‘Presta’ Lease-to-Own CE Website Being Beta-Tested At Think Finance

Think Finance launched a beta version of a lease-to-own website for CE products Thursday, targeted at the “financially underserved.” Shoppers at the site, called “Presta,” can lease products for a year and then own it, or they can purchase it at a “buy it now” price, CEO Ken Rees told Consumer Electronics Daily.

The purchase options offer consumers “a lot of flexibility,” Rees said, which includes the chance to buy a product at any point during the year lease. Once consumers make their initial payment, the company sends them the products, typically within two days, Rees said. If they decide they want to upgrade to a newer version of, say, an iPad, they can do that, or if they don’t like a product or can no longer pay the monthly lease fee, they can send it back using shipping materials and postage provided by Think Finance, Rees said.

The program is designed to enable financially strapped consumers to buy a product over the course of a year using fixed payments. If they choose, over that period, to pay for a product in full, they can contact the company and get a discount off the remaining balance, Rees said. Presta provides more flexibility and control for customers “who right now don’t have a lot of great options for making payments,” he said.

Think Finance has operated for more than a decade providing credit to “the 25 percent of Americans with FICO [credit] scores less than 600,” he said. “We built up our understanding of that customer base and leveraged that so we can approve a high percentage of customers while keeping fraud and credit losses to a minimum,” he said. During that time, Think Finance has worked with more than a million customers, issuing more than $3 billion in credit, he said.

The company chose to launch the site now because “banks are largely pushing working Americans out of the banking system,” he said. “There’s been a trillion-dollar reduction in consumer credit in the past few years, and that hits our customer base hard,” he said. Consumers who don’t have the cash for high-ticket purchases, or who don’t want to or can’t take on debt, have limited options when it comes to CE purchases, he said. “Layaway programs aren’t a good solution because you don’t have access to a product until you pay for it in full,” he said, “and if you change your mind and decide you don’t want the product, you're charged a fee.” Rees envisions a fundamental shift in consumer buying habits over the next few years. “They're going to be looking for products like this that offer flexibility to ‘use it by the drink,’ and if their situation changes, they can return it,” he said.

A 16-gigabyte iPad 2 costs $21 per week at Presta, which prices out to more than $1,000 if a customer goes the full lease term. Presta also offers a $549 “buy-it-now” price for the iPad 2, compared with $529 at Buy.com. Purchase prices tend to be 10-15 percent higher than street prices, he said. “It’s a markup over the price you pay in a store, but the “control over the spend” and the flexibility to be able to return it makes the trade off “a pretty good economic decision,” Rees said. The company is “extremely lenient” on returns, Rees said. “We recognize that products are going to be used, so normal usage is not a problem at all."

When researching the business, Think Finance originally looked at what Rees called the “$7 billion rent-to-own” space, which he said hasn’t innovated in a decade. “They still sell refurbished goods in big stores not necessarily in the best parts of town,” he said. There aren’t any online competitors “of scale,” he said, “so we're looking to start aggressively cannibalizing the brick-and-mortar space” as more consumers head online, he said. There’s a misconception that Presta’s customer base isn’t comfortable with technology, “which we just haven’t found to be true,” he said, saying more than half of prospective customers have smartphones and three-quarters are involved in social media. Its clientele “demands technology for convenience,” he said.

Presta doesn’t plan to open brick-and-mortar stores for now, Rees said. Its next expansion will be a shift to mobile access where customers can purchase by cellphone. The company is working on iPhone and Android apps that will roll out in a couple of months, he said.

Presta is working with several distributors, Rees said. “We ping their inventory,” taking a “flash sale approach,” he said. Inventories are limited for most products except for “the most important items like iPads,” he said. Other products are sent directly from manufacturers who also handle returns when necessary, he said. The company works from three inventory locations in Florida, Pennsylvania and Ohio and plans to be in 47 states by the end of Q1, he said. At launch, the site would offer “about a dozen” SKUs, Rees said, but on Thursday we counted just eight, including the 16GB iPad 2. Other offerings included an Xbox 360 Kinect system ($25/week), an 8GB iPod Touch ($9/week), a 32GB iPad 2 ($25/week), a Toshiba Thrive tablet for $15 per week, Toshiba Camileo camcorder ($7/week) and two Toshiba flat-screen TVs, one at $15/week and the other at $31/week. Items aren’t taxed because they're leased, Rees said.

Products were chosen based on surveys sent to prospective customers, Rees said. IPads, PCs and laptops, and cameras are the hottest products currently, according to consumer feedback. The site will focus on CE for now, but Rees said “there’s equivalent need for other product categories.” Until the site rolls out to the remaining 47 states, Presta will “laser-focus” on the current categories, Rees said. “There’s something compelling about being able to have a constantly changing inventory,” he said.

Think Finance will generate customer leads through search engine optimization, banner ads, direct mail and TV and cross-selling to its existing customer base, Rees said. The company generates about 100,000 applications per month through its existing business “so we expect to be able to reach a pretty big customer segment,” he said.

Think Finance provides services for 60 million “underbanked” Americans, including installment loans, open ended lines of credit and payday loans, Rees said. Presta is its first foray out of unsecured credit “into providing better payment options for consumers who want to buy goods,” he said. “Historically people have had to get credit from us in order to make a purchase,” he said. “By making the purchase, in essence, for the customer, we're able to lower the effective price for that customer,” he said. As Presta becomes more experienced with CE, it sees opportunities for partnerships with hardware companies and service providers. “With the evaporation of consumer credit in this country, that’s a need we hope we can serve,” he said.