Consumer Product Rental
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Industry Overview
The US consumer product rental industry includes about 12,000 companies with combined annual revenue of about $20 billion. Major companies include Aaron's, Blockbuster, and Rent-A-Center. The industry is concentrated: the largest 50 companies account for about 70 percent of industry revenue.
The industry includes companies that rent personal and household goods, primarily for short periods but also under longer-term arrangements. Examples of products rented by companies in the industry include consumer electronics and appliances, DVDs and videotapes, formal wear, home health equipment, and recreational goods.
Competitive Landscape
Demand is driven by personal income and the timing and popularity of new movie releases. The profitability of individual companies depends on the right merchandise mix and inventory financing costs. Large companies have advantages in economies of scale in purchasing, distribution, and advertising. Small companies compete effectively by providing superior customer service and catering to local demographics. The industry is labor-intensive: average revenue per worker is about $100,000.
Products, Operations & Technology
Major services include renting DVDs and videotapes (about 35 percent of revenue); home health equipment (20 percent); and consumer electronics and appliances (10 percent); Other products rented include furniture, formal wear and costumes, party supplies, and recreational equipment.
In-store rentals account for about 80 percent of the DVD and videotape rental market, but other forms of distribution, including by-mail, kiosks, and digital streaming, are growing in popularity. Most video rental companies are small: retail chain franchises account for about a third of the video rental industry. Videos are the most important revenue source for the movie industry. Movie studios generally release a movie as a video during an exclusive "distribution window" of 30 to 60 days, during which the film isn't available on TV, cable, pay-per-view, or online. Some movies are released as "sell-through" where consumers can buy the movie at relatively low prices at the same time the movie is released to rental stores.
Rental of consumer electronics, furniture, and some home healthcare equipment is on a contract basis, usually week-to-week, where the consumer, such as a student or temporary worker, either wants the item for a short period, or prefers to pay week-to-week on a rent-to-own basis. The rental company retains title to the merchandise during the rental term. Only about 25 percent of initial rental agreements are taken to full term. To cover relatively high operating expenses, rental purchase agreements generally charge higher amounts than purchase plans. Tools, formal wear, and party supplies are generally rented for only a short period; frequent turnover on such items is necessary to be profitable.
Video stores typically stock hundreds of titles; Redbox operates more than 30,000 automated kiosks that hold more than 600 DVDs each. Household goods rental companies usually have several thousand items in their stores, which can approach 9,000 square feet. Video and rent-to-own companies have large automated distribution facilities that store merchandise before delivery to local stores. Video companies generally use a third-party delivery agent, such as UPS. Subscription movie rental services such as Netflix operate warehouse facilities across the country that deliver rentals direct to consumers via US Mail. Furniture and appliance rental companies usually have their own truck fleets to deliver merchandise, both to stores and to customers.
Rental companies have computerized inventory systems to efficiently track merchandise. Video companies use customer relationship management (CRM) systems to track consumer purchases and create a transaction database to formulate and adjust marketing plans. Increasingly, companies are using radio frequency identification (RFID) tags on inventory to help tracking and reduce losses.
