Cash-strapped Koreans turn to IT pawn shops
Published : 2013-02-06 20:16
Updated : 2013-02-06 20:16
Tech-savvy South Koreans are temporarily abstaining from their gadgets in exchange for almost-instant cash loans thanks to a new breed of pawn shops specializing in IT products.
While traditional pawn shops that deal in everything from fur coats to wedding gifts are going out of fashion, IT pawn shops equipped with modern interiors, Websites and young staff are spreading across South Korea, one of the world’s most wired nations.
Kim Moo-hyun, 42, owns one of the roughly 15 so-called IT pawn shops in the Seoul metropolitan area.
His store in the residential Nowon district in northeast Seoul is stacked with scores of Galaxy smartphones, iPhones and iPads with yellow post-its bearing the name of their owners. There are also digital cameras, laptops and computer monitors along with a few odd objects such as a guitar, golf clubs and snowboards.
The former real estate agent, who was looking for a new business amid a prolonged slump in the local property market, said a conversation between subway commuters inspired him to open the pawn shop.
“One guy was telling his friend he was having a hard time finding someone who could lend him 200,000 won ($184),” said Kim, who runs the business with his wife.
“What was ironic is that he was holding the latest iPhone and iPad, which are obviously expensive. I thought this could become a business model.”
After working part-time at some luxury product pawn shops in the posh Gangnam district, Kim completed a mandatory one-week training at the Korea Consumer Loan Finance Association and got his business license.
IT pawn shops like Kim’s lend around 50-70 percent of a device’s market price at a monthly interest rate of 3 percent and an annual rate of 36 percent.
To borrow money, customers can visit an IT pawn shop, go through a quick ID and device check, sign a contract, deposit their belongings and leave the store in less than 10 minutes.
“A lot of our customers are people who want to borrow small sums of cash but don’t want to go through the hassle of getting loans at a bank,” said Lee Soon-sung, a manger at an IT pawn shop located near Konkuk University in east Seoul.
Most of the loans range between 200,000 won and 1,000,000 won, with high-end laptops usually fetching the biggest amount, according to Lee.
The Galaxy S3, one of the most common smartphones in the home turf of Samsung Electronics Co., can be deposited for a maximum 350,000 won, with prices adjusted depending on the device’s condition.
Since the amount of the loan is relatively small, use is usually limited.
“I don’t ask them why they came. It’s rude. But some use it to buy gifts for their girlfriends or go on trips,” Lee said.
For others, the money they get from depositing their smartphones and tablet computers is necessary to make ends meet.
“I came to take out a loan to pay my bills,” said a 30-year-old Seoul resident, who asked to be identified by only his surname Lim.
“It’s more convenient than a bank and has a personal touch.
I’ve already been here a few times,” the salesman said as he dropped off his Galaxy S2 phone.
In efforts to erase the dreary image of traditional pawn shops, owners of IT pawn shops have been decorating their venues and introducing one-on-one consulting services via mobile messengers.
“People link pawn shops to dark and spooky places. So we focused on creating a welcoming ambience,” Lee said, showing off his store that has potted plants and stools resembling colored dice.
But despite the friendly atmosphere, IT pawn shops are still not a place where people want to be seen.
“I was first planning to set up the store on the first floor, to get more customers. But I learned that even if people are more confident (about borrowing money), it’s still a bit of a taboo,” said Kim, who ended up opening his shop on the eighth floor.
Meanwhile, IT pawn shop owners say they have trouble keeping digital products with short life cycles. With manufacturers racing to launch new products, even the latest model rapidly becomes obsolete.
“I can’t stock the pawned devices for too long since new products quickly replace older ones,” said Kim, adding he generally keeps them for one month and extends the loans for up to a few months when necessary.
Kim also said he asks customers to bring the packaging and basic accessories, such as chargers and adapters, along with the devices in case he has to sell them due to a default.
For now, the property broker-turned-pawn shop owner believes IT pawn shops will thrive for the time being.
“Young people dread asking favors. It seems that people will continue to come for small loans since more and more people are starting to own several digital devices,” Kim said.
In 2012, South Korea saw the rate of smartphone users break the 60 percent-mark for the first time, more than doubling from the previous year.
The ratio of people who own two or more digital devices also reached 54.5 percent in 2011, up from 31.3 percent in 2010, according to data by the Korea Information Society Development Institute.
Most South Koreans buy their smartphones through two-year contracts with mobile carriers, which helps them pay for the roughly 1 million won devices through monthly installments.
“What’s funny is that this is all possible since we’re living in a time where you can buy a smartphone even if you’re broke,” Kim said. (Yonhap News)