Pawn shops typically prey on those who need money and steal the item. After all, if you were not desperate, you would not be selling to a Pawn Shop. My point is, they own the items for next to nothing and can make great deals to dispose of lots of stuff if they choose to.
Pawn shops don't prey on anybody. Nobody has to pawn anything with a pawn shop. People bring in items and voluntarily pawn or sell them. If they don't like what is offered, then they are free to go elsewhere. Often, they have nowhere else to go, can't get credit from a bank, friends and family either can't or won't help them, or they won't involve friends or family and they aren't willing to hold a yard sale. So where there are a lot of other options other than pawn shops, people still go to pawn shops when they have exhausted all those other options.
We were in the pawn business for 25 years. I can assure you that we didn't come to own things for "next-to-nothing."
Some simply rules of thumb to consider. In this modern day and age, .1-3% of the items pawned or sold to a pawn shop are reported lost or stolen and are confiscated by the cops. In the old days of the 1970s, numbers were more like 1-8% depending on the shop (based in information at the time from Dallas Pawnbrokers Association and Texas Pawnbrokers Association).
Only a small percentage of the pawned items fail to be retrieved by customers. Most customer do not sell items to pawn shops, unlike what you see on TV. When they do sell something, it is because they aren't willing to take the time to sell it themselves to another individual for more money.
While a pawned item that may come out for sale several months later (in Texas, the time is one month plus 60 days before forfeiture), the cost of the item isn't just the amount loaned, but all of the associated overhead including facilities, breakage, deterioration, shrinkage, wages, etc. Indirect costs actually make up a big chunk of the actual cost of the item.
The amount loaned or paid (purchase) for an item is related to several factors that are not wholly about what the item is thought to be worth in the real world, but what it can maybe be sold for in the pawn shop itself. Every shop has its own market. Items that would move quickly when they came out of pawn would have up to about 50% direct cost (assuming the customer asked for that much money, which not all do). More mundane and slower turning items, the standard was about 1/3 direct cost.
Repeat or good customers are apt to get more money for their items, especially when the person pawns the same item repeatedly. That is just good business.
What a lot of people, like yourself, fail to realize is that a pawn is for the purpose of redemption. It isn't the pawnshop's fault if the person fails to redeem their item. It isn't the bank's fault if you fail to pay off your car loan. However, in the grand scheme, most pawn shops make a large percentage of their money from the pawns themselves. Depending on the year, we made between 45 and 70% (this is tied to economic cycles).
Anybody in retail sales knows that shelf time is a killer. Slow movers are not where you make your good money. Sadly, like a lot of guns stores, too many pawnbrokers get married to their merchandise and will have items moldering on the shelves for years. That is just bad business.
So the "Wholesaler" comes in to buy everything. As noted, we had a tool guy that did that. That person gets the stuff we loaned too much on as well as the stuff that we didn't loan that much on. He gets the stuff that is a slow mover and well as the stuff that moves quickly. Probably the biggest benefit is that the guy takes the stuff that we have too much cost in or the stuff that is slow moving (wrong market, too expensive, too specialized, out of date, etc.) that is just wasting shelf space for us. In the end, we don't make as much money off the deal as if we sold it all piecemeal ourselves, but shelves get cleared, things re-arranged, and we get a fresh start.
