EXCLUSIVE: Radio Rentals is set to do away with bricks and mortar retail stores that sell CE products and appliances, instead the Company is investing millions in a new online operation according to Company Managing Director John Hughes.
However the Company is retaining shop front rental locations where consumers can sign up to rent appliance and home entertainment gear. These locations will also be used as part of the process for the delivery of large online purchased goods such as appliances.
Currently Radio Rentals is Australia’s largest household appliance rental company, with 65 stores nationally and over 400 employees.
Key to the new venture which will be rolled out in October 2008 under a brand new name is marketing says Hughes who has recently called for submissions from advertising agencies. He also says that Gerry Harvey is wrong when he says that online retailing will not work in Australia. “If I was Gerry Harvey and I had an operation that was built on bricks and mortar and I was getting money from franchisees I would be preaching the same message. His model is an old one and is based on a 1970’s way of doing business. The market is changing and we are changing with it” said Hughes.
He added “We have done a lot of research and we are convinced that our future is online. We are doing away with our stores though we are retaining rental locations. For example if a consumer wants a new refrigerator we will full fill the order online and ship it to the nearest Radio Rentals location they in turn will contact the customer to arrange delivery. In some cases we will ship product directly to them”.
“Currently 70% of our contract business for Radio Rentals is done either over the phone or online with the bulk being over the phone. We believe that in the future that he bulk of bookings will move online. When we look at sites like ASDA in the UK and ABT in the USA we believe that we can build a similar model in Australia. We have built our forecast model based on consumers being given the choice of collecting goods directly from a Radio Rental location or being delivered directly and we believe that we can break even pretty quickly. We already have in place the back of house operations and finance” said Hughes.
Radio Rentals which has operated in Australia since 1937 is more than 70 years old and recently rolled out an extensive new financing program which they plan to extend to online customers.
The cash loans program which the Company claims consumers can apply for online is limited to between $1000 and $3000, would be offered to customers to help them pay pressing medical or insurance bills, and would have to be repaid over a 12-36 month period.
A trial which started in Tasmania in January is currently underway says Hughes. “The interest charged on these loans will be competitive and below the statutory capped rate of 48 per cent a year,” Mr Hughes tod the Australian newspaper. He stressed the company was not entering the US sub-prime loans market, which caused a credit meltdown.
“This is totally different,” Mr Hughes said. “Do not associate what we do in sub-prime with America’s sub-prime. America’s sub-prime means people just lending money madly to people who can’t afford it, for houses well outside of their reach and over-committing them.
Analyst Nick Harris of ABN AMRO Morgans said: “I am surprised that RR is doing away with their bricks and mortar stores. I was under the impression that they were going to run a trial before rolling out a full blown operation. They are going to have to watch costs marketing and operational costs are not going to be cheap. This is a big risk” he said.