Original article from Andria Cheng on marketwatch.com
Luxury consumers’ appetite and love affairs with their Hermes and Chanel bags have contributed to a resurgence of pawn shops in the U.S., and in Hong Kong, the handbag-backed loan business is looking hot.
While money lenders in Hong Kong typically ask for cars and homes as collateral, a four-year-old company, Yes Lady Finance Co., accepts handbags on the spot and procures loans within half an hour, as long as it’s your Gucci, Chanel, Hermes or Louis Vuitton, and occasionally, Prada, the Wall Street Journal reported.
Because of Hong Kong consumers’ big appetite for the latest luxury products, the handbag-backed loan business is a lucrative one, the Journal reported, adding lenders lend 80% of the bag’s value and the loaners get the bag back by repaying the same loan with 4% monthly interest, within four months. Classic purses and special edition bags often keep much of their retail price, the Journal reported, adding pawnbrokers typically take watches, jewelry and electronics also as collateral.
The luxury craze has spawned a similarly promising business here in the U.S., leading pawn shops to become viable competitors against the likes of Tiffany & Co.TIF and Saks SKS during the holiday season, as reported in this MarketWatch story in December. Pawn shops including publicly traded Cash America CSH have reported good traffic for the holiday season. They also no longer see just low-income shoppers in downscale neighborhoods, as many of them are expanding in more-affluent areas, catering to higher-income shoppers and advertising the luxury side of their business.
Pawn shops have also led to profitable resale businesses of pre-owned designer goods, with entrepreneurs going to luxury pawn shops in places like Las Vegas to stock up on their merchandise for resale. A former mortgage broker, for instance, has reported generating total gross sales of $50,000 a week for a profit of about $10,000 weekly through the resale of designer handbags and other luxury goods, partly sourced from pawn shops.