In the market for essential household (‘white’) goods, like vacuum cleaners, cookers and washing machines, the old adage is true that the poor pay more. The reason is that it is not easy to find a lump sum at short notice, and many people turn to doorstep lenders and easy access schemes, such as ‘rent to own’ purchases, that end up costing far more than if you could purchase outright or with affordable credit.
One in five tenants in social housing has used a doorstep lender. The leading rent to own company, Brighthouse, is marketed well and operates across the UK with 250 stores, serving 200,000 customers. Its message at this time of year is ‘pay a little bit at a time this Christmas’. The low upfront costs make it easier to sign up, but the total costs are high. Barnado’s for example has found that for the purchase of a washing machine, with service cover, you can pay an astonishing £780 more when buying through rent-to-own companies. The Guardian reported this weekend on prices for basic goods that were up to twice the same prices you could get from Tesco or Co-operative Electricals.
Not too long ago, the Office of Fair Trading found that consumers can easily face three-digit figures (APR from around 100 per cent up to 400 per cent) when buying with shorter-term credit products, with offers from some suppliers even marketed as ‘interest free’.
The solution is the winner of the Buy Better Together Challenge that we launched this year with the Department of Business. Our research shows a growing trend of collective buying – with half of all consumers now planning to save money by co-operating with others on purchasing.
We had one hundred and nine entries and awarded the prizes to finalists today with two senior Ministers (invite one, get one free), Ed Davey, Secretary of State for Energy and Climate Change, and Jo Swinson, Consumer Minister.
Smarterbuys is a collective purchasing scheme that uses its group purchasing power alongside existing sources of affordable credit to bring down the costs of everyday essentials. It has been developed by a co-operative consortium of housing associations and local authorities (Northern Housing Consortium).
Smarterbuys is a website that links consumers both to the product they want to buy and to the credit provider, typically a local credit union. The pricing policy is to ensure that they beat the list prices of Asda and Tesco Direct, while also connecting people through to affordable credit so that the end cost is less still.
The offer of the month in November is a Hoover HP2200 Hurricane Power bagless vacuum cleaner, selling for £73.99, a 62% discount on the full retail price. The site was launched in April 2012 and has the backing of 110 housing providers, representing 1.2 million tenants.
Having launched the core e-commerce platform, with over 12,000 enquiries since launch, Smarterbuys now plans to partner with local housing associations and authorities to market this as a service to tenants from their landlord.
Smarterbuys uses the convening power of social landlords to enable tenants to buy together and save money in the process. Because it handles the need for affordable credit and operates a simple to use online store, it makes the end of a cooker or breakdown of a vacuum cleaner far less of a crisis.
It is a worthy winner of the inaugural Buy Better Together Challenge Prize.