Rent-to-Own Retail: UK Market Profile and Forecast 2015

12 Nov, 2015, 16:44 ET from Reportlinker

NEW YORK, Nov. 12, 2015 /PRNewswire/ -- This report covers the UK rent-to-own retail market, sometimes called rent-to-buy or hire purchase. It quantifies the market size, historical growth rates and levels of industry profitability while reviewing key factors behind these figures.

It also includes an in-depth analysis of the relevant drivers of industry growth – in particular the macroeconomic environment and supplier trends – setting out historical trends and available forecasts – and regulatory framework. The forecast for industry growth is based on this analysis of historical trends and growth drivers.

What are the objectives of this market report?

Rent-to-own is a fast-growing segment of retailing in the UK, expanding to take up some of the increasing degree of slack on the high street and also using the internet as a channel. These retailers are frequently criticised for imposing a combination of credit terms and insurances which leads to items being significantly more expensive than via other channels. However, for many consumers, they increasingly make it possible for them to obtain goods which would not otherwise be accessible. This report aims to explore these views. It also considers the factors which have driven the high rates of growth that the sector has experienced and sets our views on how likely it is to continue in the future.

It is intended for:
– Operators of rent-to-own retail businesses themselves
– Investors in these businesses
– Retail property-owners, developers and landlords
– Market regulators and policymakers
– Banks, analysts, consultants and other parties with interests in the sector

What are the sources and methodology?

This report is based on:
– Interviews with senior-level contacts in the consumer credit industry
– Extensive research into published industry sources
– In-depth analysis of the macroeconomic environment and relevant market drivers
– Financial analysis of the accounts of companies in the industry.

Information from these sources has been synthesised and presented clearly and concisely with extensive use of charts and tables to illuminate points and support conclusions.

Market forecasts have been constructed using simple assumptions which are clearly stated. Supporting evidence is provided for our assumptions but readers can easily flex them to model alternative scenarios.

Summary

Market background

The market consists of high-street shops and online retailers selling larger items along with a credit package which, by spreading payments over a year, is designed to make them affordable for lower income buyers. Categories of items commonly sold include computers / technology, audio / visual, furniture and domestic appliances. A rent-to-own agreement is a form of secured loan with the goods generally remaining the property of the seller until the final payment is received and a provision for them to be recovered if payments are missed. Loan periods are generally from 1-3 years with an APR of between 30-70% being typical.

Market growth and drivers

The market has grown rapidly in recent years, having doubled since 2007, driven by store roll-outs. This growth has been driven by a series of trends which have coincided:
– A significant increase in the number of customers in the sub-prime segments as a result of the economic downturn
– Significant reduction in the appetite of the mainstream banks for serving such customers
– A favourable regulatory environment in the UK
– Retreat of many other categories of retailers from the high street which has enabled some attractive locations to be obtained on favourable terms

Competitive landscape

The leading companies in the sector are all private-equity owned:
– Caversham, which operates the BrightHouse chain and is owned by Vision Capital.
– Perfect Home, whose shareholders include Cabot Square Capital as well as a leading US rent-to-buy operator, Aarons, Inc.
– Buy As You View, based in South Wales, which operates an internet based model and is owned by Rutland Capital.

Outlook

The prospects for the market depend to a large extent on the four key drivers outlined above (numbers of target customers, appetite of mainstream lenders to provide alternative forms of credit, regulation and availability of sites). While each of these areas has specific uncertainties and risks which are examined individually and taken into account in our forecast, indications are that most are likely to remain favourable and support further store roll-out. The key area of uncertainty is around regulation where the FCA is currently reviewing the market.

Read the full report: http://www.reportlinker.com/p03375612-summary/view-report.html

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