The furniture industry knows a thing or two about the various challenges caused by Covid and the many changes that have happened or will happen because of it.
One of these changes has to do with a little-talked-about category in the industry: rent-to-own furniture.
The rental furniture market is projected to reach 139 billion by 2029, according to Fortune Business Insights, and over 44 million people, or 35.9% of U.S. households, rent their homes—which means there’s potentially a lot of business to be had for rent-to-own retailers.
Enos Barger, a managing partner at 6-store Castle Rental & Pawn, has been in the rent-to-own category for the vast majority and came back from his brief hiatus right before the pandemic was getting into full swing.
“One of the biggest things I didn’t anticipate was moving from about 15% of your time being spent on procurement of inventory to 40 and 50%,” he says. “And that’s just trying to stock and be able to plan out advertising campaigns with product in them. I’ve never in my career experienced that before.”
Customers were well-funded because of unemployment benefits and stimulus payments, according to Barger, which put the company in a rare situation where they could sell almost anything they had on the floor—if they could get it.
“We had to get really creative as far as where we filled our floor from, and quite honestly, there were points in times in which we actually went into the local Facebook marketplace and bought good-quality used product just to make sure that we had something to fill our floor with.”
However, he says one thing that helps with the rent-to-own business is that instead of the style of furniture being the most important thing, it’s more about the style of doing business that matters.
“Rent-to-own companies always lag behind traditional retailers, and when other companies were seeing 80% of the revenue coming in via credit card processing, we were still doing maybe 45%.”
Barger also says the company had mechanisms in place to allow customers not to have to come into the store, they just really executed on them. That caused the company to re-evaluate its values, cut out the excess and increase its social benefits.
Another effect of Covid was retailers could not get comfortable with a very narrow lineup of vendors.
“When you run into a situation like this, where there’s a scarcity of goods and there’s a lot of mouths clamoring to be fed, vendors are going to take care of people who they’ve done business with,” Barger says. “And sometimes the horse you pick is not the one that ends up having stock when problems happen. And so I think what the pandemic has taught us was to be a little bit more diversified in how we spend our dollars and in with certain channels.”
Overall, Barger says his company is better equipped to service that customer as a result of the pandemic, but that the change from face-to-face to screen chatting has taken some getting used to.
“It’s a skill you have to hone in on because you never chat with someone the way you talk to them in person, so you have a tendency to be a little bit drier and not as expressive and things like that,” he says.
The Millennial generation is also having a major effect on the rent-to-own industry, as they prefer not to own as much as the past generation. And this is a problem Barger says hes’ working on.
“We’re looking at how to adapt our model to, leverage the traditional model for the people that are looking for that, but also adapt to a level of service that stops putting our priority first, and really listens to what that customer might want. And so that’s kind of been exciting because it lets us reimagine a way to do business.”
Keven Dalke, director of Rent Direct at Nationwide Marketing Group says the need for product has been just as great in rental as it was in retail, and with the younger generations not wanting to be tied down or wanting to switch something out in six months or eight months, rental furniture is a smart choice.
“Right now the majority of the customers come into a rent-to-own store with the intention of purchasing,” he says. “But there’s definitely a growing trend with Millennials and rental furniture, although it’s probably a smaller percentage than true brick and mortar customer make up. They want nice things but possibly don’t have credit built up to be able to go to the department store or a furniture retailer to get it. So that’s always a good outlet there.”
As is the case in every industry, the savviest rent-to-own retailers survived the pandemic and adjusted their businesses according to the times.
A few months ago, the question going forward may have been, “Will moderate to affluent shoppers put rent-to-own furniture in their homes because they can’t get what they want?”
But now, with inventory piling up and sales slowing, the highest rise in inflation in years may cause more people to turn to rent-to-own resources as a way to save some cash and prepare for the future.
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