Service Matters – In praise of rental

The July issue of IER featured a profile of Forbes Direct, the UK’s largest independent rental company. Many small dealers have long since abandoned rental, but it’s a very good earner if you can get and retain the customers.
Rise and fall
There has been a rental culture in the UK since before the 1930s. In terms of value and volume the rental market peaked in the early 1970s, when 85% of all colour TVs produced were rented out. In those days the biggest problem for dealers was raising the capital to finance a rental operation – and getting good engineers to service the sets! Large outfits like DER and Radio Rentals waxed and waned, finally to leave only three national companies in the field: boxclever, DVR and Forbes Direct. Taken all together, they represent a very small slice of the rental cake of years gone by. Many independent dealers wound down and abandoned their rental activities as the real price of home electronic equipment plummeted, and renting went out of fashion. In these times rental is a niche market, still good to those who work hard at it, but slowly shrinking nevertheless.
We built up a portfolio of thousands of rental contracts in the 1970s, and have actively promoted them to this day. We routinely ring our customers to offer them upgrades on their equipment, very often at the same price, working from a stock of new and ex-rental equipment. This minimises the age of the equipment out there, maximises its value and reliability, and gratifies the customers. Some years ago we added washing machines and tumble driers to our range, and we can still number our rentals in four figures, though there’s a gradual decline, virtually arrested lately in the face of the economic squeeze. If you can make them stick, the value of rental deals is very good, with the cost of the gear being recouped (net) in 12-14 months, and a minimum rental period of 17 months.
Customer profiles
Rental customers devolve into two groups: a small one consisting of better-off people who choose to rent for the ease of updating and instant service (hotels and institutions are also part of this); and the vast majority who may be described as ‘sub-prime’, with little money or financial discipline – combined, perhaps, with a fear of breakdown and consequent large repair bills – the main driver of rental business from its outset. We even have a few slot meters still out there.
The status qualifier for rental (depending of course on the value of the gear in question) is lower than for other credit dealings, and the initial requirement of just one month’s rent is attractive to many impecunious people. We generally require direct debit or standing order payments, but some renters still have a payment card. The regular footfall this brings to the shop is not very lucrative!
Service obligation
Of course, the prime requirement for a rental operation is a local service department. First-line service based on a big van with two people, and workshop service to as great a depth as possible in these days. This needs to be in-house, shared or tightly-contracted because it would be totally uneconomic to pay a third party normal repair rates per job. Once these facilities are in place their costs can be offset by retail sales, especially within a group like Euronics, and by chargeable repairs (now increasingly rare and sought-after on a local scale) in the workshop.
One of the prime reasons for rental is the excellent service that comes as part of the deal, but wow, how our customers exploit it! Calls to change the batteries in the zapper; to refit aerial leads which have fallen out; to deal with ‘finger trouble’; to explain operation; etc. Relatively few call-outs are down to real faults, ones that have to come into the workshop to be fixed – and when they are, an upgrade is now as common as a repair on older stuff.
Ongoing
Rental is still viable in the 21st century, and useful to both dealers and customers to sustain them through such hard times as we are currently experiencing.