RTO stores do well with higher-priced furniture selection
By Roy Griffaw -- Furniture Today, September 8, 2003
Reno, Nev. — In the past decade, the product mix carried by the nation's rental purchase industry has changed significantly.
"Ten years ago, I could deliver a rent to own sofa on one shoulder. Today it's real furniture," said one rental dealer attending the industry tradeshow here.
Has the rent to own customer changed? No, according to Mitchell Fadel, president of Rent-A-Center, the world's largest rent-to-own company.
"I think it's the industry getting rid of some preconceived notions of what the RTO customer can and can't afford," he said. Rent-A-Center offers more leather upholstery than ever before, and Fadel said there is "an opportunity to do even more with leather as well as higher-end case goods."
Steve Robins, national accounts manager for Klaussner Furniture Inds., said the average cost of a sofa shipped to rental dealers is up 25% in the past 5 years. "We ship much more leather to the rental channel now, mostly in sofa/chair combinations to keep cost down, but it's growing," he said.
Ernie Lewallen, owner of UHR Rents and former president of the Assn. of Progressive Rental Organizations trade group, said that carrying better goods has pushed his average rental per unit is up 25% in the past 3 years. He attributes this to an evolution among rental companies.
"We used to think that a barrier existed that we could not cross, a maximum rate our customer would pay," he said. "That was wrong. Our customers want the best like everybody else, and they're willing to pay for it."
The move away from promotional goods began in the late '90s, initially because RTO companies needed more expensive products to push up margins and cover fixed costs. Almost by accident, the industry learned that rental purchase customers will pay a premium for quality merchandise.
Will we see Thomasville galleries in RTO stores? Probably not. The typical sofa shown in Reno was $799 retail. But as RTO companies embrace the idea that "quality sells," the opportunities for expansion into new categories will abound.
