Came across a website today that offered a service (which is somewhat common) that I had never really thought about before in any deep way. I have formed my own opinion on the matter, but interested in hearing what others think.
So, the business sells consumer goods, everything from food and clothes to toys, tools and electronics via direct marketing with a focus on the hire-purchase model of sales, ie buy now pay 'X' $$ per week.
They take a product, say a mobile phone worth $100 through a usual outlet and basically double the price (ie underneath the item say total value $200). They then double the price again and add on a $10-$40 administration fee (not unusual for companies allowing terms of credit) and divide this amount by 50 weeks to allow for a per week payment rate.
Maths for the $100 phone would be:
Value: $200
Weekly payments $8.30
Consumer gets their $100 phone now, after 12 months they have paid $415.
Now clearly a business like this is not targeting a "thinking" individual (unless they own nothing and know that they are going to die within 12 weeks time leaving no estate to be claimed upon effectively leaving them with a situation whether they get a product at below cost...but that is an aside). A fairly prudent shopper would double check the price with the competition, add up the weekly payments over the 50 weeks and decide whether they think are happy with the deal.
I struggle with the concept that anyone would be happy paying 4 time what something is able to be otherwise purchased for simply for the convenience of having it NOW.
However, these people must exist because this is not a small company and they have been around nearly 10 years. I can only deduce that they are not the most educated people and given that it is a HP based model, they are counting on their customer base to not have the means to pay for it at present and thus have to pay it off, generally both the education and fiscal means points point to....lower decile populations. PC for Maori and Pacific Islander communities as well as poor Pakeha.
What do we think about this? Is this business exploiting the less fortunate, is this just a semi-sharky but ultimately ok venture or is this a perfectly viable business making an honest earning. (after all the business is taking the risk here that the consumer buggers off with the good, makes no more than the required 2 up front payments and then ceases to make any further payments and is then potentially has to file the customer into bankruptcy even though they probably have nothing left to help defray the costs).
Love to hear your thoughts KB.
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Originally Posted by Brett
...Full throttle till you see god, then brake.
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