PawnGuru Takes Process of Buying, Selling, and Negotiating Online
Anyone who has watched “Hardcore Pawn”—the reality show set in Detroit that follows the Gold family, owners of American Jewelry and Loan—knows that getting a fair price for the stuff they want to sell can be a challenge.
One has to first bring an item to pawn that is considered attractive to pawnshop owners, and then they have to make it through white-knuckle negotiations with a business whose livelihood depends on convincing sellers to accept less than the item is truly worth. In fact, fans of shows like “Hardcore Pawn” mostly tune in to see the emotional meltdowns that occur when desperate people find out their item for sale isn’t worth anywhere near what they thought it would be.
Unless you have dreams of seeing your temper tantrum broadcast to the world, Jordan Birnholtz said, there’s an easier way. He is the co-founder and chief operating officer for PawnGuru, a Southfield, MI-based startup that aims to take the process of buying and selling wares at pawnshops and put it online, where customers can comparison shop and get better deals.
When the company’s founders were first exploring the industry, they visited 10 pawnshops in Detroit with a handful of random items to sell—a diamond ring, a trumpet, an iPad—in order to find out what kind of money they’d be offered. They were shocked by what they discovered, Birnholtz said. Although the pawnshops were all within 15 miles of one another, the money they offered varied wildly.
“There was a huge variance,” Birnholtz said. “Pawnshops offered us anywhere between $65 and $1,060 for the diamond ring.” After the company crunched the numbers to determine the disparity between the lowest and highest offers, the average difference was a whopping 265 percent. “The pawn industry is not one where the consumer has the luxury of comparison shopping, because there usually isn’t time. So, we thought, what if we bring the process online?”
PawnGuru got its start after one of its co-founders, David Stiebel, watched a documentary called “Spent,” which examined the problems faced by “underbanked” Americans—the estimated 30 million people who lack access to financial services offered by banks and other institutions. The film struck a chord, and Stiebel soon assembled a team to try and figure out what underbanked consumers truly need. The answer they came up with? Liquid cash, which is where pawnshops come in. And because the underbanked tend to have smartphones but not reliable transportation, Birnholtz said it became clear that whatever the company offered needed to be accessible by mobile app.
Birnholtz said PawnGuru users fill out an online form for each item they want to sell, writing a description of the item and uploading a picture. From there, the item for sale is disseminated to local pawnshops and those that are interested make an offer. Sellers are able to communicate with the pawnshops online to negotiate a price and answer questions. Once both parties are in agreement, the seller takes the item for sale over to the pawnshop it has negotiated with and closes the deal. No money changes hands on PawnGuru, and the service is free, for now, for both sellers and pawnshops.
Since the company launched in 2014, it has signed up more than 1,300 pawnshops for the free version of PawnGuru, primarily in Detroit, Chicago, Houston, and Atlanta. About 22,000 people have used PawnGuru to negotiate $4.2 million in offers for their stuff. The startup has grown its users by 30 percent each month since the app went live over the summer, Birnholtz said. The five-person team is still figuring out how to make PawnGuru profitable, as the company wants to increase its user base before it starts charging money. But Birnholtz said PawnGuru will eventually take a cut from transactions between pawnshops and sellers executed on its site, though the company has yet to decide how much.
So far, PawnGuru has raised $800,000 from angel investors, Invest Detroit’s First Step Fund, and Impact America. The company is currently raising up to $2 million, Birnholtz said, to expand into cities like New York and Los Angeles. He said PawnGuru would also like to open up its app to other buyers and sellers of second-hand goods—thrift stores and antique shops, for example—in the coming year.
For now, the company is still trying to get the word out about its services. Just last month, it got a profile boost thanks to a story on Gawker. The reporter had found his way to PawnGuru’s post on a data science blog about its findings on price variance between pawnshops. Though Gawker’s notoriously snarky commentariat had a field day with the idea of needing a pawnshop in the first place, it was (for Gawker) a glowing article.
“We came out relatively unscathed,” Birnholtz joked.