Forecast of the pawnshop market in the current economic situation in India
The relevance of research
A pawnshop is a legal entity - a specialized commercial organization whose main activities are the provision of short-term loans to citizens and the storage of things. Pawnshops are the only financial institution whose loan life cycle ends after the sale of the pledge, without litigation and collection stories. The client remains with the money he received, and the pawnshop sells movable property and fully reimburses the loan amount
Purpose of the study
Analyzing the state of the pawnshop market in India, assessing the size of the market, analyzing competitors, as well as determining the factors affecting the pawnshop market
Content
Chapter 1. Key components of the pawnshop market
1.1 Market size
1.2. Growth rates of the pawnshop market
1.3. Pawnshop Market Trends
1.4. The main problems of the industry
1.5. Stage of the life cycle of the pawnshop market
1.6. Estimation of the number of buyers and their financial capabilities
1.7. Estimated consumption per capita
1.8. Analysis of sectoral indicators of financial and economic activity
1.9. Price analysis
Chapter 2
2.1. Economic components
2.2. Social Components
2.3. Technological components
2.4. Political Components
2.5. STEP analysis of the pawnshop market
Chapter 3. Assessment of the degree of competition
3.1. Scale of competition (local, regional, national, global)
3.2. Number of competitors and relative market shares of the largest competitors
3.3. Compact location of industry companies in certain regions
Chapter 4 Industry Forecasts
4.1. Analysis of the impact of recent crises on the industry (the global crisis of 2008 and the currency crisis in India in 2014)
4.2. Analysis of the impact on the state aid industry at the current date
4.3. Assessment of the degree of impact of the crisis due to covid-19 on the analyzed market. Barriers existing in the pawnshop market
4.4. Prospects and growth drivers for the pawnshop market
4.5. Forecast for the development of the pawnshop market in the context of the current economic crisis due to covid-19
Chapter 5 Forecasting Methodology
5.1. Methods for forecasting key industry indicators
5.2. Sources of information for forecasting
5.3. Timing of forecasting
Research excerpt
Chapter 1. Key components of the pawnshop market
1.1. Market size
A pawnshop is a legal entity - a specialized commercial organization whose main activities are the provision of short-term loans to citizens and the storage of things.
Pawnshops are the only financial institution whose loan life cycle ends after the sale of the pledge, without litigation and collection stories. If the client does not redeem the product, sanctions will not be applied to him, his credit history will not suffer. The client remains with the money he received, and the pawnshop sells movable property and fully reimburses the loan amount.
The pawnshop market has a number of features that affect the marketing strategy: a single, unified product that is not subject to gradation in terms of quality or status; the inability to increase business through related products or additional services, the great importance of the distribution channel - a busy geographical point, the provision of similar goods on other conditions by adjacent markets, etc., due to which the price becomes the main tool of a modern pawnshop. The price, in turn, is strictly regulated by the Bank of India, setting a maximum for the entire country based on the average prices for loans of the hundred largest companies.
The pawnshop market can be divided into three segments:
- network pawnshops - present in more than 5 regions and specialize in issuing loans secured by gold items;
- regional pawnshops - operate in the local market and accept as collateral mainly gold items, as well as other valuables (household appliances, watches, etc.);
- car pawnshops - they specialize in the pledge of vehicles (including expensive cars), they mainly work in and.
Unscrupulous thrift stores sometimes disguise themselves as pawnshops. Instead of keeping the mortgaged property, they immediately sell it. In order not to encounter such an organization, you can check the lender in the warning list of companies with identified signs of illegal activity.
During the crisis, the demand for the services of pawnshops increases both among individuals and entrepreneurs.
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Growth rates of the pawnshop market
Traditionally, the volume of the pawnshop services market is considered to be the total volume of pawnshop loans.
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Diagram 1. Dynamics of the volume of the pawnshop market, 2017–2021, billion Rs.
1.3. Pawnshop Market Trends
Among the trends in the pawnshop market, it should be noted:
- Increase in the portfolio and the volume of loans issued with a decrease in the number of participants;
- Growth in the share of large network pawnshops;
- Consolidation. Large network pawnshops absorb small regional ones;
- Investments in online services to maintain efficiency and competitiveness;
- Reducing the number of pawnshops. Pawnshops that were not included in the State Register of Pawnshops were retrained as commission stores or left the market;
- The market is becoming less attractive for new participants: the positions of the largest market operators are strengthening, and the regulatory burden is increasing.
1.4. The main problems of the industry
The main issues in the industry include:
- Tighter market regulation by the Central Bank;
- Strengthening control over the circulation of precious metals;
- Excessive reporting and numerous cross requests from regulatory authorities: the prosecutor's office, the Central Bank of India, Rospotrebnadzor;
- Non-redemption of the collateral by the borrower, which at the same time creates a number of other problems:
– problems of a pawnshop when selling unclaimed items;
- mortgaged equipment may have hidden flaws that will be discovered later;
–– before the moment of implementation, the model may become outdated, and, therefore, fall in price even more or not even be sold; - Pledges obtained by criminal means. In this case, there is a risk not only not to receive money, but also to lose the collateral, since the stolen will be looked for in pawnshops in the first place;
- The influence of the human factor - errors and fraud in manual assessment.
1.5. Stage of the life cycle of the pawnshop market
The pawnshop market is in the stage of maturity. The maturity stage is built on the use of the service by conservative consumers, on the popularity and wide representation of the service, which ensures the stability of the industry.
The level of competition in the market is above average. A high value at the stage of maturity gets the speed of the company's reaction to the actions of competitors.
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1.6. Estimation of the number of buyers and their financial capabilities
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However, during 2012-2017 India's population has shown a positive trend. However, in 2018, the vector changed – the population decreased due to the natural population decline in 2016–2019.
The current demographic situation in India is characterized by natural population decline (since 2017), which is accelerating, and migration growth, which does not compensate for natural decline.
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1.7. Estimated consumption per capita
Estimation of per capita consumption was made by GidMarket on the basis of the ratio of the volume of the pawnshop market to the population of India.
Pawn shop consumption per capita for 2017–2021 ...
Diagram 5. Consumption in the pawnshop market per capita, 2017–2021, Rs./person
According to the Central Bank of India, based on market survey data in May 2021, the profile of a pawnshop borrower is as follows:
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1.8. Analysis of sectoral indicators of financial and economic activity
According to GidMarket's calculation, based on data on the financial performance of key market companies, the gross margin of the pawnshop industry significantly exceeds the average profitability of all sectors of the Indian economy.
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Current liquidity characterizes the extent to which all short-term liabilities of the enterprise are secured by current assets. Shows how many rupees of current assets account for a unit of short-term liabilities. The optimal values are 1,5–2,5 times.
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Absolute liquidity shows what part of short-term liabilities can be repaid in the shortest possible time. For Indian companies, the normative value of the absolute liquidity ratio is in the range Kal> 0,2–0,5.
The indicator of the pawnshop industry throughout the entire period under study is significantly higher than the normative one. The value of the indicator in excess of the recommended one indicates inefficient and irrational use of funds that could be directed to the development of the enterprise.
Table 2. Absolute liquidity of the pawnshop industry compared to all sectors of the Indian economy, 2017-2021, times
In general, the analysis of sectoral financial ratios in the field of pawnshops shows a high profitability of the industry and indicates the ability of most enterprises to repay current debt at the expense of existing current (current) assets.
1.9. Price analysis
Pawnshop rates depend on the value of the collateral. The lower it is, the higher the percentage and vice versa. So, with a large pledge, the interest rate can be reduced up to two times relative to the rate with a small pledge.
GidMarket analysts believe that consumer price indices in the pawnshop market are similar to price indices for interest rates for consumer loans monitored by Rosstat.
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Chapter 2
2.1. Economic components
India GDP
GDP is a macroeconomic indicator that reflects the market value of all final goods and services produced in a year in all sectors of the economy on the territory of the state for consumption, export and accumulation.
The dynamics of India's GDP is decisive in the vector of development of the entire economy of the country and determines the key trends in consumer effective demand and economic activity.
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Gold prices
Official discount prices for gold are set by the Central Bank of India every working day. Prices are calculated on the basis of gold fixing on the London spot metal market, and are converted into rupees at the official US dollar to Indian rupee rate.
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2.2. Social Components
Decline in numbers and restoration of incomes of the population (discussed in paragraph 1.6.).
2.3. Technological components
Implementation of pawnshop terminals
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Automated terminals can significantly influence the popularization and availability of pawnshop loans for consumers. According to the Association for the Development of Pawnshops, with the successful operation of an automated pawnshop, market players will save up to 30% of costs. The positive influence of the factor.
Digitalization
In terms of Internet use activity, India is on par with the leading countries and even somewhat ahead of them, taking into account the achieved level of development of telecommunications infrastructure. As of 2020, Indians spend 7 hours and 52 minutes online every day.
Using the power of the Internet has a great impact on the pawnshop market.
The most advanced pawnshop networks actively communicate with customers through feedback on the website, push notifications and mobile applications, which makes their services more accessible and comfortable for the consumer. Also, some sites have an online consultant with which you can interact with your potential customers.
2.4. Political Components
Register of pawnshops
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Unified Chart of Accounts
The Bank of India has been implementing a program for the transition of non-credit financial institutions to a single chart of accounts (CAP) and industry accounting standards (OSBU) for a long time.
The first reporting under the new rules will need to be submitted in Q1. 2023 for 1 sq. 2022 The transition applies to the states of the microfinance market listed in paragraph 1 of the Bank of India Ordinance No. 10.11.2020-U dated November 5616, “On the application of certain regulatory acts of the Bank of India on accounting and accounting (financial) reporting”.
One of the most important aspects in the transition to the ENP and OSBU for pawnshops is the full automation of activities, which should be provided by specialized software, which should contain and take into account all the nuances of the transition to new standards.
The main difficulties for the transition:
- the high cost of accounting programs for the ENP - it will not be possible to use the already purchased 1C Accounting and you will have to buy a new, expensive program and pay for its maintenance;
- lack of knowledge among accountants who serve pawnshops.
Most small pawnshops cannot afford the extra costs. Negative influence of the factor.
Jewelry marking
In the spring of 2021, the Ministry of Finance of India launched the state integrated information system in the field of control over the circulation of precious metals and precious stones (GIIS DMDC). He is also the GIS operator.
The system provides real-time traceability of DM and DC from the moment of extraction to the moment of their sale to the end consumer in the form of jewelry. This facilitates state control and supervision in the jewelry industry. And a full transition to EDI when working in GIIS simplifies the interaction of participants in the turnover between themselves and the supervisory authorities.
The start of mandatory marking of jewelry is scheduled for March 1, 2022. Previously, it was scheduled for July 1, 2021, but was postponed at the request of turnover participants.
Until September 1, 2022, it is necessary to complete the identification of jewelry leftovers (on tags).
From March 1, 2023, jewelry (except for remnants) in the hallmark area must be physically marked (nanomark in the form of a special DataMatrix code), but storage of unmarked products is allowed.
From March 1, 2024, jewelry labeling will work in full force: it is prohibited to circulate and store jewelry leftovers without a physical label.
Gold, precious stones, precious metals, as well as various products from them are subject to labeling: diamonds (including unprocessed), rubies, sapphires, emeralds, diamonds, platinum and palladium, gold coins, platinum and gold jewelry.
Not marked: silver jewelry, jewelry weighing less than three grams. They only require the assignment of a UIN for traceability.
For the buyer, the introduction of innovations gives additional confidence that he is purchasing a quality product. On the other hand, the new rules will entail new costs - manufacturers, sellers, pawnshops will have to install special equipment, train specialists to work on it, and pay for access to databases.
2.5. STEP analysis of the pawnshop market
In general, the impact of macro factors on the pawnshop market can be assessed as negative.
The economic factors of the macro environment have both a positive and a negative impact on the pawnshop market: the growth of the dollar, the growth of gold prices have a positive effect on the development of the pawnshop market; GDP recovery has a negative impact.
Political factors as measures of state regulation have a negative impact on the pawnshop market.
Social factors - population decline and recovery of real disposable incomes also have a negative impact.
Technological factors require additional costs from enterprises, but they also open up new opportunities for growth and development, improving business efficiency, and its investment attractiveness. Implementation of software, equipment and digitalization of business is a necessary condition for competitiveness in the market.
Table 6. STEP analysis of factors affecting the pawnshop market
Chapter 3. Assessment of the degree of competition
3.1. Scale of competition (local, regional, national, global)
In the pawnshop market, local competition is most pronounced. Scaling networks is resource-intensive, increases the risks of the organization, so the penetration of even federal networks is small, significant market power still belongs to local players.
The volume of sales in the market is directly proportional to the proximity to the target audience and the high traffic of the place. Clients most often choose pawnshops on a territorial basis, close to home or work.
The pawnshop market in each region is different in terms of a number of criteria - the level of competition, the distribution of market shares, the level of profitability, which forces companies to selectively use various pricing policy tools.
Market conditions indicate the small size of most enterprises. The geographical segmentation is pronounced, the number of federal players is still small and their influence on the market is different and uneven.
At the same time, the arrival of large federal players in the regions in recent years has caused a tightening of strategies with their transition to price wars, dumping, which, as a result, only lead to consumer gains and a decrease in business profitability.
3.2. Number of competitors and relative market shares of the largest competitors
Most pawnshops in India can be classified as small businesses: ...
At the same time, large organizations operate on the market - pawnshops with a portfolio of more than ... million Rs. Among such pawnshops, including: pawnshops with a wide network of separate subdivisions in large economically developed regions; pawnshops cooperating with networks for the sale of gold products that use store sites.
More than half of pawnshops have been operating on the market for over 10 years.
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The assessment of the market share of the largest competitors is based on the data of the forecasted revenue of enterprises and the forecasted total revenue for the industry for 2021.
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The study of the dynamics of total revenue is indicative from the point of view of the analysis of growth trends. In 2018–2019 the total revenue of the largest market operators was in stagnation.
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Diagram 12. Dynamics of the total revenue of the largest pawnshop market operators (TOP-5) in India, 2017–2021, million Rs.
3.3. Compact location of industry companies in certain regions
According to the state register of pawnshops compiled by the Central Bank of India as of 25.01.2022/2/209, a total of operating legal entities in the field of pawnshops are registered.
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Diagram 13. Compactness of location of companies in the industry in certain regions, Jan. 2022, %
The pawnshop market is quite strongly concentrated on a regional basis - most pawnshops are located in regions with a high proportion of urban population and cities of federal significance.
Chapter 4 Industry Forecasts
4.1. Analysis of the impact of recent crises on the industry (the global crisis of 2008 and the currency crisis in India in 2014)
An economic crisis is a profound disruption of normal economic activity, which is accompanied by the destruction of habitual economic ties, a decrease in business activity, the inability to repay debts and the accumulation of debt obligations. This is a phenomenon of a market economy, repeating with a certain frequency, and depending on the scale, it can either concern a particular state or be of global importance. The crisis is accompanied by a sharp decline in production, bankruptcy of enterprises, a fall in the gross national product, a large-scale increase in unemployment, and often a depreciation of the national currency.
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4.2. Analysis of the impact on the state aid industry at the current date
Since the introduction of restrictive measures in India related to the spread of a new coronavirus infection, the state has been providing the necessary support measures to business representatives who have encountered objective difficulties.
Some of them are systemic and apply to all organizations and individual entrepreneurs, while others are intended only for companies and businessmen working in certain sectors of the economy.
The pawnshop industry was not included in the lists of the most affected sectors of the Indian economy, therefore, there were no specific measures for state support of enterprises in the analyzed market.
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4.3. Assessment of the degree of impact of the crisis due to covid-19 on the analyzed market. Barriers existing in the pawnshop market
In 2020, the pawnshop industry in India as a whole, amid the pandemic, faced almost the same significant deterioration in business confidence as the entire service industry. This does not happen often: usually, the business activity of pawnshops is in antiphase with the real incomes of the population, but in the second quarter of 2020 it also decreased.
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4.4. Prospects and growth drivers for the pawnshop market
Perspectives:
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The main drivers for this will be:
- Acceleration of digital processes;
- Deterioration of lending conditions in banks;
- The growth of the ruble value of gold.
4.5. Forecast for the development of the pawnshop market in the context of the current economic crisis due to covid-19
Forecasting the dynamics of the volume of the pawnshop market is based on the forecast indicators of the development of the Indian economy, barriers and growth drivers that exist in the market.
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Chapter 5 Forecasting Methodology
5.1. Methods for forecasting key industry indicators
Modern statistical forecasting methods are used, taking into account the actual dynamics of the industry and the impact of the current and projected general economic situation in connection with the spread of the covid-19 virus.
In addition, when compiling the forecast, changes in real incomes of the population, trends in consumer preferences in a crisis, development forecasts and the degree of impact of other factors affecting the industry are taken into account.
5.2. Sources of information for forecasting
- Industry volume over the past 5 years
- Industry dynamics in 2008–2009, in 2014–2015, in 2017–2021*
- Dynamics of macroeconomic indicators over the past 9–10 years
- Current public assistance plans
- Databases of the State Statistics Committee of India
- Indian Revenue Service databases
- Open sources (websites, portals)
- Issuer reporting
- Company websites
- Media Archives
- Regional and federal media
- Insider sources
- Specialized analytical portals
* Until October 2022, financial indicators for the main market operators and industry coefficients for 2021 are GidMarket forecast based on the dynamics for 2017-2020, except for cases when the operator discloses data on the results of financial 2021 publicly.
5.3. Timing of forecasting
The forecast belongs to the medium-term category - 5 years (2022-2026)
Diagrams
Diagram 1. Dynamics of the volume of the pawnshop market, 2017–2021, billion Rs.
Diagram 2. Industry life cycle stage
Diagram 3. Dynamics of real disposable income of the population of India, % to the previous year, 2012–Sep. 2021
Diagram 4. Dynamics of the population of India, million people, as of 01 Jan. 2012–2022
Diagram 5. Consumption in the pawnshop market per capita, 2017–2021, Rs./person
Chart 6. Profitability before tax (profit of the reporting period) in the pawnshop industry in comparison with all sectors of the Indian economy, 2017–2021, %
Diagram 7. Current liquidity (total coverage) for the pawnshop industry for 2017–2021, times
Chart 8. Dynamics of India's GDP, 2012–2021, % to the previous year
Diagram 9. Monthly dynamics of the US dollar against the rupee, Rs. for 1 US dollar, 2017-Feb. 2022
Chart 10. The dynamics of discount prices for gold, set by the Central Bank of India, 2017-Jan. 2022, Rs./gram
Diagram 11. Shares of the largest competitors in the pawnshop market in 2021, %
Diagram 12. Dynamics of the total revenue of the largest pawnshop market operators (TOP-5) in India, 2017–2021, million Rs.
Diagram 13. Compactness of location of companies in the industry in certain regions, Jan. 2022, %
Diagram 14. Forecast of the volume of the pawnshop market in 2021–2025, billion Rs.
Tables
Table 1. Gross margin of the pawnshop industry compared to all sectors of the Indian economy, 2017-2021, %
Table 2. Absolute liquidity of the pawnshop industry compared to all sectors of the Indian economy, 2017-2021, times
Table 3. Consumer price indices in the pawnshop market in India in 2017–2021, %
Table 4. Average prices in the pawnshop market by Union Territories, Jan. 2022, % per day
Table 5. Average market values of the total cost of consumer loans in India, Q1 2022, %
Table 6. STEP analysis of factors affecting the pawnshop market
Table 7. Main companies participating in the pawnshop market in 2021
Table 8. Assessment of the impact of recent crises on the industry
Table 9. Analysis of the impact on the industry of the state aid proposed as of April 27.01.2022,
Table 10. Forecast indicators of the development of the Indian economy
All reports