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Consider Rental Purchase Operations

Furniture World Magazine


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Potential expansion opportunity or competitive threat?

For retail furniture managers, the rental-purchase industry likely prompts two principal questions: Is this a potential expansion business? Or, is it a competitive threat?

The answers, generally, are yes and no. However, both aren't quite that simple. Making rental-purchase work for you requires a significant dedication of resources... and if retail furniture stores neglect customer service rental-purchase stores can be a competitive alternative for consumers.

The rental-purchase segment is a $4.5-billion industry in the U.S. today, serving 3.4 million Americans every year. Although the 7,500 stores here also offer home appliances and electronic entertainment equipment, furniture represents a significant portion of an average store's rentals.

Like in any business, rental-purchase offers profit opportunities to enthusiastic and dedicated operators. The question is whether retail managers are prepared to give the business sufficient attention.

WHAT SPECIALIZED SKILLS ARE REQUIRED? Unlike most furniture stores our primary customer is someone whose credit history is either non-existent, or not strong. For retail managers, that would demand a change in thinking about managing accounts.

Our employees build relationships with customers, and careful attention to the health of that relationship is vital to maintaining what is essentially a revenue stream business. We help the customer decide what he or she can afford to rent, and to ensure a smooth voluntary return, we are part of the decision when the customer's need for an item has come to an end.

In addition to nurturing relationships, a successful rental-purchase business requires honed communications skills. Repeat customers know that every facet of the rental-purchase agreement has been fully explained and understood, and they accept their responsibilities in return for the unique advantages our stores provide. Many of our customers have not been treated warmly in retail stores; our success depends on how well we recognize that special sensitivity.

Members of the Association of Progressive Rental Organizations (APRO) learn these and other specialized skills through the association's many educational and networking opportunities. Taking advantage of those forums would be critical to anyone entering the industry.

CAN THERE BE SHARED EFFICIENCIES? Certainly, retail managers launching rental-purchase businesses can benefit from shared warehousing, some commonalty within their existing customer base, and the fact that many of their furniture suppliers are accustomed to working with rental-purchase stores.

But what cannot be shared is the physical facility. Rental-purchase must be a completely stand-alone operation, not one that shares the retail sales space. There must be no confusion in the customer's mind between a retail installment sales and a rental-purchase, or "rent-to-own" agreement.

Similarly, a completely separate staff is required, one that is dedicated exclusively to rental-purchase and its unique requirements.

WHAT RETAIL STORES COULD BENEFIT MOST? Large furniture chain stores are unable to provide the type of personal customer service that is required in rental-purchase. Consequently, the smaller retail businesses would be most likely to maintain a separate rental purchase operation.

For the small "mom and pop" retail furniture store, rental-purchase might be a viable way of countering the competitive pressure it feels from the large chain stores.

Another factor is the nature of the store's market. The most successful rental-purchase stores are in areas typified by rental housing, and the presence of transient working populations and military personnel.

NOTABLE SUCCESSES AND FAILURES: Members of APRO have made a commitment to learning and improvement, but operators who don't make a similar dedication to the business are more likely to fail. If rental-purchase is treated like the surly step-child of your retail business, then--at least fiscally--it will behave like one.

Despite the unfounded claims of the industry's critics, our stores are not outrageous money machines. We are no more profitable than any other successful business. As someone once said, we offer consumers another way of "going to market," and both sides in the transaction can benefit from our offering.

But, quite simply success requires a different mind-set than in retail. As already explained, the business demands a much higher level of customer service. For instance, our most common agreement--weekly--means four times more transactions and customer-contact opportunities than the typical monthly installment sale contract.

Success also demands a different concept of what goes into customer service, and the cost of that service. Our rental fees may seem high to uninformed critics who don't have to balance the books but they reflect the cost of our unique offerings. We make no credit check--if the customer rents long enough, he or she simply takes possession of the product. We let the customer return the product at any time for any reason, with no added cost or obligation. We deliver the product--free. We pick up the product--free. We repair the product in the home, replace it if it's not repairable, and provide a loaner if necessary--all free.

Given what we provide, yes, we can be competitors to some of your retail operations. But, with the proper dedication of resources, rental-purchase can just as easily be a valuable extension of your existing businesses. Specialists at APRO (512-794-0095) are available to help you with your decision.


Bob Simons is president and co-owner of All Star Rentals, Inc. He is also 1st vice president of the Association of Progressive Rental Organizations. Questions about this article can be sent to editor@furninfo.com.

 

Furniture World is the oldest, continuously published trade publication in the United States. It is published for the benefit of furniture retail executives. Print circulation of 20,000 is directed primarily to furniture retailers in the US and Canada.  In 1970, the magazine established and endowed the Bernice Bienenstock Furniture Library (www.furniturelibrary.com) in High Point, NC, now a public foundation containing more than 5,000 books on furniture and design dating from 1620. For more information contact editor@furninfo.com.