Borrowing, not buying, is the new trend
More retailers are renting out consumer electronics as the slowing economy increasingly makes this an attractive option for financially strapped consumers, especially lower-income earners and newlyweds.
The size of the domestic rental market of consumer electronics and appliances hit 10 trillion won ($8.935 billion) last year, more than triple the 3 trillion won registered in 2006, according to the Korea Rental Association (KORA).
The market comprises 25,000 professional suppliers of rental products.
Demand has also risen due to the shorter life cycles of products, from TVs and fridges to iPads and digital pianos, KORA added.
Market watchers expect the rental boom to continue given its high growth potential.
E-Mart, the nation’s largest discount chain, GS Shop, and online shopping mall 11st have already jumped into the market, and Lotte Mart is reviewing whether to follow suit.
Rentals currently account for 12 percent of total sales at E-Mart, up from a mere 0.6 percent when it entered the fray in January.
The share peaked at 15 percent in March, wedding season in Korea, it said.
For many products, retailers offer a three-year-contract, free maintenance service and the option to buy the product by paying the outstanding sum when the contract matures.
“According to our analysis, we had 7,344 customers using our rental services from January to May, with total revenue over that period reaching 10 billion won,” said an E-Mart employee.
“Premium items like LED TVs were the most popular products, followed by French-door refrigerators and drum washing machines.”
The retailer said these fridges, with two doors that meet in the middle, are proving eight times more popular than regular fridges, while rentals of drum washing machines outpace regular washers at a rate of two to one.
GS Rental Shop, which also opened earlier this year, offers 80 products ranging from water purifiers to massage chairs and cots.
The parent company, GS Shop, said it saw the market potential back in 2007 when annual orders for its purifiers surged five-fold after it began renting them out.
Retailers are also renting out expensive furniture.
A so-called sanitary management service has emerged as a cottage industry.
“The number of rental subscribers has jumped from 4,000 in November, when we started the service, to over 20,000,” said Kwon Sang-bong, head of sales.
Many rental companies are even offering massaging chairs worth over 2 million won for a monthly rental fee of around 50,000 won.
As the market is attracting more consumers, other companies are being tempted to jump in.
Lotte Mart, which operates its own consumer electronics store, Digital Park, is among these, as are Homeplus and Hi Mart. 11st, which recently launched an online rental shop, said it is seeking ways to add digital products to its line-up.
KT Rental, an affiliate of the telecom company that rents cars, is gearing up to expand its product range to include camping gear, leisure goods and, unusually, Harley-Davidson motorcycles.
Industry observers say the trend shows how the purchasing power of middle- and lower-class consumers is falling, and that the economic slowdown is driving average households to seek ways of keeping up with the Joneses without forking out huge sums. Economic growth of 2 percent for 2012 is increasingly being viewed as a good bet.
By Kim Jung-yoon [email@example.com]
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