Posted by: Matthew Molinari | March 28, 2012

A New Pawn in the Game

About a year ago there was a big change in the traditional way Pawn Shops did business. For the first time, one store decided to forgo the typical brick and mortar store front for the internet. The site is called Pongo and you can take a look at how it works here:

It’s pretty simple actually, if you need some cash, let Pongo appraise your item, send them the item and they’ll wire you the cash. If you repay the loan with interest, you get your item back and if not, Pongo keeps it and then resells the item online to repay the loan. The only real difference between a typical Pawn Shop and Pongo is the way in which the business procures and sells the goods.

I think Pongo has really hit on something by removing the personal interaction of the typical Pawn Shop experience. The main reason people are looking to pawn their possessions is because they need help paying bills and that probably means they are feeling embarrassed. Having to walk into a shop and go through the process may actually turn people off from the experience. The way Pongo is set up really let’s people avoid that part of the transaction and that is a big advantage.

A successful business needs to provide a valuable service while simultaneously establishing differentiation between themselves and the competition. Pongo is certainly doing that and they are probably saving tons of money on inventory costs because of it. A typical Pawn Shop is basically a warehouse that needs to set up as a retail store so customers can locate items they may want to buy.

Pongo avoids this by selling items on-line. Snap a picture, post it online and that’s it. They can keep their inventory in a much less presentable manner because it truly is just a shipping warehouse and not a store.

Whether or not you agree with a business that could be seen as taking advantage of people in a time of need (often charging exorbitant interest rates) you have to admit that they took a centuries old idea and reinvented it for the digital age.

Let me know what you think.

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