Pawn Redemption

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H&T chief executive John Nichols reveals the secret behind his success

In these times of economic uncertainty, with many industries struggling to survive, pawnbrokers are reaping the benefits of a soaring demand. Kat Slowe talks to H&T Pawnbroker chief executive John Nichols to uncover the secret behind his success.

H & T chief executive John Nichols sits in a chair at Corney & Barrow in St. Pauls. At first glance, he doesn’t look like a pawnbroker – that is, he still has hair, white teeth and is wearing a suit that looks as if it could have come from Saville Row. There also isn’t a gold chain in sight.

But then, this traditional view of a pawnbroker is very outdated, or so Nichols claims. In the last few decades, pawn broking has boomed into a profitable and respectable business, no longer consisting of dodgy deals in the back rooms of jewellers, but of transactions made out in the open and on the high street.

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Nichols joined H&T Pawnbrokers as chief executive in 1997. At the time he worked for former company owner Cash America, where he played a pivotal role in revolutionising modern attitudes towards the pawn broking industry, remodelling stores and successfully re-branding them as acceptable places to visit.

Nichols took this model with him to the UK and it proved a huge success. By 2004, when Nichols led a management buyout of the company from Cash America, with backing from Rutland Partners, the company operated 57 stores and Nichols was ambitious to continue expansion.

Nichols says: “We were trying to kick in the modernisation of pawn broking by getting high street facing stores, because until Cash America and when I took over Cash America, your pawn broking operation was always round the back of the jewellers, it was always the little door down the side.”

“They thought people wanted to be very secretive about it. Well, I think I blew that myth out the water.”

Nichol’s instinct seems to have been proved right. If you look round an H&T store, it could quite easily be confused with a local bank branch or small scale jewellers – some of the newer stores in Harrow or Wembley are certainly more upmarket in appearance, with the secure areas shielded only by transparent glass.

At the back of the store, behind the counter which you must pass through to gain access, are the jewellery vaults. What these contain will often vary, depending on the local area. In areas with a heavy Asian population, the jewellery will often be mostly 18 carat gold and, in areas of African concentration, usually 22 carat. Some of the stores also specialise in particular sectors, such as watches, and these will often carry Rolexes or Patek Philippe pieces.

In one corner, at the back, lies a collection of glass bottles containing acid, idiot proofed through colour coded tops. These are for testing the jewellery to determine its value. The white cap is for testing nine carat gold, the blue cap for 14 to 22 carats, the green cap for 18 to 22 carats, the orange cap for silver and the clear for base metals.

It is a relatively simple way of determining the value of the item, which is also weighed. Every transaction is recorded on the computer, with the customer’s details and a picture of the individual.

The system must work well. For, while many jewellery retailers struggle to make a profit, upping their stock of silver due to the continued high price of gold, the revenue to be made from pawn broking has suffered no such decline – though exactly what constitutes a pawn broking business is a little more difficult to decipher.

The chief executive claims that, aside from the company’s recent foray into cash-for-gold (H&T has opened 62 cash-for-gold-bars since last May), it operates more as a consumer friendly bank. That is, the jewellery acts as a deposit for customers needing a quick loan.

“Predominantly, our customers are from the C to D, or E demographics,” Nichols admits. “But, depending on where you are, 10 to 15 percent are A Bs, and we are not what you would call a top end pawnbroker.”

In some stores, as much as 90 percent of business stems from customers pledging their jewellery, with only 10 percent coming from clients seeking to sell. The intention is that the loan be paid back, in addition to an eight percent monthly interest, and the customer regains their property. Should they fail to provide payment, any excess profit made on the item at the auction above the value of the loan with interest, is returned to the customer.

Traditionally, such pieces are bought at auctions by retailers seeking stock, but increasingly now members of the public are catching on to the idea that these auctions are a great opportunity to snap up a good bargain.

Judging from the number of repeat customers on H&T’s computer system, pawning items also seems to have an addictive aspect to it, in much the same way as a credit card. Indeed, the similarities between the two are manifest – both involve high rates of interest and generally operate in the form of short term loan, though larger amounts can be arranged.

For some people, the pawn brokers is just an everyday facility, a system that enables them to go for a night out before receiving their pay check the next day. These customers will often just want money for a week or even a day. The lowest amount they can borrow is £5, though it can go up to as much as £25,000. At some stores, in areas like Chalk Farm, musicians have been known to pledge their musical instruments during the week, just to get them back for the weekend when they play their gigs, before re-pledging them on the Monday.

“People like it because it’s so easy,” Nichols says. “You have got a £100 bill to pay or, on the other end of the scale, you have got a guy who runs a business and has to pay £10,000 for some materials. How is he going to get it? He is not.”
With bank loans becoming increasingly hard to come by, for some pawning their jewellery is the only alternative. It is therefore no surprise that, at H&T, business is booming. The aim is to open 20 new outlets every year and to reach a target, with acquisitions, of 250 shops by 2015.

Yet, despite H&T’s recent success, Nichols remains determined not to rest on his laurels and count his profits. Competition is out there, most notably in the form of pawn broker Albemarle & Bond, which recorded 75 percent growth in H1 of this year. The need to constantly diversify to remain competitive is apparent and H&T seeks to do just that.

Later this year, the company is seeking to open a cash-for-gold/retail hybrid store, H&T Light, where customers can bring the old gold jewellery that they don’t wear and exchange it for another piece of similar value. A location for the store has not yet been found, but the company hopes to launch it within six months and, if it proves a success, the model could be expanded.

Retail is becoming an increasingly large part of the H&T model. The stores mostly stock second hand items bought from clients, alongside items which have failed to sell at auction. The company has also, however, recently introduced a few new lines of white gold diamond sets and watches, which it is hoping to expand this year.

Much of the jewellery it sells, claims H&T London manager Mark Harrold, is of better value and a higher quality than can be found at the majority of high street retailers. One reason for this, he explains, is that a lot of the high street jewellery – particularly the gold pieces – is currently hollow due to the high price of precious metal. Another explanation he provides is that while high street jewellers often put as much as a 50 percent mark up on their goods, H&T only take around 20 percent and, because the jewellery is second hand, it is automatically less costly than a new piece.

“Before I was in the industry, I would never buy second hand jewellery,” Harrold says. “Now, I would never buy anything else.”

H&T is hoping to further expand its operations by going online this year. It recently bought a small online company, which it plans to use as a platform to launch on the internet. H&T hopes to utilise webcam to evaluate jewellery and connect customers with its experts around the country.

“You have to start thinking that way,” Nichols says. “No-one has done it publically yet.”

Despite these ambitious schemes, chief executive Nichols is keen to emphasise that H&T’s pawn broking outlets will remain a primary focus, reasoning that ‘bricks and mortar can still acts as a conduit.’

With his target of opening over 100 new stores within five years, Nichols is certainly putting his money where his mouth is. Yet, with the way the business appears to be performing, it looks unlikely he will be pawning his personal possessions any time soon.

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