“The pawnshop industry has not been the focus of digital transformation, but we want to change that. DelfinGroup wants to develop a product in a digital environment, offering a pawnshop loan in a way that meets the requirements of today’s customers. We want not only to strengthen the leadership position in the industry, but also to become industry changers”.
AS DelfinGroup board member Sanita Zitmane states this in an interview.
How would you describe the represented sector, what is the current situation and the main trends?
It has been a year since the effects of the pandemic affected the pawnshop industry worldwide. Major market players have stabilized their business by introducing new services and offering flexible terms for their products. Historically, the pawnshop industry has seen moderate but steady growth. This stability was ensured by the fact that a large number of customers use pawnshop loans repeatedly, which indicates the convenience and availability of the service.
Today, customers are less and less willing to spend time to visit the service provider in person, therefore the implementation of digitization processes is the most important driver of the industry in the coming years. It is digital solutions that will help the pawnshop industry to reach new customers and take a strong position among other types of loans that are currently provided online.
Pawnshop services are used by millions of customers every day and are an integral part of economic development. Looking back at the practice of developed countries such as the USA, Great Britain, Liechtenstein and Sweden, pawnshop services are also actively used by customers with high incomes. I think readers will be surprised, but for example, one of the most famous pawnshops in the UK offers pawnshop loans of up to 2 million pounds. Luxury cars, collectible wines, art objects and other things of high value can serve as collateral. Often, a pawnshop loan serves as capital for investment or business development.
How has the industry changed over the years? What factors influenced it?
In Latvia, in the 1990s and early 2000s, the pawn shop industry was not regulated, so there were various merchants on the market. Most of them were merchants with one branch. However, currently the industry in Latvia is regulated and monitored. The industry has developed significantly over the years, offering customers better service and a wide range of services, including digital solutions, such as determining the value of a case online, user registration on websites and the full cycle of receiving an online loan. The largest pawn shop chains provide their customers with spacious, bright and professionally decorated premises, their professional expertise gained over the years for evaluating cases and customer-oriented service.
Most importantly, today’s pawnshops are focused on the inclusion of customers in the financial sphere. Customers are offered an alternative type of loan. Similar to other companies in the financial sector, the priority of TOP pawnshops is the customer, therefore all industry participants select only professional service specialists who contribute to the growth of the industry by providing high-class service.
How has the Covid pandemic affected the industry, did operations and customer profiles change? Is there an impact on the industry due to the war in Ukraine and rising inflation?
Pawn shops, like many other representatives of the service and trade segment, were subject to strict restrictions on in-person activities during the Covid 19 period. Pawnshops traditionally offer direct in-person services, so home sitting and various customer service restrictions have significantly reduced the availability of pawnshop loans.
However, as often happens, the new situation and trends in the market encouraged us to look for various new solutions to serve the population and, therefore, to develop. It was during the pandemic that we started the digital transformation of the industry. For example, a completely new service was introduced in Banknota – online collateral value determination, which allows you to evaluate the product remotely.
Who is your core target audience, what is the customer profile and the core assortment you work with? What are the scopes?
Our target audience is all economically active residents of Latvia. Our data shows that the pawnshop loan service is used by all age groups from 18 years old, both in Riga and in the regions, which indicates the usefulness and availability of the service. The majority are customers aged 30-39 (31%) and 40-49 (25%).
The best security can be an item that is valuable but not used every day. Throughout the year, categories such as jewelry, laptops, work tools and audio/video equipment dominate. However, we accept a much wider range of goods – sports equipment, watches, art and interior items and other goods. Our goal is to encourage the client to look more broadly at the categories of goods to be pawned or sold, adopting the practice of economically developed countries.
As for the volumes of activity, in the recently published business results of DelfinGroup, we can see that the citizens’ interest in pawnshop loan services and trade in used, slightly used and new goods is growing steadily. The issuance of pawnshop loans in the twelve-month period increased by 54% compared to 2021, reaching 19.6 million euros. The volume of sales of used, slightly used and new goods increased by 29% in the twelve-month period, reaching 11.9 million euros.
There are many different ideas and stereotypes about pawnshops, such as how you can verify the origin of the product, low or inadequate valuation of the product, etc. How do you deal with them and solve these problems?
Without a doubt, we face certain stereotypes about the industry. People remember pawnshops from the 90s, but Banknote has been working for several years to improve both the branch itself and the quality of services. At the moment, each branch is a separate, modern place for receiving sales and services. For example, last year TC Domina opened a completely new concept branch in Riga, which we plan to develop in the future. It is important for us that the client feels safe and comfortable when visiting our network of branches, as well as that each client receives fast and high-quality services.
In response to a question about the origin of the product, Banknote’s entire team of professional customer service specialists undergo training to help verify the origin of the product before acceptance. Guidelines are regularly developed and updated, how to avoid accepting such things more successfully, for example, we accept two-wheelers with CSDD registration documents.
As for the valuation of the goods, our specialists have many years of experience in the valuation of movable property. I would even say that we have the best and most experienced experts in this field in the country. You can get up to 80% of the market value for the product, but even more for precious metals.
Banknote offers not only a pawnshop service, but also an online store for used, slightly used and new goods. What are the current trends in this field of activity?
Not only in the online store, but also in branches, we offer the opportunity to buy used, slightly used and new goods. If we talk about branches, then over the years, the proportion of the volume of goods purchased has grown against the total volume of transactions in branches, which indicates the interest of customers in the circular economy and the desire to extend the life cycle of things, giving them the opportunity of a second life.
In 2022, we have renovated the online store, where currently more than 40,000 new products are available, as well as products tested by our experts and, if necessary, restored. Here I would like to mention that we are actively developing another business line – buying goods. We look for suppliers, cooperate with international partners, and also buy goods from private individuals in order to be able to offer a wide assortment of goods to our branch and online store customers.
The main trend is that Banknote customers and the Latvian society as a whole think more and more about preserving the environment, so this segment of our activity is becoming more and more popular and in demand.
How do you plan the development of the branch network? Publicly available information shows that Banknote are actively taking over smaller industry players, while at the same time you are already representing the widest network of pawnshops. What are the next steps? What are the directions of future development of the industry and Banknote development plans?
Yes, we currently hold a leading position in the pawnshop loan segment in the Latvian market. The pawnshop industry has not been the focus of digital transformation, but we want to change that. DelfinGroup wants to develop a product in a digital environment, offering a pawnshop loan in a way that meets the requirements of today’s customers. We want to not only strengthen our leadership position in the industry, but also become industry changers.
Taking into account world trends and customer habits, the most important direction for the development of pawnshop loans is the online environment. We have already taken the first steps, providing customers with case evaluation on our website. All the client has to do is to fill out a small questionnaire about the item for which he would like to receive a loan or sell. After filling out the questionnaire, the client is given information about the value of the case. The next steps of development are related to the improvement of processes so that the customer can get a pawnshop loan without leaving home.
