Thorn Group, the company responsible for the Radio Rentals and Rentlo brands, has posted a significant increase in its first year earnings with profit up 30% and revenue up by 20% to $96 million, as economic conditions remain weak, pushing more consumers into pay-as-you-use models.
Retail experts say not only are economic conditions rife for such models, but that consumers are doing this on their own as confidence remains low and spending continues to be subdued.
“I would expect the tough economic conditions and the uncertainty facing consumers right now would benefit any organisation that allows people to enjoy the comforts of life more cheaply,” Forrester Research analyst Steven Noble told SmartCompany this morning.
“These types of models allow them to enjoy a product temporarily, and then pass it on so you can afford it. I’m not terribly surprised there are good results here.”
Thorn Group recorded a 30% rise in net profit from $11 million to $14.3 million in the first half of its financial year. In a statement, the company attributed the success to its strength in challenging market conditions.
“Growth in the core Radio Rentals/Rentlo business was again a key driver in Thorn’s performance and is very pleasing given the tough retail market,” it said.
The business noted a number of key statistics, including an increase in the number of installation volumes. Furniture was the biggest category, up 26% from the previous corresponding period, while flat screen televisions and whitegoods were also cited as areas of key growth.
Noble says subdued economic conditions enable these types of models to thrive, where consumers may not want to pay full price but still want to enjoy comforts. Cost, he says, is only one fact.
“Cost savings are one of the motives, that’s correct, but there’s also product choice and convenience included there.”
“Radio Rentals is quite a traditional model, and the value of that model is clear. It won’t diminish, and during tough times, they come to the fore.”
Noble says consumers over the past few years have used the internet in order to share goods between themselves to save costs.
“This is definitely a trend. The internet allows shared ownership, or peer-to-peer rental, where somebody buys a good and then rents it out to others.”
“This is a business that benefits from current economic certainty, and it will continue to thrive.”
Thorn Group managing director John Hughes was contacted this morning, but was unavailable prior to publication. In a statement, Hughes said the company’s performance “reinforces the strength of the business”.
“Further expansion opportunities are currently being explored with another five outlets planned for opening in the second half,” he said.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
