Pawnshops report rising sales, especially of tools, guns

Pawnbrokers - the folks who do business at the gritty end of the economy - say they're starting to see glimmers of hope in an economy that has battered them and their customers.

A half-dozen pawnbrokers interviewed recently said business could be better, but they're seeing increased sales and redemption of tools, perhaps an early sign the building industry is on its way to recovery.

Kaz and Georgia Warszawski of Kash's Gems on East Platte Avenue said sales and redemption of pawned tools have been stronger lately, with customers telling the couple they're starting to find construction work on area military installations. Charlie Bliss, retail manager at Ace Loans on Platte Avenue, said he's also seeing what he calls a "strong trend" in tool sales.

That doesn't mean bidding wars are breaking out over drills and compressors.

But the Warszawskis said the steady sales are a turnaround from last year, when construction workers were pawning the tools of their trade just to pay bills.

Across the street at Acme Pawnshops Inc., co-owner Tom Frezza also said sales of pawned tools have been pretty steady.

But Frezza said his big seller represents an economic stimulus that President Barack Obama may not want to claim for his administration.

Since the election of the Democratic president, sales of handguns at Acme have doubled, a trend that pawnshops and retailers nationwide have noticed and which apparently is being driven by fears that stricter gun-control laws are in the offing.

Although Frezza has seen a small drop in the percentage of people who redeem their pawned merchandise - typically 75 percent and now down to about 70 percent - that has not happened with firearms.

Few of those who pawn guns at Acme fail to redeem their weapons, he said, so he's ordered guns from wholesale and retail outlets and buys them directly from private owners to feed the demand for heat.

Still, despite these two bright spots, pawnshop owners say their usual customers, often the first to feel changes in the economy, are still struggling with an economic slowdown now into its second year. And pawnshop owners have been sharing their pain.

That's because many of their regular customers have either run out of items to pawn or are not returning to redeem their merchandise.

Those trends, plus competition from check-cashing businesses, have hurt pawnshops' cash flow, and that hinders their ability to make new loans, the pawnbrokers said.

Most pawnshops make the majority of their profit by loaning money on personal property left as collateral.

The property can then be redeemed when the loan and interest is repaid within a specified time.

If the loan isn't repaid, pawnbrokers can sell the items.

But that is less lucrative than loans, and there's a risk the merchandise can linger on shelves unsold.

At Ace Loans, about 85 percent of customers typically return and pay to retrieve the possessions they've pawned.

But over the past year and half, that figure has dropped to just 40 percent, Bliss said.

"The common assumption is that pawnshops are being flooded with cheap merchandise," he said.

"But after our customers have pawned their guitars, their computer games, the TV, the wedding bands, the tools, the pickup, that's it. Then they're staying with relatives. If your legs are short, you can't jump very high."

For Ace, the decline in redemptions - and the soft sales of merchandise that has been left more than 40 days - has forced the family-owned business to lay off some employees and push its unredeemed merchandise on eBay.

For example, the Platte Avenue store recently sold a Gibson guitar to a seller in Singapore. Bliss said the $1,000 guitar could have sat on its shelves for a year before selling.

The shop also recently sold a titanium shotgun for $1,500 to an out-of-town gun dealer.

At Kash's Gems, the Warszawskis laid off their four employees and now rely on their sons' help. Searching for a way to perk up sales, the couple have started to advertise wares on the Internet through craigslist .com.

That tactic has resulted in a few sales of large-ticket items, including a pottery kiln, to out-of-town customers.

Mister Money on Colorado Avenue is now seeing steady business from real estate and insurance agents, mortgage brokers and car salesmen, who are pawning larger diamonds, Rolex watches and more-expensive musical instruments.

Timothy Lanham, president and chief operating officer of the Fort Collins-based corporation, said these unlikely customers often say they need cash to carry them through until they can start making the deals that bring in commissions.

Despite the pickup in tool and gun sales, the pawnbrokers were split on what they might mean for a quick recovery of the economy.

Count Kaz Warszawski among the optimists: "A lot of people are spending money again."

Consider Georgia Warszawski among the unconvinced: "It could be better."
Frezza at Acme Pawn has seen lots of folks borrow money in hopes of getting out of financial trouble.

He reckons it works no better when a government heads down that precarious path:

"I don't think it's going to get better tomorrow. We have a ways to go," he said. "I don't think you can borrow money to get out of trouble."
Bliss of Ace sees better days ahead.

"I'm right down here at the bottom of the pond. We're doing more buying and selling, and I see things picking up by midsummer and coming around faster than many think," he said.