Pawnshop chain sees opportunity for growth

The economy is tough for many people right now, but Brad Shain says that's not why the largest local pawnshop company chose this year to make its biggest expansion move ever.

He says it's because 15-year-old Pawn X-Change waited until it fully developed the managerial know-how needed to lend money on everything from used DVDs to a $5,000 watch.

"To scale this business is tricky — it's got a lot of moving parts," says Shain, the president and CEO of MaXit Financial, which owns Pawn X-Change.

With $2 million in fresh capital raised this spring from its investors, the company will open eight stores this year — a rapid pace after adding only five in the past four years. That will give it 38 locations in Washington and Arizona.

Pawnshops are a financial planner's nightmare, of course. For a loan worth about half an item's resale value, Pawn X-Change charges the fees and interest allowed by Washington law; these add up to $77 for three months on a $500 loan, or more than 60 percent on an annualized basis.

A customer unable to make payment within 90 days either surrenders the pawned item, or pays a full new round of fees.

Nonetheless, there's a steady clientele of people who "just can't make that paycheck stretch," Shain says.

He points out that financially strapped consumers are charged more at payday lenders. The 15 percent maximum fee allowed for a two-week payday loan translates to an annual interest rate of 391 percent, says the state Department of Financial Institutions.

At the Redmond Pawn X-Change on Bel-Red Road, manager Len Weakland says one of the first customers Thursday morning was a regular visitor who pawned a stack of 98 DVDs, a saw and a tool kit, netting almost $200.

"He just wanted to go to the bank and get his account positive. A check to Starbucks put his account into the red."

These days, Weakland says about his customers, "a lot of them are real estate, construction people."

They have helped fill two 6-foot-high safes in the backroom, where drawers are full of jewelry in carefully tagged and bar-coded plastic pouches.

A bag pulled out at random turns out to hold a Cartier watch — "probably a $5,000 watch," Shain says — that has eight 90-day pawn tags on it. After checking his database, Weakland says the customer borrowed $2,500 and has paid more than $2,300 in fees to keep a claim on the item.

On average, though, customers redeem their pawned items in 44 days, Weakland says. About 15 percent of items aren't reclaimed.

Pawn X-Change, which expects revenues of $38 million this year, seeks to separate itself from the stereotype of the dingy and disreputable pawnshop. Power tools, guitars, TV and electronics — but no firearms — are carefully arrayed around a well-lit store staffed by cordial employees wearing company shirts.

To keep experienced employees, MaXit pays full health insurance for those who've been there 11 months, and offers a 50 percent 401(k) match, Shain says.

The economy's current woes have not brought a huge burst of new business, according to Shain. In 2007 the company's same-store sales, measuring results at locations open at least a year, were up 8 percent.

One factor is a big jump in the price of gold, which means bigger loans when people pawn jewelry — and bigger sales for Pawn X-Change when they don't reclaim it.

Diamonds are for online

Amazon.com recently bagged its biggest sale ever — a $124,000 yellow diamond ring.

CEO Jeff Bezos told shareholders that much at the online retailer's annual meeting in Seattle Thursday, but didn't divulge the buyer.

Apparently, six-figure online purchases are fairly common.

Seattle-based Blue Nile, which specializes in Internet jewelry sales, regularly receives orders above $100,000, says spokeswoman Liz Powell. Blue Nile recorded a sale worth more than $150,000 on the day of Amazon's meeting, she says.

Its record: a $1.5 million diamond ring.

— Amy Martinez

Espresso machines make their debut

Starbucks began the official rollout of its new espresso machines last week, starting with a store at Madison Street and Second Avenue in Seattle on Thursday and going international quickly with Starbucks' first shop in Argentina on Friday.

About 10 stores in Switzerland and Seattle have tested the machines since last year.

The machines, called Mastrena, are more precise and easier to use than the automatic espresso machines used at most Starbucks stores.

Jessica Smith, manager at the Seattle location, puts it in coffee lingo: "These shots are sweeter and deeper."

The nuance was lost on Melissa Jensen, a regular customer. "It tastes the same as before," she says after a sip of her soy latte Thursday.

By 2010, Starbucks plans to have Mastrena machines in 75 percent of its U.S. and Canadian stores.

— Melissa Allison

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