Steve is doing his Christmas shopping at Pawn America. He is thinking of buying an electric guitar for his 11-year-old son, Derek.
A musician himself, Steve knows that at $150 for the guitar and amp, he is getting a pretty good deal. Pawnbrokers will tell you they do well selling musical instruments.
"The saying is, a guitar can't play the blues if hasn't been in a pawn store," says Brad Rixmann, owner of Pawn America.
Pawn America is the largest pawnbroker in Minnesota with 15 outlets around the state. Now, the stereotype of a pawnshop is a small, dark and seedy place catering to crooks and desperate people. Those places still exist. You can find them in any city. But Rixmann is trying to make his company a thing of beauty.
"We do locate our stores in high traffic, well-lit, easy-to-get-to locations; we spend a lot of money improving the real estate to fit in with the community and we spend a lot of money on our operations and training."
Rixmann's employees wear white shirts and ties. His showrooms are clean. The merchandise is well laid-out. The Fridley store does not look out-of-place next to the SuperTarget. And this particular holiday season, sales are brisk.
"December is always our biggest month, so our sales have gone through the roof...we'll probably end up 20 to 25 percent ahead of last year."
Rixmann says the foreclosure crisis has had an effect on his business. "It's made a lot of consumers value-conscious. People still want to buy things, they still want that newer flat screen TV, they still want to buy the new video games, and they can afford to purchase more with their dollar at a pawn store than one of mainstream retailers."
In a pawn shop, a good deal for one customer may mean heartache for another. Every item on the shelf used to belong to somebody else.
Customers can sell their items to the pawnbrokers or get a loan on it. It is their choice. If they default on the loan, nothing gets reported to the credit bureaus. The only penalty is that customer loses their stuff and whatever interest they paid. Brad Rixmann says that is good for business and it works for his customers, too.
"No harm, no foul. If you want to get a loan from us in the future, that's okay."
For example, Angela wants to pawn her computer to buy Christmas presents for her kids. She wants a $100 loan and will have to pay 25 percent a month in interest. That is a steep price for a consumer loan.
Angela will get her computer back when she repays the $100, plus interest. If she does not make a payment for two months, Pawn America sells her computer. The pawnbroker helping Angela figures he can sell her computer for $200.
Pawnbrokers admit that for customers, carrying a loan can get very expensive.
"We've got pawns like this one here dating back to April 17, 2005," says store manager Kris Thompson. In the back office, Thompson pulls out a ring in a tiny plastic bag. The tag says the owner pawned it a year and a half ago for a $100 loan.
"So this person -- I won't reveal her name -- every 30 days they've extended this. Extended, and extended.
That means she's paid $500 -- and counting -- to hang onto her ring and it is probably not worth that much. You have heard the cliche "the dealer always wins?"
Like Pawn America, other pawn chains are polishing their image -- going upscale -- and doing business on the Internet. Wall Street has noticed and taken a number of the pawn companies public. This is one industry where a downturn in the economy is good for business.