Will Sears Strike Gold With Lease-to-Own Program?
Sears found success with its layaway plan. Now it’s come up with another option to help cash constrained consumers buy big ticket items such as electronics, furniture, home appliances and mattresses — a lease-to-own program.
The program, which was tested in 10 stores in Florida, New York and Texas last September, is being rolled out to all of Sears’ 900 stores this week. Sears is partnering with WhyNotLeaseIt, a lease-to-own company that also works with Ashley Furniture, Discount Mattress and Jennifer Convertibles.
"Over the last three to four years, it has become difficult for our customers to have access to credit and to get new credit," Jai Holtz, vice president of financial services at Sears, told The Associated Press. "The program gives a much-needed financial solution to those unable to purchase on credit, secure credit, or because of immediate need, can’t use layaway."
Consumers participating in the program will not have to undergo a credit check. They will, however, need to be at least 18, earn a minimum of $1,000 a month and have a Social Security or tax identification to apply. Items $280 and up will qualify for the program.
Similar programs to the one being offered by Sears have come under criticism in recent years for charging rental fees well in excess of the value of the products being purchased. Companies operating within the space say fees account for services such as delivery, opt-out clauses and pick-up in addition the actual cost of the item.
Discussion Questions
Will Sears be successful with its lease-to-own program? What will this do for the perception of the Sears brand?
Sears may not realize it but this program could be a harbinger for a new model of doing business based on the Circular Economy.
If Sears and other producers of household and other products move to a “service-and-flow” business model, this would change the current paradigm of produce-consume-dispose. The business model of traditional manufacturing rests on the sale of goods. In the new model, value is instead delivered as a continuous flow of services such as providing illumination rather than selling light bulbs. This aligns the interests of providers and customers in ways that reward them for resource productivity.
Sears and other manufacturers and retailers could provide a continuous flow of household comfort and convenience services, presently satisfied by buying appliances, furniture, etc. Do we really need to own and then dispose of (mostly trash) these products? Leasing works for automobiles, condominiums, etc. If I were Sears, I would modify the offer from lease to own to delivering a continuous flow of services.
This is an area, the Circular Economy, in which Europe is ahead of the U.S.
There is a large segment of consumers who will find this to be an attractive program. It allows to them to have something that they might not otherwise be able to acquire. However, caveat emptor still applies.
What is not clear is the relationship of the lease payments to the value of the item. While WhyNotLeaseIt’s website indicates there is no interest charge; the implication is that the lease is simply the value of the items divided by the number of months it being leased for. I am sure that while the DailyFinance article indicates Sears plans to avoid all the excessive fees, no one is doing this on a non-profit basis.
I’m going to say they will be unsuccessful because they have such a good track record of being unsuccessful at just about everything. Overall I think it will hurt their reputation even more. I think a lot of consumers will not want to be seen in their stores once they convert to a rent-to-own outlet.
Well, we’ve always known that Lampert is more of a financier than a retailer. So perhaps it should come as no surprise that his most successful retailing programs to date are finance plans.
There is a need for lease-to-own-programs and Sears may become a big player in this area. These programs allow consumers access to products that they might not be able to afford, if purchased for a lump sum.
Hopefully Sears will charge reasonable rates of interest to participate. Usury rates will hurt the Sears brand.
Well, for those five customers who will still consider doing business with Sears, maybe this can be successful. The track record of these guys is awful, so I am not terribly hopeful this will be executed successfully due to the way they mess everything up.
Also, given the legal technicalities surrounding lease transactions, and the notorious nature of representatives of Sears be it at store level or their outsourced blue ribbon executive customer service team, more trouble than good legally may come out of this.
Sears: good niche ideas but utter failure in execution, guaranteed!
Sears knows its customers. They are value shoppers looking for quality and price. Knowing this, they are doing what is necessary to make it easy on their customers to own their merchandise. It won’t hurt their perception at all. It’s just another purchasing channel.
Payment systems and solutions will be a hot spot of retail innovation in the coming years. This is the latest example of Sears driving solutions that will define retail’s future, even as they defy past paradigms. I’ll say it again: Sears does not have to “win” at every initiative in order to influence the industry and move it forward.
Lease-to-own can be an advantage for those with no other means for purchase. If Sears positions the offer with a consumer focus they can gather new shoppers and advocates.
One potential pitfall has to do with those extra fees and interest. An approach that is transparent and commonsensical may just be the right strategy. Truth in lending disclosure with a listing of pros and cons for the shopper may reinforce the benefits Sears is offering. Of course this thinking is all predicated on a sincerely transparent and well-intended Sears.
I read about this in the paper this morning and my immediate reaction was, “yes, this could work.” To me, this bodes well with their brand image and customer base. The question is, can Sears pull it off?
They seem to be trying a few new things, some good, some not so much. While I give them kudos for trying, I am not seeing a consistency in the strategy. This could hurt them in the long run. Just sayin’….
On the surface, this seems like a home run! While the terms are not spelled out, if they can make the financials for the customers fair, this will open up a new branch of customers for Sears.
Based on the shelf life of washer/dryers and Refrigerators, I could also see this morphing into an upgrade program for other customer segments (after 5 years, get free upgrade to latest model, etc.).
Sears may have found their way back to competitive with this program. One can only hope it will work. They have been so close to the edge for so long you can’t help but root for them. Next step is to come up with advertising that will make people go to the stores.
If my experience thus far is any example, I would say this will be an unsuccessful disaster for them and significantly tarnish the Sears reputation. This program is not well understood by most Sears staff and documentation on the nature of the agreement is difficult to acquire. I thankfully tried to research before buying and could not get the facts or details and so avoided.
To make matters worse, the lease agreement is not held with Sears at all! It is done through a 3rd party company, that is both flagged by and understandably has received a “D” rating by the Better Business Bureau.