pick up now that stimulus checks, unemployment increases and jobless benefits paid through July are ending – and there is no other relief in sight. This trickle of money drying up could lead consumers to return to pawnshops for quick cash.
"Now that the stimulus effect and unemployment benefits have been dwindled, I expect people with permanent job loss to experience more financial trouble, especially if virus concerns keep portions of the economy closed for an extended period," said James Bohnaker, associate director and economist in the Boston office of IHS Markit, a market information service headquartered in London.
Author Bio:Michael Hollis is a Detroit native who has helped hundreds of business owners with their instant approval merchant account solutions. He's experimented with various occupations: computer programming,dog-training, accounting… But his favorite is the one he’s now doing —providing business funding for hard-working business owners across the country.