Comment: Spicing up retail with HP
During my student days the acquisition of a bulky TV and a chunky VHS video recorder were at the very top of the household requirements when renting a property with friends.
Like many people at this time in the 1980/90s it did not involve a purchase but an HP (Hire Purchase) agreement with the likes of Radio Rentals.
The cost of buying these electrical goods at the time was simply too much for many people’s budgets so rental was the most economical route. The rental companies did very good business for some years. Indicative of this is a former unit in my local area of Crouch End, North London, that has long ceased to be a Radio Rentals store but its footprint is enormous and in located one of the area’s prime retail spots next to the former town hall.
The business model imploded when the cost of electrical goods began to drop dramatically and the purchase of TVs, videos and other such items became affordable to the masses. Interestingly we are on the verge of another potential back-to-the-future moment as the HP model has been resurrected by a start-up Raylo – for a new set of tech products.
The business has developed a lease-and-reuse model that enables shoppers to sign up for subscriptions on fixed length or rolling contracts on new and refurbished goods. The model is attractive to consumers at various price points – they can choose a cheaper reused product or take a new model and change it after a year or so when they want to upgrade to the new version. This leasing arrangement on new models is not dissimilar to the car industry, especially in the US, where buying new cars outright is a bit of an outdated arrangement.
Raylo offers an array of product lines including laptops, games consoles and desktop PCs as well as mobile phones. The latter strikes me as the sweet spot for the HP model. The company can offer new phones on subscription for more competitive rates than if they were bought outright. The ability to offer such a proposition is down to Raylo’s refurbishing of these returned phones that can then be offered to another customer.
The company suggests a phone’s lifespan can be extended to six or seven years – across possibly three customers – compared with the current situation of a single owner operating it for a much shorter period and then consigning it to a drawer until they ultimately throw it away some years later. Raylo calculates phones are used for 2.3 years before spending 3.7 years in what it describes as ‘device hibernation’. Against this wasteful backdrop only 17.4% of e-waste is officially recycled while the remainder finds itself in landfill.
The HP model clearly very much taps into the circular economy and therefore it could be attractive to other third-party retailers as an add-on service to their purely new sales models that would burnish their environmental credentials. This has been recognised by Raylo, which has developed a checkout integration that enables retailers to plug into its back-end and offer a lease alternative at the point-of-sale on their websites. It suggests this could provide them with a new audience.
In this early part of 2025 when most people’s disposable incomes are at a low ebb and there are New Year’s resolutions out there that potentially include an intention to be less wasteful the HP model might just be ripe for a return. While it might not transform electrical goods ownership in the same way as it did during my student days there is undoubtedly a place for it as a planet-friendly alternative in today’s retail landscape.
