Second-hand has lost its stigma and is booming as buy-back stores attract new shopper groups. Charlotte Hardie pays a visit to those businesses stealing footfall as the recession bites

I haven’t been at work for at least three weeks. Even the boss isn’t working,” says John, a double glazing fitter. He digs into his pocket, pulls out about£50 of crumpled notes and a piece of paper, which he pushes across a desk. He is at Cash Generator to buy back his Xbox 360, which he had taken in to get some much-needed short-term cash. Like millions of others, for John these stores that combine retail with financial services are a vital way to make ends meet.

And although it’s a distinctly gloomy day in Gloucester, for Cash Generator life is anything but miserable. Business is booming. Last month, sales for this particular store – which enjoys visitor numbers of 5,500 each week – were up 38 per cent year on year. Last week, the store’s franchisee manager Mark Smiley says it was busier than the run-up to Christmas.

As Cash Generator managing director Julian Urry says: “As people are having their credit reduced or withdrawn, our services have increased in popularity. People are having to think very hard about how to make their pound work harder.”

Like-for-likes at Cash Generator climbed 4.7 per cent for the nine months to November 15. Sales of second-hand goods rose 18 per cent and at its pawnbroking business profit rocketed 83.3 per cent. Its rivals are enjoying similar success. Last month, Albermarle & Bond announced that half-year profits jumped 19 per cent. Meanwhile Cash Converters said its half-year UK profits had leapt 120 per cent to£466,000 in the six months to December 31. This year it plans to open 20 stores, bringing its portfolio up to 100.

This is a world that some of the high street retailers need to watch. As the recession deepens, more and more people are realising the benefits of these stores’ services. And as footfall increases, retailers such as Cash Generator and Cash Converters stand to increase their chances of stealing consumer spend from the high street – particularly from retailers of electrical goods, as these are among some of the most commonly traded items. At Cash Generator, for instance, there is a huge, near-mint condition LCD TV on sale for several hundred pounds cheaper than a shopper could find even on the internet.

There is something that customers find addictive about these stores. One of Cash Generator’s buyers – who decide the value of goods that customers bring in to sell – says: “Because our stock changes so quickly, they will come back in regularly and have a look around,” he says. There is certainly a wide array on offer for all different budgets – jewellery, electric guitars, mobile phones, DVDs, kettles, fishing equipment, iPods, amps and bikes. One woman brings in a vintage 1950s Bakelite phone.

Urry adds that there has also been a boom in power tools with the falling demand for builders’ services. He says: “A lot of people are bringing tools in, putting them on 28-day buy-back and keep on rolling that over until they get a new job.” Others simply sell them, so anyone in search of cut-price power tools is in for a treat.

Pound of flesh

Today’s world of pawnbroking and buy-backs is nothing like the Shakespearean depiction of Shylock’s trade in human misery. For the usually cheerful customers who visit these stores, they provide an extremely useful means of raising cash – no matter how much that may be. One woman places four DVDs on the counter to sell. “They’re probably worth next to nothing, but I’m skint,” she laughs. She gets£4 for them and walks away a happy woman.

Urry is keen to defend this nature of lending, which he claims is very responsible. Regardless of the value of the item, it only lends what customers need. Hand over a£1,000 ring and you’ll get£120 in cash if that’s all you need. “You won’t get a credit card with just a£120 limit,” Urry points out. “People end up overstretching themselves and then they’re in trouble. I believe pawnbrokers are very sensible. If we lent out more than that person could afford to pay back, it would be very bad business.” Statistics from the National Pawnbrokers Association suggest that about 88 per cent of customers redeem their goods, mostly within three months.

Importantly, the demographic of people flocking through the doors is changing. Urry says the stores offer a quick-fix solution for increasing numbers of wealthier people who want to raise short-term cash. “These are the people that don’t necessarily want to stand in a muddy field with their car boot open, so they’re coming to us,” he says.

Cash Converters business development manager John Colbert agrees. “People from all walks of life are coming into our stores now. The stigma about second-hand has gone and we’re synonymous with value.”

Smiley says he has definitely noticed an increase in more affluent customers. Initially this is often because of the other services it offers – particularly currency exchange. “We offer a very competitive price and typically these people will trawl around for hours looking for a good exchange rate,” he explains.

But once they’re in the stores, they’re converting to paying customers. “It’s like putting them in a net, it’s great.” He cites one example of a man who came into the store to buy euros. “He had no idea about what we did and said he didn’t know the types of things we sold. His son was going to university and so we set up all the stuff his son needed, a TV and so on, at the fraction of a price of new stuff.”

Equally, these wealthier customers are then returning to bring their own products to sell, which is boosting the quality of merchandise on offer. The Gloucester store’s buyer says: “We’re seeing more high-end goods now with the recession, complete with manuals, and they sell brilliantly.”

Urry says another growing group of loyal customers are the younger generations. Cut-price gaming consoles and games are one reason why. Wii games sell for about£10, as opposed to£30 or£40 brand new. Within a month of the Wii console being launched, Cash Generator was selling them in stores for about£160, instead of£250 – the price of a new console. “We’ve got a new generation of young consumers and we’ve locked them in,” says Urry.

Service is king

The high street multiples could also learn a thing or two from these stores. One factor that is immediately impressive about this store is customer service. Smiley says: “What we deliver and what the multiples can’t always is the personal touch.” It may sound like the same old line that many a store manager loves to trot out, but in fairness, it’s absolutely true. His knowledge of the people who visit the store in one afternoon is jaw-dropping. Aside from knowing their names, he asks about one man’s impending operation, one woman’s son who is in hospital and he jokes with a regular Malaysian customer who sends money back home about the way he always folds his wads of cash into pristine bundles. It feels like a social club.

Smiley says: “Look at the massive supermarkets and the huge electricals chains. They’re not personal anymore. You’re lucky if you get served. Here, we have so many repeat customers we get to know them.” He adds: “It’s like good old-fashioned retailing. They get good value for money, any financial issues they have hopefully get sorted out and they can speak to someone. People will come in just to see us. One elderly couple comes in every night and they spend money.”

On the back of Cash Generator’s increasing success, a major TV advertising campaign is about to be launched on prime time ITV. “We’re very keen that the brand continues to become known to a wider audience and we’ll be using it to get our key messages across – that we offer a vast range of goods at reduced prices and that they are guaranteed for six months,” says Urry. “Without doubt, we will sustain this growth.”

As every retailer knows, their recession-bitten consumers are striving for bargains and the success of discount grocers has shown that people will go out of their way to find them. By definition, the people who visit these stores often become loyal followers.

Colbert says: “A lot are coming in for pawnbroking or a buy-back, then on the way out they’ll buy a TV.”

Odd though it may sound, these buy and sell stores are increasingly becoming destination stores. Like eBay, many people view these operations as a sort of hobby. And no matter who you are, once you step inside, it’s difficult not to think about all those unwanted items knocking around at home that could earn you a bit of cash. Amid the gloom, the pawnbroker is enjoying a new era. Word is spreading. Retailers beware.