The economic meltdown has been good for business at American Jewelry and Loan in Detroit, a 50,000-square-foot former bowling alley crammed with lawn mowers and snowblowers, bicycles and boats, an occasional car, and fur coats by the tens of thousands.
The parking lot of Les Gold’s pawnshop on Greenfield just south of 8 Mile is almost filled on a Friday afternoon, and the lines of customers inside are long as they wait, quietly, to turn over their jewelry or household items for cash.
Among the customers is Jamie Green of Westland, who had just pawned some speakers and was in line to get her cash. She hadn’t expected to wait for the money, which she said she would use to buy gas, oil and windshield wiper fluid for her car.
Gold said people like Green are one reason his loan business is up 5 percent to 10 percent from a year ago. But his retail business is steady this holiday shopping season because customers are choosing pawnshop bargains over traditional retailers.
“Times are much more difficult than in the late 1970s,” Gold said. “Yet a lot of people are coming in because of our inexpensive prices, so we’re seeing an upturn in retail.”
His showroom advertises a “Beaver Coat Blowout” sale while flat-screen TVs line the walls and diamonds up to 5 carats glow in glass display cases.
The National Pawnbrokers Association, a trade group with 2,400 members across the country, said it does not keep national statistics about whether business is up because of the financial crisis or the holidays. But Gold’s pawnshop is definitely not alone in seeing increased business: Cash America, a publicly traded chain of pawnshops based in Ft. Worth, Texas, reported a 12 percent increase in revenue in the first nine months of 2008 over the same period in 2007.
Pawnshops buy merchandise and lend money to customers – typically 10 percent to 20 percent of the value of the item being pawned, or surrendered, as collateral. Under Michigan law, shops can charge 3 percent interest and a $1 storage fee, per month, for 90 days.
“There’s nothing of any value that we don’t take,” Gold said as he inspected the storage area. It holds gas grills, jet skis, bicycles, a ladder, musical instruments and an antique car.
“What I’m seeing today is a lot more suburban people coming in” to pawn things, Gold said. American Jewelry makes about 600 loans a day and, traditionally, about 15 percent are not repaid. That number climbed recently to about 17 percent, he said.
Jason Silver, whose father founded Lew Silver Diamond Broker in Southfield, Mich., said the shop’s forfeiture rate rose from 5 percent to 7 percent in the past year as the economy faltered.
Jason and Lew Silver’s shop deals only in jewelry and they said they see more white-collar customers who use the shop as a bank alternative.
“We’re seeing small-business owners who need to cover payroll and can’t go to the bank to pay their bills” because of tightening credit, Jason Silver said. He added that he’s also seeing people who need financial help with the little crises of life: “The tire blows out and you can’t go to a bank for a $200 loan, it just doesn’t happen.”
One customer, Gold said, pawned every piece of jewelry she owned to bury her teenage daughter. “She did whatever it took to bury her child,” he said. Eventually, the woman got her jewelry back.
A customer at the store this day said she was pawning jewelry to help cover a utility bill, but declined to identify herself. “You pawn your jewelry to pay your bills,” she said. “Why walk around with your jewelry when you’re about to get your gas cut off?”