Trade grows 8% as taboos are broken and new consumers are reached.
The UK pawnbroking industry has grown 8% in recent years, as asset-rich but cash-poor individuals use what’s sitting in the safe for monetary loans. Now, with TV shows and advertising campaigns pitching pawnbroking to consumers of all ages and socio-economic background, three industry leaders tell Kathryn Bishop about new trends in pawnbroking, the impact of marketing and breaking taboos.
Open a copy of The Sunday Times or Stella Magazine and in between the adverts for luxury handbags, shoes and cars you might just spot one of the National Pawnbrokers’ Association’s advertising campaigns — debuted last month to promote pawnbroking as a viable finance option for middle-income individuals.
The campaign will run in various UK magazines, national newspapers and online through sites such as DailyMail.co.uk until January 2015. It is the fruit of research by the NPA to tap into a growing market for the pawnbroking industry – the middle-income, asset-rich, cash-poor consumer – and aims to raise awareness of pawnbroking, explaining how it works to increase its appeal as an alternative form of credit.
The NPA undertook research in 10 UK cities in a bid to understand the barriers that might be hindering the public from using pawnbrokers, with the revelation that many did not understand the pawnbroking process. Currently, about 4% of the UK public use pawnbroking, but 25% stated they would consider it in the future once they understood how it worked. As a result, the new NPA campaign and its supporting website findapawnbroker.co.uk have been rolled out in a bid to maximise consumer awareness.
NPA chief executive Ray Perry tells Professional Jeweller: “Pawnbrokers have realised that they need to promote themselves, so the NPA has been much more proactive, engaging with TV, radio and the press to create awareness. Our research recently indicated that there was a great deal of misunderstanding and lack of awareness about pawnbroking, especially among middle income earners, which is why we created our new national advertising campaign.”
This middle-income group has also become the focus of UK-wide pawnbroking giant H&T, which this year adapted its retail offer to better suit a shifting client demographic. “According to NPA research, the fastest-growing segment of pawnbroking customers is middle-income earners,” says H&T chief executive officer John Nichols. “At H&T Pawnbrokers we have data which supports this: the average pawnbroking loan has increased by almost a third in the past four years. In addition, the number of loans offered over £5,000 has quadrupled since 2010.”
Nichols adds: “Traditional sources of credit are increasingly difficult to access, whereas pawnbroking presents a feasible and flexible alternative, often carrying lower risks and costs. In fact, an independent assessment of pawnbroking by BBC Radio 4’s MoneyBox programme found that a pawnbroking loan is more affordable than both an unauthorised bank overdraft facility as well as a pay day loan.”
These findings hint at a higher value of product also coming in to pawnbrokers, with the likes of H&T rolling out 36 jewellery and luxury watch-focused retail fascias in 2014, known as Est1897. Here, pre-owned items are sold as the main product offer, while pawnbroking services are available at the back of stores for those purposefully seeking them out. “We have responded to this market change by opening up the asset classes we loan against and expanding our valuation centres with specialists able to identify, authenticate and value a wider range of specialist items,” Nichols explains. “Valuable items like diamond jewellery, designer handbags and Rolex watches can be pawned to raise money for projects or help [customers] through a time when cash flow is a problem.”
Perry outlines that middle-income customers, often with more expensive goods to pawn, currently contribute to about 20% of the pawnbroker market, while the remaining 80% are “working people and lower social income groups”. However, like Nichols, Perry believes the increasing middle-income client is the result of banks’ reluctance to lend. “Consequently many pawnbrokers have considered broader opportunities such as accepting designer watch brands and other luxury goods,” he says. As a result cars, boats and even fine wines have become assets accepted by pawnbrokers, who keep these larger items in third-party storage. “[Pawnbrokers] have achieved this by promoting their services online and have been thinking outside the box to consider how to store larger items that clearly wouldn’t fit in a safe,” Perry explains.
Promotion of pawnbroking has also been achieved by the rise of TV shows focused on the trade, such as Posh Pawn on Channel 4 – focused on the pawning of high-end, luxury goods – and Pawn Stars UK, on History. These two shows, aired during prime-time slots, have shown that pawnbroking is an option to raise funds for all kinds of reasons — from paying school fees, to helping renovate property.
David Sonnenthal sits behind the desk as founder and director of New Bond Street Pawnbrokers and in front the camera as one of the dealers on Channel 4’s Four Rooms. He has worked in the pawnbroking industry from an early age and day-to-day runs New Bond Street Pawnbrokers with his gem expert father Michael and colleagues focused on fine jewellery, diamonds and art.
Sonnenthal notes how being on TV has boosted the business’ outreach. “Being a dealer on Four Rooms has been a great experience for me [and] being on the show has made more people aware that New Bond Street Pawnbrokers exists. It has encouraged more people to look into what we do and specialise in. I would go as far to say we have become more approachable as a pawnbroker.”
New Bond Street Pawnbrokers has recorded a steady increase in high-end clients in recent years, with the business reporting an average 25% increase in its client book year-on-year. Sonnenthal explains: “Using our online platform we cater to clients not only within our local area but throughout London, the UK, and internationally. With the increased media attention on [the sector], I believe it really has opened up pawnbroking to all classes throughout the UK as an alternative method to raise an immediate loan.”
He adds that New Bond Street Pawnbrokers has sought to break “old fashioned taboos” with regards to pawnbroking services. “We do believe we are a stand-out store within the industry, creating an environment online and in-store that is unique, welcoming everyone from regular users of pawnbroking services to first-time users, or someone who may just be seeking advice as to the current value of a treasured family heirloom.”
As Sonnenthal notes, the internet has become an important element in the promotion of pawnbroking services and research made by members of the public. Social media has also taken centre stage, after the Financial Conduct Authority (FCA) this year proposed best-practice guidelines for promoting financial services online, to ensure consumers are given the full picture in such cases.
Says Perry of the NPA’s involvement: “Social media is a great way to allow pawnbrokers to reach out to a wider audience and increase consumer awareness. However, communication should be fair and clear and customers should have some understanding of the basic parameters of any financial offer.”
He continues: “We will be encouraging all of our members to effectively use social media platforms, ensuring that all pawnbrokers understand the guidelines set by the FCA.”
The NPA’s UK Pawnbroking Stats
• The industry grew 8% between June 2012 and June 2013
• The market is valued at £865 million
• About 2,145 pawnbrokers operating in the UK
• The average loan to businesses is £2,000 to £3,000 and is now typically used to make short term payment to creditors or staff rather than for business development
This feature was taken from the November issue of Professional Jeweller. To read the issue in full online, click here.