Rent-to-own News - UK's BrightHouse focuses on customers in credit starved economy

BrightHouse CEO Leo McKee and BrightHouse Business Developer Hamish Paton at a meeting this summer with APRO officials in Austin, Texas.

The United Kingdom's largest rent-to-own company, BrightHouse, is planning to open 21 new stores this year as part of its overall campaign to reach new customers impacted by worldwide lending restrictions and mounting economic troubles.

Only a dozen of BrightHouse's 178 stores are in Greater London, but, as BrightHouse CEO Leo McKee, recently told the London Times, the chains customer demographic is growing as recessionary forces, job loss, tight credit and overall economic uncertainty make the rent-to-own transaction all the more popular.

BrightHouse's customers, like a large portion of the rent-to-own demographic in the U.S., come largely from the lower socioeconomic groups and are finding credit increasingly difficult to come by - if they had it at all - as lenders cut their risk profiles.

“We're going into areas that [Lloyds] TSB are pulling out of,” McKee told the Times.

The prospect of BrightHouse stepping in to deliver credit to the most deprived communities did not please everyone, according to McKee, however, he insists this is an outdated perception.

McKee commissioned an independent study when he took over the company in 2004 to examine the proposition. The results were less than positive, McKee said, indicating a perception the company was a high priced "rip-off merchant'.

“The first thing I did," McKee told the Times, "was to change all the prices to match the high street, on the day I found out [the results].”

The previous thinking was that as long as customers could afford the weekly payments, they would not notice or worry about the cash price. And this thinking had a lingering effect on the company.

“My buying director is the former buying director of Comet. Before I appointed him, we were paying more wholesale for our washing machines than they were selling them for in Currys (a competing retailer).”

Deep discussions with suppliers followed and McKee learned what his customers wanted was quality products at reasonable weekly payments.

“Our customers want brands. Our customers want quality," he said.  “Even at the peak of easy credit, banks wouldn't lend to our customers. This is the credit-impaired group in Britain who don't have access to loans.”

As the credit crisis worsens, BrightHouse estimates the “alternative credit market” will grow to five million-strong. By that reckoning, BrightHouse appears to be standing on fairly solid ground. The company insists there is room for at least 600 stores in the market.

McKee and BrightHouse Business Developer Hamish Paton met with APRO Executive Director Bill Keese and Legal Counsel Ed Winn III this summer to learn more about RTO in the U.S. and public perception and pricing issues here.

mevans@rtohq.org