If you look at the 8,000 stores today you see a lot of me-toos. I don't think it's particularly respectful of customers.
David Ingram, CEO, easyhome

Photo RTO Online

L-R David Ingram, CEO of easyhome and Bud Gates, CEO of easygates and U.S. Master Franchisor for easyhome at Saturday's grand opening of the company's first U.S. franchise location in Olathe, Kansas.

easyhome CEO David Ingram and Franchisor Bud Gates (easygates) have taken an evolutionary leap toward answering the decades old question - "Why do only a fraction of credit-constrained consumers use rent-to-own stores to acquire furniture, appliances and electronics?" Their observations will surprise you;

- In the history of the rent-to-own industry, no one has ever built a brand.
- As long as the rent-to-own industry is held hostage by relationships that exist between customers and employees, the business will never grow to its full potential.

RTO Online interviewed Bud Gates and David Ingram at the grand opening of the first U.S. easyhome store in Olathe, Kansas Saturday. See 80 photos from the event here. The Olathe store is evidence of the impact that easyhome's new presentation can have on consumers. The doors opened at 10:00 AM. Customers who had waited in sub-freezing temperatures for hours just to get in began leasing merchandise immediately - The first agreement was signed at 10:07 - a laptop computer rented by a woman that had waited in line for two hours. According to store manager David Herrera, by noon there were 40 agreements. See First Impressions for a store description.

Before cutting the ribbon to officially open the store, Bud Gates told the crowd, "You'll be able to look back when we have 1,000 stores and say, 'I was there for the first one'." Those same words spoken by anyone else may have been written off as playing to the cameras - but this is Bud Gates, Harvard MBA and former CEO of Rent-A-Center. It was like Babe Ruth calling his shot. It was most of all a refreshingly optimistic look at what the future of the RTO business in America could look like.

By some estimates, there are 8,000 rent-to-own stores in the United States and, according to easyhome CEO David Ingram, they are all the same. "It's not been an industry that's been particularly innovative," Ingram told RTO Online. "It's been a legacy business with a legacy model and legacy management teams." Ingram says that, while those "legacy" models may have done well in the past, they have become stagnant and are responsible for the lack of significant industry growth. "The customer potential in the U.S. has always been about 30 percent of the population," Ingram said. "The penetration rate right now is in the low single-digits. There's an audience that could be available to this industry if it could be made more exciting and more innovative in its approach."

Ingram continued, "If you look at the 8,000 stores today you see a lot of 'me-toos'. I don't think it's particularly respectful of customers." Ingram says that customers want to feel pride in their association with a company. "That pride of association makes them your best advertising tool because they become referrers."

Bud Gates dismisses any talk of market saturation. "I think the markets are saturated for more of the exact same thing with just a different name," he observed. "If you're just a variation on concept 'A' then you're down to just a relationship business." Gates said companies that pay too little attention to brand building will never grow to their potential. He uses McDonalds as an example of a company that has built true brand loyalty. "Your relationship with McDonalds isn't with Betty the cashier, your relationship is with McDonalds."

Gates says until the rent-to-own industry moves beyond a relationship business, it will never grow beyond its current customer base - there will always be 8,000 stores and the industry will forever serve only a fraction of its potential audience. "It's impossible to build a brand if all you have is relationships," Gates said. "You want relationships to be a part of the package, but the consumer's compelling reason to do business has got to be the brand. No one in the history of the rent-to-own business has built a brand until Dave [Ingram] came along and did it with easyhome. Its a bunch of store-fronts with a bunch of relationships and no particular brand loyalty."

There have been innovations of course. Rent-A-Center didn't get to 3,000 locations by being a slouch. Aaron's has forced the U.S RTO industry to begin marketing the transaction as a lease. Other companies, like New Image RTO in Colorado have developed layouts that attract traditional retail consumers (see story), but no national company has successfully combined the preference for weekly payments with the broad acceptance of a lease, presented in a way that appeals to the entire spectrum of retail consumers, and packaged in a small footprint familiar to rent-to-own operators until now. "We've created a main-street retail shop environment," Ingram says of easyhome's U.S. model. "And that attracts a wider audience who want to get the same service and the same presentation that they can get in any great retailer."

"The negative image of the rent-to-own business has been very difficult to overcome," Ingram said. "So you're left with only two major companies in North America and that doesn't make for a lot of competition and it doesn't allow for a lot of consumer-choice. There's a place for a third company to offer an alternative to the way its been done in the past."

Evolution

Why hasn't the RTO industry evolved? Ingram says large companies have trouble changing because of the sheer size of their operation. By building evolution into the easyhome system, Ingram and Gates hope to never be counted among the "me toos."

easyhome conducts a strategic top to bottom review of the business twice a year and draws inspiration from successful retail environments in the UK, Canada and the U.S.

easyhome rolled out its stage-two model just months after opening its first U.S. store in S. Glens Falls, New York in 2007 (see story). Stage-three was presented to the board in Nov 2007 in Toronto and according to Ingram, the model will never stop changing.

Some of the stage-three changes are subtle but make a significant impact on the customer experience. A raised platform rooms-to-go vignette was added to the front of the store that dominates the window display. The wood flooring was lightened and the overall color-scheme was changed - moving away from the bright pumpkin used in Canadian stores toward more subdued colors. Exterior signage was also changed and flat-panel displays now pull double duty both as rental units and in-store signage promoting the easyhome brand.

Gates has been patient in his approach to launching the easyhome franchise concept in the U.S. since becoming Master Franchisor in March of 2007 (see story). "We've been building our infrastructure, building our organization and getting it right," Gates explained. His team includes A-list players like Ladd Welch and Chris Prater (see story). "I'm a bit envious actually!," Ingram says regarding the easygates team. "Bud has cherry picked the best of the best. It just reinforces that we made the right decision in partnering with him." Ingram added that the availability of territories in 36 states is driving increased interest in easyhome. "For franchisees it's open season because they have territory that expands across the whole of America."

Some industry insiders believe that the biggest threat to your business is a liberal Congress. Yes, it's critically important to stay involved and press state and federal legislators for positive change. But on the list of realities that will threaten your business, Chuck Schumer is a distant also-ran compared to the everyday threat of complacency in the face of innovation. Change or die. It is a fundamental truth in life and in business. If you don't believe me, ask a dinosaur. And if you cant find a dinosaur, find a Circuit City executive.

See an expanded version of this interview in an upcoming issue of RTO Magazine, the rental-purchase and leasing industry's leading trade magazine.

First Impressions:

RTO online has often written about the importance of first impressions. The most important one-minute in the life of a rental agreement is the first 60 seconds that a customer spends in your store. Customers form an opinion about you, your company, your employees and your transaction within seconds of entering your location. Is this a place where I can send my friends? Is this a place that I will enjoy visiting? Is this a place that I can be proud of? All of these questions are asked and answered by the customer long before any money changes hands.

My first impression upon entering the Olathe easyhome store was - this is not a rent-to-own store. While that may say as much about the current crop of rent-to-own stores in the United States as it does about easyhome, the fact remains that nothing about the interior would indicate visually to a customer that they were anywhere other than a national retailer. Forget about the fact that the word "Rent" is never seen or heard at easyhome, the presentation gave the impression of a middle-end furniture dept of a Famous Barr or Macys - bright lighting, hardwood floors, well thought out vignette displays, efficient use of wall space and killer signage all combine to make the shopping experience pleasurable for the customer and equally important, a place about which employees can feel proud.