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With supply chain doors closing, pawnbrokers see a window

The message has been circulating for months: Don’t put off buying holiday gifts until the last minute this year. Delivery delays mean some store shelves have less to offer than in the past. And a global shortage of computer chips could mean some items are completely unavailable.

This may be bad news for some, but not everyone sees it as a bad thing.

Pawnshops are hoping the supply chain crisis will prompt shoppers to reconsider buying second-hand.

“I’m always surprised we’re not the first stop,” said Ed Pierce, owner of the monster pawn in Bloomington and Peoria.

Pierce describes himself as genuinely shocked that people are paying top dollar for things like musical instruments and camera gear without checking a pawn shop first.

But he said when it came to buying used goods, people tended to split into two camps.

“Some people never think they want to buy used, but some people that’s all they want to do,” Pierce said.

But as supply chain issues continue to escalate, the industry sees an opportunity to win new business.

Kelly Swisher is the president of Illinois Pawnbrokers Association. He senses a bit of a change in the broader perception of pawnbrokers. Especially when it comes to electronics, Swisher said, people are starting to question the wisdom of paying full price for the latest product.

“The electronics that are produced today are already obsolete when they sell them to us. His replacement is already under construction somewhere,” Swisher said.

Some people will always be looking for the latest and greatest, making pawnshops both a good repository and a relatively new source of electronics.

“Instead of these things ending up in a landfill, it makes sense to reuse and reuse them,” Swisher said.

Buying and selling with pawnshops is a good way to alleviate environmental concerns, Swisher said. The world is already full of stuff. So instead of creating a demand for more, just buy what’s already there.

Swisher said second-hand consumption also has social benefits.

“There is huge pressure to start using recycled gold,” he said. Mining for precious metals is hard on the earth and often involves abusive labor practices. Broken or unwanted jewelry that is sold to pawnbrokers is in turn sold to a processor and melted down for reuse, which facilitates the demand for new gold.

Purchasing goods and materials is a big part of what pawnbrokers do. Some purchases may be direct transactions – like broken gold – but most occur through a loan.

Someone who needs a quick, small loan – say $100 – takes a laptop to a pawnshop. The broker takes the item in exchange for the money, giving the person an agreed amount of time to essentially buy back the laptop for $100 plus a service fee.

If the person decides they don’t want (or can’t afford) to pick up the laptop within the time frame, the broker keeps it to resell. The person keeps the $100 and the transaction is complete.

Pierce of Monster Pawn said pawnshops basically operate like banks specializing in small loans. And given that people tend to turn to pawnshops for quick cash, he was surprised there hasn’t been an increase in transactions during the pandemic.

“If you had asked me at the start, I would have thought we’d be lending money like crazy,” Pierce said. But he thinks government stimulus checks may have gotten people through.

Almost two years later, the pandemic is still there. Government stimulus measures are running out of steam, but the economic effects of COVID-19 are not. So Peirce thinks he might see increased interest in pawnbroking as the holidays approach.

“I think a week before Christmas … maybe the phone will be ringing non-stop,” he said.

Swisher said at his Arlington Heights store that the phone has been ringing for weeks. Callers are usually looking for a specific item.

Everybody looking for game consoles right now,” he said.

Thanks to the shortage of computer chips, game consoles are extremely rare. Swisher said he couldn’t keep one on the shelves for more than 24 hours. This is good news for someone who has a game console for sale, but not so good for someone looking to buy.

But pawnbrokers stand to gain on both sides of the equation. And pawnshops are perhaps the rare industry that will benefit from the supply chain mess.

Pierce believes fewer options can win more converts across the industry.

“If the supply chain (crisis) stays and continues with us, I think we’re going to be more and more of the option,” he said.