There has been a lot of discussion lately about whether this old school layaway program from 20 years ago still is relevant and works today in the pawn industry. We love this and love to test fact from fiction.   We like to look at the facts and not theory of mathematics and calculations.  You cannot spend percentages and math.  But you can however spend profits and cash.   Here is the industry standard as it relates to pawnshops and their layaway program.

To be clear, we are fans of layaway & teach it as a part of all of our sales training.


In this industry we hear a lot about If you do this, at this rate of return, you we will get this in cash flow”.  For example, if you use the theory that “If I put $100,000 in loans out on the street at 10% interest, I will collect $10,000 a month in interest at 10% alone, x 12 months a year making over $20k in profit on interest alone!”  This sounds great at first, but then facts set in.  This example assumes that 100% of every pawn loan gets paid on and is picked up.  Judging by how much inventory stores have for sale, we know this is not reality.  In fact, a common redemption ratio we see every day is anywhere between 60-80% depending on what interest rate you charge and how much you loan.  If you use the “average”, then that $10,000 a month in the example above is in reality only $6,000-$7,000.  This is a huge difference and just one example of many ways that numbers are skewed to trick you as owners.  We question using the pawn layaway in the 10% down -10% a month for -10 months method because of the same exact facts.  You must ask yourself, do you just want “cash flow” or profit and cash flow that lasts and is duplicatable?


Those of you that know us, and have worked with us, know that we look at data differently than anyone else and layaway is one of those items.  We have worked with countless businesses all over the United States and Internationally.  These clients, in states, provinces and countries charge anywhere from 1.5% interest per month to as high as 30% interest and they all have the same problem; “How can we sell more”. The idea behind 10-10-10 layaway came into existence to try and stimulate sales in a lagging business model and uses the same false theory as mentioned above with loans.  It assumes that 100% of all layaways done will be paid in full, on time, will “generate 10% cash flow for you each month”, that the items won’t lose value if they do default and that your entire team will manage this database of customers in layaway perfectly to ensure that those in default get pulled asap with not errors or customers falling through the gaps. In those many examples of our client experiences mentioned above, we have hard data that shows the following information without a doubt:

  • On average we see 40-45% of layaways default (meaning the customer falls behind and the item is pulled back into inventory months later to try and sell again). Stores that we see range from around 20% default at best to 80% default at worst.
  • The average layaway lasts 7+ months. We see on average anywhere from 3 months on the low side to 12+ months on the high side (especially in those stores that currently do 10-10-10).
  • The average store has 25% of their sellable inventory in layaway. We have seen as low as 5% all the way up to 70% with one of our current clients!
  • The more money you have secured in layaways, the lower your overall gross profit (sale price minus cost) will be. Stores that have more than 20% of their inventory in layaway see on average 10% less GP! That is $10 out of every $100!  We believe this is true for several reasons, first of which is depreciation.  When a hard-good item sits in layaway for 4-7 months and then must be put back on the sales floor, is it worth more, less or the same as it was when it first sold on layaway?

You may be saying that our clients base is too small of a sample compared to the tens of thousands of shops worldwide, but in helping our industry leading partner PawnMaster with some custom reporting, they are seeing roughly the same data and information when they onboard new clients from other softwares and help their thousands of current clients understand what their reports mean.  We are confident this data is accurate.

Still Not Convinced?

Like it or not, items that we deal on every day in our pawnshops lose value, often at rapid rates.  and when the layaway defaults, profitability of each items suffers.   The only things that regularly maintain their value are Guns, Gold and Jewelry.  Don’t believe us?  See for yourself:

Tv’s lose 50% of their value the first year and will have lost 75% of their value in 2 years.   Do you think this affects your overall profitably if your layaway default rate is 40% and you are doing 10-month layaway?

The average iPhone depreciates 53% in one year and will lose another 50% of its remaining value in the next 6-12 months.  Do you think your customers are unaware of this when they have an item in layaway and can get one cheaper in a few months?  Especially if we give them back store credit on the money they already paid in.  What about other phones?

Your iPad loses 60-70% value in the first year.  This is due in part to competition in the tablet marketplace as well as a new model each and every year.  Does this hurt your profitability the longer it stays in layaway if it defaults?

Electronics of all kinds tend to lose anywhere from 30% to 70% (or even greater) of their value in less than a year.   Much of your layaway inventory is electronics.  How do you feel about holding an item in layaway for 10 months hoping that the customer pays it off and doesn’t default knowing that it loses 70% of its value in that time?

Jewelry, Guns and Gold.  You may be saying to yourself that these items are still safe to do a 10-10-10 method on because they don’t devalue like other hardgoods.  You are correct in saying this, but we will challenge you with two questions.  How may times could you have sold this same item at 100% retail price without having to wait 10 months or longer if it was on your showroom floor, and,  how many like items would have had come in on pawn just like it?  Customers bring in what they see in the store and is your layaway program affecting your pawn balance and inventory?


In closing, we are not against layaway programs.  We are not against allowing the customers to pay overtime and we are not against you growing your sales.  We want your sales to grow!  We do however want you to make good sound business decisions that make your business more profit and is long term sustainable. If you choose to do this program, we suggest that you only do it on jewelry, gold, guns and other high dollar sale items that won’t depreciate at a high rate.  All other items we recommend 90 days or shorter layaway programs. The larger retailers offer only 30-60 day layaway.  Have you ever wondered why?  We also recommend that you have a written customer policy that states your program clearly and the consequences of default.   We do not believe that the data we see every single day, in just about every single client, supports the fact that a 10-10-10 layaway program will deliver you lasting success. You do not need a Band-Aid, you need a solution.   Don’t take our word for it. Find our for yourself.  Call us for a free evaluation and #takethechallenge.   Call your software provider and ask them to help you understand your data.  In fact, if you are a customer of the largest software provider, PawnMaster, call them directly.  They have a custom report just for you, built by us, to prove this crucial data and so much more.  Instead of 10-10-10, we believe that teaching your team to sell now, and more often to your customers without layaway if possible (or 90 day layaways programs if not) with less discounts is the answer.  Doing this by driving more traffic into your stores for sales and doing online sales is the answer.  Grow your business the right way and do not sacrifice the hard earned profit we all as business owners work so hard for.

Our final analysis is that the 10-10-10 layaway program, while possibly temporarily growing your sales in the short term, is not long term sustainable and is not a long term solution to maximum profitability in pawnshops.

If you would like testimonials on folks that we have helped unwind years of customer service using the 10-10-10 program and that have experienced amazing sales growth and more profitability without this program than with, please contact us or call us directly at 952-582-4669