Article

Parents playing with the idea of Netflix-style toy rental

Is toy rental by mail a fad, or is it here to stay?

December 13, 2011

Consumers rent movies, furniture and TV, so why not toys? In these hard economic times, it's no surprise that parents are turning to toy-renting services to give their kids access to expensive toys, according to Shannon McAfee, founder and owner of TOYconomy, an online toy-rental service that launched in September. The company has grown by an average of 50 percent each month and now has more than 150 registered customers.

"Many families are looking for ways to save money each month," McAfee said. "But beyond the cost savings, families are realizing that renting toys makes sense. Why pay full retail price for an item your child may lose interest in after a month or two? Renting is a great way to reduce clutter in the home, and families with children are always looking for ways to reduce clutter."

How it works

TOYconomy offers two ways for consumers to rent toys: Non-members simply log on, order a toy and pay a one-time rental fee. The toy is delivered to the home, and after 30 days the consumer ships it back. Members, on the other hand, pay a monthly fee of $9.99 but receive 50 percent off each toy rental and receive free shipping. There is also no time limit on their rentals.

"It's a great way to try something before you buy it - we offer customers the option to purchase any product they have rented," McAfee said.

Another toy service, BabyPlays.com, offers similar programs, but its members may pay $19.99 per month to receive four toys every 60 days or $32.99 to get four toys every 30 days. A third toy service, Toygaroo.com, launched in January 2010 with Dallas Mavericks owner Mark Cuban and Canadian entrepreneur Kevin O'Leary as 35-percent investors. The woman behind Toygaroo appeared on the March 25th episode of ABC's reality show "Shark Tank," where she secured funding. It also gives consumers a variety of monthly membership options.

Toygaroo.com, which calls itself "The Netflix of toys," made $0.54 million last year, according to Hoovers.

Viable business model or passing fad?

Although he admits that rental services boom in times of economic trouble, Doug Stephens, president of Retail Prophet, has doubts about the long-term success of toy-renting services.

"An increasing number of families are finding themselves falling below the poverty line in America," he said. "For those clinging to it, buying their kids new toys isn't necessarily an option. This sounds like a reasonable alternative, although I have some serious doubts about its viability."

Stephens sees several challenges with the business model. For example, companies will probably spend too much time chasing families to pay for broken toys, he said, and those consumers won't be happy about paying for them.

"Kids break toys — it's almost a law," he said. "And the terms clearly state that toys that are broken while being rented will in most cases end up being charged to the consumer. When you combine the maintenance involved in cleaning used toys, to repairing minor damage to shipping, billing and other logistics, I just don't see a viable model for sales — especially if a significant percentage of parents end up defaulting on their rental payments."

McAfee disagreed, pointing out that since the company's September launch, only a handful of customers have lost pieces, and no one has broken anything. However, to help offset customers' fear of paying for broken toys, the company offers optional TOYsurance, which is 10 percent of the rental price and covers the cost of any broken or damaged toys.

"For customers who did not get TOYsurance and they have missing pieces, we give them a few weeks to see if the piece turns up. If not, it is usually a $5 replacement fee or less," McAfee said. "If the toy is broken, we ask the customer to purchase the toy at a discount minus their rental fee."

Is cleanliness a factor?

As Stephens points out, parents may have initial concerns over germs and the cleanliness of toys that have been in the homes of other children. The topic was fodder for jokes on this week's episode of Saturday Night Live, when Weekend Update host Seth Meyers called Toygaroo "part of an effort to make the movie 'Contagion' come true."

But all three companies tout strict cleanliness policies. McAfee said TOYconomy uses a three-step disinfecting process to ensure 100 percent clean toys.

"This is definitely a common concern for people who have not tried the service," she said. "Our customers are very happy with the condition of the products - many comment that they are 'like new.'"

(Photo by Lars Plougmann.)