Home appliance companies are building their rental service businesses as the trend is for consumers to value experience more than ownership. With the growing size of the local home appliance rental market, some companies have started management services to take care of rental customers, while others have set up entire rental business subsidiaries.
On Nov. 17, LG Electronics announced the formation of “Care Solution,” which will manage home appliances for rental customers. While a rental management service existed before, the new offering goes beyond simply providing replacement parts and instead regularly replaces the main components of appliances.
For rented water purifiers, LG Electronics will exchange filters and water pipes and inspect sensors. For those who rent its Tromm Styler home dry cleaning appliance, the company will replace water container components every two years and periodically provide scented aroma sheets.
Cuckoo Electronics, known for rice cookers, jumped into the rental market last December when it established its Cuckoo Homesys subsidiary. Last month, the company introduced a new rental brand, “Inspure,” which focuses on water and air purifier products.
Samsung Electronics has yet to launch a rental business on its own but has partnered with professional rental companies for its home appliance products. It started renting its products through Kyowon Wells last June and also joined hands with Hyundai Rental Care last July.
Home appliance companies are focusing on the rental business as the market seems to be growing. According to the KT Economics & Management Research Institute, the rental market in Korea is expected to grow past 40 trillion won ($35.49 billion) by 2020 from 25 trillion won in 2016.
LG Electronics recorded 128.2 billion won in rental-related sales in the first half of this year, more than doubling the 53.8 billion won reported two years ago. Operating profit for Cuckoo Homesys through the third quarter of this year was at 52.8 billion won, a 50 percent increase from the figure over the same period last year.
With a sluggish job market and slowing economic growth in Korea, consumers are feeling the pinch and valuing experience over ownership. The result is an increase in demand for rental products.
The rise of premium products, which have been developed by companies to stay competitive in the crowded home appliance market, has also contributed to the rental trend. As such products are expensive, consumers are looking toward rentals.
For example, a 55-inch LG OLED TV costs 3.6 million won to buy outright, but it can be rented out at 59,900 won per month for 36 months. The price drops further when other discounts are applied, such as those offered by credit cards companies.
“The need to use good products exists, but with troubling economic times, penny pinching is called for. Consumers are taking an interest in rentals that can meet their needs at a low cost at the moment,” said Jung Yeon-sung, a professor of business at Dankook University.
The increase in one-person households has also contributed to the rise in rental services as it is difficult for a single person to afford appliances that could cost millions of won. According to government data, there were 5.5 million single-person households in Korea last year, accounting for 28.5 percent of the total number of households. The figure has doubled since 2000, when there were 2.22 million single-person households.
For companies, the rental business doesn’t bring in big profits immediately, but it provides steady profits.
“We plan to focus on management instead of just the leasing out products and help customers improve their quality of life,” said Choi Sang-gyu, head of domestic sales at LG Electronics.
