Rental Services Short-term Ownership.

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Presentation transcript:

Rental Services Short-term Ownership

Overview The U.S. consumer product rental industry, which is strictly rental and not rent-to-own, is comprised of about 12,000 companies with combined annual revenue of about $23 billion. This industry includes those companies that rent personal and household goods, primarily for short periods of time but also for longer-term arrangements as well. These products can include consumer electronics and appliances, DVDs, formal wear, home health equipment, and recreational goods. DVD and videotape rentals account for 35% of this industry’s revenue; home health equipment accounts for 20%; and consumer electronics and appliances account for 10%. The balance is divided between furniture, formal wear and costumes, party supplies, and recreational equipment

About the Competition This industry is concentrated with the largest 50 companies earning 70% of the industry’s revenue. The profitability of individual companies is based on having the right merchandising mix as well as inventory financing costs. Large companies have the competitive advantage that comes from being able to leverage economies of scale in several areas, including: purchasing, distribution, and advertising. Small companies can find their own competitive advantages through superior customer service and specific offerings to local communities.

Tapping into Demand The demand for rental services overall is driven by personal income, while movie rentals follow the popularity of new movie releases. Movies are typically available for rent during a distribution window that lasts somewhere between 30 and 60 days, during which consumers cannot view these movies on TV, cable, pay-per-view, or online. This is a prime opportunity for movie rental services to amp up their marketing efforts. The big advantage to renting products such as consumer electronics, furniture, and some home healthcare equipment is that it can be rented on a short-term basis, usually for a week at a time.

Targeting Consumers The majority of this industry’s target consumers are individuals with poor credit and lower incomes who are otherwise unable to purchase items such as furniture, appliances, consumer electronics, and outdoor machinery. In the wake of the recession, the demographic for these consumer product stores has expanded to include middle- class Americans who have lost their jobs and/or lost access to credit. For DVDs, games and videos, on the other hand, the target consumer is typically middle- to upper-income who own DVD players and consoles and are looking for the latest movies and games but don’t want to purchase outright. The average game renter is a 31+ year old male (53%); a parent of at least three children; plays 7 hours or less per week.

Industry Trends In order to tap a completely different target market with a wider appeal, some operators are beginning to offer modified rental agreements on applicable products, to include allowing for hourly rentals of items like bicycles and electronics. In the way of rental appliances, metallic blue and high gloss black are the two colors in greatest demand by consumers on items such as washers and dryers. In game rentals, the trend is toward family playing time, with parents renting something on the lighter side, such as a dance game for the kids, while getting more mature titles for themselves

Opportunity to Grow The consumer goods rental market is growing daily, expanding to encompass entirely new categories of goods that individuals are interested in renting. This includes items like handbags, clothing, shoes, and children’s toys. According to recent study results, kiosks will continue to grow in popularity due mainly to the following: Offers greater choices to the customer Allows for quicker reaction to market fluctuations Provides kiosk operators with a way to offer value-added services Keeps customers more in control and better informed In-store rentals account for about 80% of the DVD rental market, but other forms of distribution are growing in popularity, including kiosks, mail order, and digital streaming.

Future Expectations The rental industry is expected to grow its revenue at a rate that will outperform the economy by up four times in 2013 and 2014, at a rate of 7.6%, leading the U.S. economic recovery. It is expected that the consumer electronics and appliances rental portion of this industry will continue to see demand increase as it targets consumers with poor credit who are unable to afford purchasing consumer electronics and appliances outright; however, this is anticipated to change with increased competition and better credit ratings following that five-year time period. The DVD, games and video rental portion of this industry is expected to continue changing, with in- store rentals declining rapidly as consumers move toward online, by-mail, and streaming options.

Advertising Strategies Consumer product rental companies should focus on the key selling points of renting in all marketing efforts: the ability to “own” what they cannot afford to buy for short or long periods of time. Event rentals can be a boon to the industry. Tents, tables, chairs, place settings, and linens are just a few of the items people need when planning events. Partnering with wedding and event planners can get a foot in the door with this lucrative short-term market. Rental service companies should advertise on television in order to increase name recognition, especially after consolidation in new geographic markets. The commercials should feature products and name-brand selection, prompt delivery, price matching, free repair service, no credit requirements, and no long- term obligations.

Advertising Strategies Rental service companies can generate top-of-mind awareness and increased repeat purchases with promotional mailings and email marketing tied to a seasonal event (e.g., TV rentals for the Super Bowl). Since consumers and other customers, like contractors, need these services throughout the year, ads should be placed during primetime viewing slots and scheduled to run year round.

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