Regulatory changes limiting interest rate levels and other fees have been introduced to protect vulnerable borrowers.
Melbourne, Australia (PRWEB) October 10, 2014
Operators in the Pawn Shops industry in Australia have suffered from a negative public image, which has resulted from the high interest rates they charge on loans, the low prices offered to customers for goods and a perception that pawnbrokers take financial advantage of those in need. While this negative perception has potentially limited industry growth over the past few decades, major player Cash Converters has provided the industry with a more legitimate and professional image.
According to IBISWorld industry analyst Alen Allday, “this has increased the market reach and customer base for industry operators.” In the five years through 2014-15, industry revenue is estimated to increase at an annualised 3.5% to $539.2 million, including 6.5% growth in 2014-15. External competition from online auction sites and other loan providers continues to increase, which has contributed to lower margins across the industry in the past five years and limited industry revenue growth. Regulatory changes limiting interest rate levels and other fees have been introduced to protect vulnerable borrowers. These changes are expected to constrain industry revenue growth in future years.
The Pawn Shops industry is dominated by Cash Converters, which has 151 outlets across Australia and is estimated to account for 42.9% of industry revenue in 2014-15. The next-largest pawn shop company in Australia has only seven stores, and is estimated to only account for less than 2.0% of industry revenue for the year. “In the almost three decades since its establishment, Cash Converters has found its niche in a highly fragmented industry through its franchise model, and by building its brand image through local and national advertising campaigns,” says Allday. The industry exhibits medium levels of market share concentration. Major players include Cash Converters International Limited.
Future growth is expected to be lower than in previous years, but with steady increases as Cash Converters continues to open new stores and expand into other geographic regions. However, this expansion will be at the expense of other industry operators, which are expected to either close down or be acquired by Cash Converters. In the five years through 2019-20, industry revenue is forecast to increase at an annualised 2.7% to $615.2 million. Although this is lower growth than in the previous five-year period, lower wage costs as a proportion of industry revenue are expected to result in slightly higher industry profit.
For more information, visit IBISWorld’s Pawn Shops industry in Australia report page.
Pawn shops offer secured loans to individuals, who then provide items of personal property as collateral. These firms also retail used goods that are often acquired from unpaid loans or are purchased directly from consumers. The industry excludes companies that only provide unsecured loans or only sell second-hand goods.
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