Executive Summary

Renting TV sets and VCRs has an old-fashioned image in the UK. Unfortunately, the idea that rental is going out of fashion is to some extent borne out by market statistics. Consumer spending on rental of TV equipments (TV sets and VCRs) declined from just over £1.2bn in 1985 to £975m in 1992, and is estimated to have dropped again in 1993.

Despite this long-term trend, there is some evidence from the results reported by the market leaders that the worst of the slide for the electronics rental sector may be over. During the recession and in a period of near-saturation for conventional TV equipment, outright purchasing has also been reduced, while renting (or sale) of satellite reception equipment has helped to sustain the rental chains.

Typical rental customers tend to be older and less affluent, and the downmarket uptake for rental has meant the market being restricted to TV sets and VCRs. However, recent years have seen the apparently successful introduction of much broader ranges of electronic products which will appeal to mainly ABC1s -- computers, mobile phones, games machines, and camcorders. There has also been a campaign to persuade the British to rent household appliances such as white goods.

Thorn EMI and Granada Group, two UK conglomerates, account for 85% of this market as a result of acquisitions during the 1980s or the failure of other competitors. Both operations are profitable, with Granada's UK Rental Division providing much of the cash to allow the group to diversify, and Thorn EMI operating as the world's largest rental company. Thorn EMI operates through Radio Rentals and Rumbelows, while Granada has recently converted all its outlets, including the large Visionhire chain, into standardised `Granada' showrooms.

The leading chains now follow a policy of selling and renting through the same outlets, and hybrid schemes such as Option-2-Own (Thorn EMI) have been introduced. Inevitably, this is blurring the distinction between selling and renting, and a process of familiarisation will be necessary for most consumers. Easy credit was behind the strong swing to purchasing in the 1980s, and the 1990s could see a revival for rentals.

In particular, the major innovations anticipated for television and home computing (digital broadcasts, multimedia, virtual reality) could force more people to consider the rental option, especially if entry-point prices for new hardware are pitched high by manufacturers, as seems likely. Paradoxically, the rental market could continue to contract in size but simultaneously become more profitable in the 1990s. Above all, the two giants of the sector appear to remain firmly committed to exploiting the potential for the rental sector.

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