Pawn shops have enjoyed a revival over the past couple of years. Interestingly, TV reality shows like Pawn Stars have helped bring pawn shops back into the light. While the mainstream media may only be promoting pawn shops, it goes without saying that these shops have helped individuals buy and sell items for a while now.
Most pawn shops today operate more like mini-banks helping millions of unbanked Americans. Additionally, pawn shops specialize in helping people from all backgrounds to buy and sell items.
While pawn shops came to the fore, one wonders how they can benefit from this cash discount signage era. Our article will show you how to leverage a pawn shop loan or cash discount program to help boost your pawn shop business.
Cash Discount Program: What Is It?
Lately, high credit card processing fees have led to the popularity of cash discount programs. Before that, gas stations were the top users of such programs, which helped owners have more cash to spend.
Customers can enjoy discounts when using cash for payments in cash discount programs. As such, they strike out the credit card processing fees. Customers who want to rack up points and miles can still use their credit cards. That’s a win-win for pawn shop owners because customers take the cost of the processing fee instead of them.
Benefits of Cash Discounts
Below are some benefits of using a cash discount program in your pawn shop:
Increase Profit by Eliminating Credit Card Processing Fees
Ideally, cash discounts aim to boost cash payments and cut down or strike out card payments. Doing that lets businesses generate more profit as they don’t incur any expenses on credit card processing fees.
No Need to Worry About Visa, Mastercard, and Amex Raising Fees on Business Owners
As cash payments bypass the risk of using merchant accounts over banks, worries about rapidly rising Visa, MasterCard, or Amex fees are a thing of the past.
Thus, you get more control over transactions in your pawn shop and money earned. So now, when you see a customer walk into your pawn shop, calmly accept a card payment or decide not to accept it. Either way, you’ll still gain profit on your transaction.
Great Marketing Technique
The best way to entice customers is with promo sales and discounts. They are usually religious with discounts due to their desire to save money. So, you’ll have more customers at your pawn shop when you give them cash discounts.
Lower Ratio of Chargebacks
The tendency to reduce the frequency of chargebacks is another advantage of cash discounts. You will have a lower cashback ratio in your pawn shop when you process fewer customer card payments.
Greater Cash Flow
Recently, debit and credit cards have been the preferred payment method for most people. But, they feel encouraged to make cash payments when they receive incentives. So, efficient access to funding is now possible for business owners. They can access their funds easily without having to wait a day or two in some cases. But, they must wait even longer to access their cash on weekends.
You enjoy more safety and avoid fraud when you transact cash payments. You’ll also enjoy significant revenue over time since customers cover extra credit card processing fees. Many people took lessons on saving for a rainy day during pandemics and recessions.
Easy Set-Up
It would help if you had little effort to get started. First, it requires effective and reliable access to merchant processing banks offering cash discount programs in their services. Next, you need to get the appropriate signatures and package for your POS and credit card terminals; then, the cash discount programs will help you save money when you implement them.
Ease of use and simplicity are stellar features of POS technology. As such, merchant processing banks are to handle all set-up functions from beginning to end. Also, you will need to sign your staff up for training on handling cash and the resulting cash discounts. Thus, you can avoid fraud and scams via cash payments.
Challenges of the Pawn Shop Industry
Small businesses in the pawn shop industry face many challenges. While the problems stem from different causes, they all point to overall decreasing points, inflation, reduced profit margins, and lesser customer spending. The section below shows some of the challenges:
Marketing
In a time when social media dominates, you can enjoy success when leveraging social media to market your business. But you need to invest resources in marketing or hire a marketing expert to broadcast your pawn shop. It’s good to remember that much of your business’s profits go into sales discounts and promotional rewards. But, of course, that’s without considering the negative impact of bad reviews when they pile up over time.
It would help to leverage social media marketing to increase your visibility. Also, since people can easily compare the market value of things at your pawn shop, it would help to create impressive social media campaigns.
Employee Management and Finding Good Help
Hiring skilled staff is another vital task that pawn shop owners must focus on. That’s because excellent customer experience becomes the duty of cooperative staff, contributing greatly to fostering customer loyalty. So, training your staff is a healthy investment that can help improve your business.
But you may face a rough patch when you have people that are slow to work without instant hefty checks. The post-pandemic period caused a shift and embedded that mentality in many minds.
Rising Cost in Pawn Shops
Digitization is now popular among many small businesses to match market competition. Yet, their profits take huge beatings from providing digital services. Examples of digital services potentially hurting business owners’ earnings are payment processing costs, POS services, and Software-as-a-Service.
The cost of those services certainly keeps rising. So marking out a combat strategy will help you overcome the hurdle when fighting against all odds. Pawn shops determine the market value of goods. Hence, it would help to consider these factors while setting the price of goods in your pawn shop.
Inflation Facing Pawn Shops
Consumer prices increased by 7.9% as a result of inflation. Although the numbers vary based on the source and what counts as “inflation numbers.” But the invisible tax is noticeable in all businesses, large and small. That is because they use “shrinkflation” to charge similar costs for lesser volumes of products.
Pawn shops have had to tweak their operations to cope with increased costs. They employed remedies like increasing the prices of musical instruments, debit card charges and the prices of other precious metals a customer pays at the jewelry store. Sadly, such actions have accounted for reduced patronage from customers. So pawn shops have no choice but to take items off the market when they can’t hike the prices too fast for customers.
Giving customers discount programs can curtail many issues for your business. So giving customers rewards on cash payments will help cut down the occurrence of debit card fees. Although most customers prefer to use their debit cards to pay into the merchant account, you can convince them to pay you cash by offering discounts.
Is a Cash Discount Program What Your Business Needs?
It’s best to assess some factors tied to cash discount programs before implementing them to know if they’ll work well for your business. Having the potential risks in mind is a good place to start. So, ask yourself the following questions before making a decision:
Do You Have Regular Customers?
Many customers return to pawn shops, so knowing what percentage of people returning make cash payments against people that make card payments is important. However, you can still find ways to create programs your customers will benefit from, even if you have loyal customers that enjoy getting their points and miles.
Merchants can introduce a dual pricing model using this system anytime repeat customers face any issues. Also, customers can get the option to choose if they want to pay processing fees in one-time instances.
A dual pricing model can resolve such issues when you have a few clients that want to enjoy the one-off payments. You’ll have nothing to worry about when your system has a good merchant processing rep to set up the program efficiently. There’s no pressure to guess your customers’ preferences initially because you can always introduce the feature later. But it’s to let your customers know that they can pay cash. That eases their minds, and as a result, they pay, and inflation on food prices stays on the downside.
Cash Discount Programs: How to Get Started
It’s quite simple to set up a cash discount program. As such, it blends with your checkout process and enhances customer experiences.
You should have a system that resembles the one below:
- Contact a merchant processor who is also an expert in cash discount programs.
- Have a meeting with a representative of the merchant processor to understand every detail about the cash discount program.
- Apply via the merchant processor for the cash discount program.
- Select all the necessary POS equipment that will serve your business effectively.
- Collect all the equipment and transport them to your pawn shop.
- Reach the representative to help install and test your pawn shop’s equipment.
- Implement a saving scheme for your business.
What Do Pawn Shops Need for Cash Discount Programs?
It’s in the best interest of pawn shop owners to recognize policies credit companies set regarding cash discount programs.
Adding to that, credit card associations could have more lenient conditions. Regardless, you don’t need extra gear or special equipment to set up a cash discount program. Instead, you can liken the program to setting up a point of sale (POS) or credit card terminal to automatically set cash discounts on the bills of customers that make cash payments. Also, you’ll want to avoid risks and mistakes, so avoid calculating cash discounts manually. You won’t be able to record such transactions on your system that way.
Advertising your cash discount program via signs and banners before you start using it is vital. That’s because you need business signage and proper banners as part of the setup process for reputable credit card companies to inform your customers.
Trained professionals are another vital aspect of setting up an effective cash discount program. Having employees that know the rules of the cash discount program on standby helps a lot, even though the POS and credit card terminals apply cash discounts. Also, they can help resolve customer issues about the program during checkout.
Alternatives to Cash Discount Programs
The cash discount program system is automated, undoubtedly generating greater cash flow for pawn shops and limiting card processing fees. However, cash discount programs are only one of the ways to achieve that result. You can see some alternate methods in the section below:
Subscribe to a Service Provider With Lower Processing Fees
You can opt for a service provider that charges less than your current provider to cut costs if you need to figure out how using a cash discount program will affect your business. Also, you can let your customers handle processing fees by slightly increasing the prices of items on your menu.
Implement a Minimum Limit for Purchases Via Card Payments
You can reduce how often customers use debit or credit cards when you set the limit for card payments at $10. This countermeasure is very popular in gas stations.
Increase Prices to Cover Processing Costs
Increasing the prices of your menu items can serve as a simple way to recover the cost of processing fees. However, customers that prefer cash payments will stand at a loss here. So, you’ll likely see a drop in sales because cash-paying customers cannot make purchases. On the other hand, your plan will likely work for both cash and credit card lovers.
Customer Reviews About Cash Discount Programs
The perception of customers about new business policies determines if they are successful or not. As such, customer perception is among the critical concerns of business owners when introducing cash discount programs. Yet, it’s evident from studies that as much as 99.2% of customers have nothing against cash discounts.
So, loyal customers will use cash discount programs to assist their favorite pawn shops. Also, introducing such programs helps high-end pawn shops have a positive impression on boosting customer acceptance.
Final Thoughts: Is a Cash Discount Program Worth It?
Increasing card processing fees are the reason for the increase in cash discount programs. But to make a wholesome decision, it helps for you to know the ups and potential downs of discount programs. That’s where you need guidance from a reliable merchant processor representative.
As a pawn shop owner, it helps to critically assess if your business will thrive by using a cash discount program. You must verify if you can alternatively reduce the burden of card processing fees by opting for a service provider than your current provider that offers better rates.
Finally, you’ll need to educate your employees about the POS system and give them full details of the cash discount program. You can increase your pawn shop’s profits if you make the right choices.
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Paul Martinez is the founder of EcomSidekick.com. He is an expert in the areas of finance, real estate, eCommerce, traffic and conversion.
Join him on EcomSidekick.com to learn how to improve your financial life and excel in these areas. Before starting this media site, Paul built from scratch and managed two multi-million dollar companies. One in the real estate sector and one in the eCommerce sector.