Giving pawnbroking a new shine

All this changed after Yeah Hiang Nam, CEO and managing director of pawnbroking chain company ValueMax, began operating its first pawnshop — under a joint venture (JV) — in Tampines in 2004. He revamped the look and feel of an existing pawnshop to mimic the brightly-lit ambience of a jewellery store. He also changed the pawnshop’s Chinese name to ValueMax. This, he says, reflected the company’s ethos, which is “to give maximum value to customers”.

“We were the first in Singapore to modernise the look. Nobody believed that the pawnshop could look like a jewellery shop,” Yeah tells The Edge Singapore in an interview. “If you want to expand profits, you need to have a brand,” says Yeah, who is this year’s EY Entrepreneur Of The Year for Financial Services.

Yeah’s bold move paid off as business improved at the revamped, branded pawnshop. Seeing its success, other pawnshops began to follow in ValueMax’s footsteps. “Others followed us by introducing their own brands. All of them have ‘max’ in their names,” he says with a laugh.

Today, ValueMax has 33 pawnbroking and retail outlets in Singapore and 11 pawnbroking outlets in Malaysia via associate companies. The company also has a jewellery retail outlet, a moneylending outlet and a remittance outlet in Singapore. In 2013, ValueMax became the first pawnbroking chain to be listed on the Mainboard of the Singapore Exchange.

Among its main competitors is MaxiCash Financial Services Corp, which has a chain of 44 pawnbroking outlets in shopping malls, residential areas and even MRT stations in Singapore. The company also conducts the sale and trading of pre-owned jewellery, watches, branded bags and its own brand of jewellery called LeGold. Additionally, it has a moneylending business — started last year — which provides secured loans to corporations. Maxi-Cash was listed on the Catalist board of the SGX in 2012.

ValueMax’s other main competitor is Catalist-listed MoneyMax Financial Services, which has the biggest chain of 72 pawnbroking outlets across Singapore and Malaysia. The company also sells preowned jewellery and luxury items such as watches and bags. The company introduced the Love Gold jewellery collection in 2016, followed by the Peppa Pig jewellery collection — its first intellectual property (IP) jewellery series — last year. Moreover, the company via a JV provides financial leasing services in Chongqing and automotive financial services with its subsidiary MoneyMax Leasing. The company entered into a JV to develop a live B2B online auction platform with Tokyo-listed Aucnet in 2017. The platform focuses on luxury branded merchandise, and gold and diamond jewellery.

Golden beginnings

Yeah’s entrepreneurship path was forged in the gold jewellery industry. He started working at a goldsmith shop at age 19 on the recommendation from a friend and honed his jewellery making skills there for a decade. In 1979, he opened his own factory to design and produce gold jewellery. These precious items were then sold to jewellery retailers across Singapore, most of which were his customers, he claims.

After about three years, Yeah felt the business had outgrown the local market as Singapore had a population of just three million then. So, he decided to enter the Middle East market. Arabs, especially those in Saudi Arabia, have a penchant for gold. Yeah claims he was the first Singapore jewellery manufacturer to venture into the region.

While the move turned out to be lucrative, it was not without some difficulties. Yeah recalls flying alone to Saudi Arabia, lugging 50kg of gold, to meet prospective buyers. Language was an obstacle as he was not fluent in English. He managed, however, to cut a deal. “A single customer bought all the gold that I brought over,” he recalls.

Yeah says it was easy doing business with Middle Eastern jewellery retailers and the profit margin was high. As crude oil prices soared in the 1980s, the Saudis became richer and flaunted their wealth by buying luxury items including gold jewellery, he says. The resulting demand required the company to recruit more skilled workers. There was a shortage in Singapore and given that there was a quota on foreign labour in the country, Yeah decided to set up factories in Malaysia and outsource to others instead.

Subsequently, however, Saudi Arabia raised the import duty on jewellery to 12% from 1% previously. Yeah says the increase was too large for the business to absorb, prompting him to focus on Dubai. Eventually Dubai too increased the import duty to 8% from 4%. At the same time, the IraqIran conflict erupted. So, Yeah decided to exit the Middle East altogether.

Meanwhile, the Hong Kong market was starting to accelerate. Yeah says the appetite for gold there was overwhelming. So, he decided to set up an office there in the early 1990s and supplied gold jewellery to Hong Kong retailers for 10 years. “You can supply many tonnes of gold there and you don’t have to worry about excess supply because the Hong Kongers will buy gold jewellery,” he says.

Nevertheless, the opening of China saw increased competition in Hong Kong. Yeah says many jewellery factories started to mushroom in China, flooding the Hong Kong market with their supply. As a result, he decided to exit the Hong Kong market.

Back in Singapore, Yeah decided to focus on pawnbroking because it is a business related to jewellery manufacturing. ValueMax owned a pawnshop under a 50:50 JV with Ban Soon Pawnshop, which it did not manage. But the company subsequently took over its operations. The rest, as they say, is history.

Innovating for future growth

Today, the pawnbroking industry is facing new challenges from the rise of disruptive technologies, such as blockchain and artificial intelligence. In addition to the proliferation of the internet and smartphones, these have led to the introduction of innovative business models and new ways of providing financial services.

To keep up with the times, ValueMax introduced an online valuation service on its website in 2016. Users are required to upload a photo of their valuable items, such as gold, jewellery, diamonds, luxury watches and pens. Within a working day, an estimated value of their items will be sent to them. Customers then need to make an appointment to visit a ValueMax outlet to obtain an accurate valuation from its appraisers. Yeah says this in line with regulations to conduct know-your-customer procedures to weed out any money laundering activity. “As technology progresses, we need to provide services online to provide convenience to our customers.”

That aside, the hiring of skilled employees continues to be a challenge for ValueMax but it has been able to recruit new hires through referrals. More important is the ability of employees to differentiate between a genuine and fake item, and then appraising its value, Yeah stresses. He says the company trains its new employees by sending them for courses and assigning them mentors.

As a result, Yeah claims that ValueMax has the strongest valuation team among its peers. “We have [commissioned] a market survey [conducted by a third party] that shows our appraising skill is the strongest in the market,” he says. This is crucial because the pawnbroking business is a volume game, as the margins are thinner than jewellery retailing and trading, says Yeah. “So, you need a lot of customers.”

To diversify its pawnbroking revenue, ValueMax also accepts the pawning of luxury handbags, says Yeah. This is usually limited to the Hermès brand, though Louis Vuitton and Chanel handbags are accepted too, on condition that they are in “new condition” and come with an official certificate and receipt.

Yeah says ValueMax is open to expanding beyond Singapore and Malaysia. However, this is subject to obtaining a licence, as pawnbroking is tightly regulated. As such, a JV is a quicker route for expansion, he explains. The company may also expand through inorganic means. “We will consider taking over pawnshops whose owners no longer want to operate.