If you want to understand how pawn shops buy and sell then you need to understand what it is that they are looking at when they do so.
So this is one of those questions that I don’t get all that often and I think I understand why. It might seem a little too personal or too probing of a question to ask a pawn shop.
But to me I don’t think it is all that big of a deal.
You see we all basically understand what is that a pawn shop does.
If you don’t know what a pawn shop does, then you are on the right website because that is exactly what I talk about here.
Basically the bottom line is this. A pawn shop has to be able to loan on something or buy it for less than what they can sell it for later. That’s the golden rule for them to operate by.
The only way that a pawnshop could possibly do that is if they know exactly how much they will be able to sell something for at a later point in time, and trust me, they are pros at this.
Some of this is very easy for them to determine. For instance, if they know what the current script value of gold is than they know just about how much they could scrap out your gold jewelry for should you have to forfeit it later.
The same thing goes if you were to sell it. The pawn shop already knows just about how much they would be able to scrap your item for should they have to do that so they know what they can pay you for it.
Pawn shops buy and sell their items in varying ways but most often it all comes down to them simply knowing what the current used value of those items on are larger market places such as eBay and Amazon.
But What About Other Types Of Items That Come Into Pawn Shops
Well the answer there is almost equally as simple. What the pawn shop has to do in that scenario is look at the various used merchandise marketplaces, such as eBay or Amazon, and they will have a good idea of what an item like yours in similar condition might sell for used.
Based on this, a pawn shop will want to buy an item for roughly 50% to 70% of its in going used price on a site like eBay or Amazon.
Now you might not think that is entirely fair but let me explain why it is.
What Happens To That 30% To 50% Profit Margin
You see you might think that a pawn shop makes the entire 30-50% profit margin and calls it a day.
However that is just not the case. If a pawn shop is in a position where it has to sell your items on a site like eBay or Amazon then there are a whole host of additional costs that go along with that item.
For instance let’s just talk about the labor involved with doing that.
First they are going to have to pay someone to sit down and spend all day taking pictures of various items and listing them for sale online. Then that person will have to follow up with everyone and answer questions that are asked about those items.
Additionally they are going to have to pay another person to spend all day packing and wrapping items to only have to label them later for shipment when they are sold on a website like eBay or Amazon.
Now while the shipping cost will often be at least partially paid by the buyer, things like the cost of the boxes or tape are often not covered by the buyer.
So let’s look at what we have so far. We have one employee listing things all day and another employee busily packing and labeling things. Additionally we have to pay for all the boxes and all of the tape that go along with that.
None of this is particularly cheap for pawn shop to do on a regular basis. Typically speaking this might eat up 20 to 40% of the profit margin in an item. That only leaves the pawn shop with between a 10-20% profit margin most of the time.
Pawn shops will often use retail spaces to sell their items to customers that come in looking for them as opposed to just selling everything online.
Do Pawn Shops Sell All Of Their Merchandise Online
Most pawn shops will also have what is known as a retail space. This is a space in their store with which they used to sell used merchandise to retail customers that come in looking for it.
In the case of these items, a pawn shop will still have to pay an employee to be there all day and sell them to customers. Often times for most pawn shops, this will mean multiple employees.
In addition to that there are other operating expenses associated with selling items in a pawn shop.
Do Pawn Shops Negotiate On Their Prices When They Sell Them In The Stores
The answer to this question is yes that often time a pawn shop will be willing to negotiate, or what is otherwise known as “haggle with you” when you are buying something in their store.
If you’re going to attempt to negotiate with a pawn shop then you should do so relatively conservatively as most pawnshops know very well what they can sell their items for.
If you try to overly negotiate something you may end up defeating the purpose, annoying the pawnbroker and the sale may fall apart as a result.
On the other hand if you make a moderate but respectable offer when you are attempting to buy something at a pawn shop, many times you will find that they agreed to the price or one very close to it.
Mandy Dormain started working for Pawn Nerd in 2020. Mandy grew up in a small town in northern Tennessee. But moved to New York for university. Before joining Pawn Nerd, Mandy briefly worked as a freelance journalist for several radio stations. She covers politics and economy stories.