Why Your Next Customer Is Still Sitting at Home

A three-year delay doesn’t sound like much until you translate it into what rent to own actually sells: first homes, first rooms, and the big “everything at once” purchases that come with household formation. The average move-out age has climbed from about 23 to about 26, and that shift is quietly reshaping demand across the rent-to-own industry. I break down why this is overwhelmingly a housing affordability story, why the purchases did not disappear, and why a backlog of delayed household formation could become a powerful tailwind for operators who build real customer relationships now.

I’m also packing for Knoxville, Tennessee for the National Shed Rental Association conference, and I explain exactly why a shed event matters even if you rent sofas, appliances, electronics, or tires. Traditional RTO and shed RTO often serve the same customer with the same weekly or monthly payment structure, but the operating muscles are different when the product sits on someone else’s property and gets sold through independent dealer lots. I share the three sessions I’m most focused on: RTO reporting and key metrics, the economics of returns and the “return advantage,” and a keynote on overcoming uncomfortable conversations that hits home for collections calls and team coaching.

Then we shift into fourth quarter execution with four sets of numbers that should shape the next 90 to 95 days: holiday retail forecasts, the spending power of households with kids, job-market texture that points to longer unemployment spells, and the reality of record debt plus rising delinquencies. If buy now pay later apps are already approving your customers, your counter conversation has to be sharper: no debt, return flexibility, and service included. I close with four practical moves to protect renewals and reduce returns before January arrives.

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Transcript

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Welcome And Two Quick Requests

Pete Shau 0:08

Hello and welcome to the RTO Show podcast. My name is Pete Chow, and today we're talking about the fourth quarter, a trip that I'm making to Knoxville, Tennessee, and a quiet demographic shift that I believe is reshaping the future of every rent-to-owned business in this country right now. Now, this is going to be a solo episode. I don't have any guests today, so it's not going to be back and forth banter. It's just you and me for the next 30 minutes or so. And I've got a notebook full of numbers that I wanted to talk to you about. Now, I think that they change how you should rent in the next 90 days. But first, before we get into it, two quick things. First, if you're not on the RTO show newsletter yet, make sure to register on the website. Every issue I pull together, there are stories that actually move our industry. Legislation working its way through state houses, merger and acquisition news, regulatory action, the things that affect your store and your day-to-day and are not going to be catching while you're going through, scrolling through TikTok or anything like that. This is not something you catch any of a long day. It's free and it comes straight to your inbox. So you can sign up at the rtoshowpodcast.com. That's the RTO Showpodcast.com. The link is in the show notes of this episode. Second, if the show has been useful to you, the single best thing that you can do is share it with another person in this business, a store manager, a franchisee, a vendor partner. This show has always been dealer to dealer, and it grows the same way our industry grows, which is one operator telling another operator about something that's worth their time. All right, so let's get into it.

The Three Year Move Out Shift

Pete Shau 1:37

I want to start with a number that stopped me for a second when I read it. Super important. In the 1990s, the average young adult in America moved out of their parents' house at about 23 years old. Today, that same average is closer to 26. That's three years. Now, I know how that sounds. Three years doesn't feel like a crisis. Nobody's writing headlines about it. But I want you to think about what three years actually means when you run a rent-to-owned business. Three years of no first bedroom set, three years of no first washer and dryer, three years of no first living room, no first television, no first set of tires on a car that is sitting in their own driveway instead of their parents' driveway. Three years of no first shed in the backyard because there is no backyard yet. The average age of moving out was 23 in the 1990s. It rose to 26 in the 2010s, and right now it's actually a little bit higher. Now, the source is the Urban Institute. Every one of those purchases is a household formation event. And household formation is the single biggest driver of demand in our category. It always has been. When somebody sets up a home for the first time, they need everything at once. And they usually need it before they had the credit or the cash or the means to pay for it outright. Now that's our customer. That's always been our customer. So let me give you the rest of the picture and so that you can kind of understand what I'm talking about. According to the most recent American community survey data, 32.5% of adults between 18 and 34 are living with their parents. That's up from the year before. Roughly one in three narrow it to the 25 to 34 year old age group. That age group, by any historical standard, should be fully launched. And now one in five is still living with a parent or an in-law at this time. And here in Florida, where I sit, in Tampa and our surrounding areas, that number is higher than the national average. About 22% of adults, 25 to 34, are still at home. 32.5% of adults 18 to 34 still live with the parents. Now, one in five adults, 20 to 34, Florida runs above average. Now, here's something that I want to be careful about because I think a lot of people get this wrong, and this is not a story about young people being lazy. First and foremost, let's get that right. Every bit of research that I read points to the same cause, and that cause is housing. Rent is too high relative to wages and home prices are too relative to savings. Honestly, just can't afford it. The research found that in markets where household costs eat more than 30% of income, young adults are measurably less likely to move out. And truthfully, they're not choosing to stay. They're stuck. And when I look at this as an operator, I don't see a problem per se. I see a damn because these purchases didn't disappear. Now, a 26-year-old who moves out still needs a bed. They still need a place to put their lawn equipment. They still need a couch. The demand didn't leave, it didn't evaporate, it didn't change. It was essentially delayed. Now, there is a blockage of household formations sitting in this country right now, and it is aging up year over year. And when it releases, it's going to be released directly to the RTO category because the people it releases are exactly the customers who have thin credit files, no cash cushion, and an immediate need for everything at one time. So here's my honest take. If you're running a store today and you're only measuring this quarter, you're going to miss this entirely. The operators who built the real customer relationships right now, who treat every account like a long-term relationship instead of a transaction, those are the operators who are going to be standing in the right place when that dam breaks. Just want to be honest with you, I think that's where it sits. And that is actually what brings me to what's been on my mind as I pack my bag this week. Because

Why A Shed Conference Matters

Pete Shau 5:23

on Monday, I'm heading on a plane to Knoxville, Tennessee for the National Shed Rental Association's annual conference. Now, if you're a traditional rental-owned operator, you might be wondering why I'm spending two days at a shed conference. Well, let me explain, because it ties directly to everything I just said. The NSRA is the voice of the shed side of the RTO industry. Two days, September 21st and 22nd. This is going to be at the Marriott in downtown Knoxville. They built this year around a theme that they titled Becoming. Curious, courageous, and clear. Those are their words, but I think the way they're framing it, I like it. So I'm going to show up with all three. And I want to be open with you about why I'm going. I spent more than 20 years in traditional rent to own. Furniture, appliances, electronics, tire and wheels. I'm not flying to Knoxville to teach anybody anything. I'm going to listen because here's what I have come to believe about three sides of our industry. Traditional RTO, VRTO, they're running the same contract agreement with the same customer. Now, it's with a different product sometimes and a very different delivery problem. Same week, same monthly payment structure, possibly the same early purchase option, same no credit needed, same promise, same renewal behavior that determines whether you make money or you don't. What changes is the shape of it. A shed is a big ticket item sitting on somebody else's property, and shed rent to own largely runs through independent dealer lots, which means your product is being sold by somebody who doesn't directly work for you. Now, traditional rent to own owns the front door and everybody that's inside. It's two industries, the same customer promise, but two completely different set of muscles. And that is exactly why I think there is something here

Metrics Returns And Hard Conversations

Pete Shau 7:05

to learn. So here are the three sessions that I circled. And let me tell you the three sessions that I circled on the agenda are what I'm actually hoping to walk out with. Because I think each one has a direct application to our business, the RTO business, the traditional side, the tire and wheel, and the VRTO. The first one is called RTO reporting, profitability and key metrics. And that's with Tanner Leby. I believe I'm saying that right. If I'm not, please let me know. The question I'm bringing it with me is simple. What do they measure that we don't? Now, in traditional RTO, most of us live on a set of numbers, the past due percentage, the closing ratio, aisle inventory, renewal rate, charge off. Now, those numbers have served the industry for 40 years, honestly, just because they work and that's what we do. But when your product is sitting on somebody else's lot and the person writing the agreement doesn't actually report to you, your scorecard has to look a little different, possibly. I believe it does. You can't walk the floor and count idle units when your units are spread across 400 dealer locations over, let's say, six states. I want to see that scorecard. And if there's a metric that they track that makes money, then I would love to see it. And I want to bring it back to you. The second session is called the Return Advantage. I love that name. And that's going to be hosted with Timothy Rudolph and Jim Morgan. Now, returns are the hidden economics of every rent-to-owned business on the planet. Everybody wants to talk about sales. The money is made or lost on what comes back through the door and what condition it is when it gets there. And on the shed side, a return means sending a truck out to somebody's property to pick up a 12 by 20 foot building. And honestly, that's a lot. That makes our furniture pickups look like a walk in the park, considering even on the second or third floor. But the wording in that title is what really got my attention. Advantage. Now, generally something happened.

APRO’s AI Knowledge Initiative

Pete Shau 8:52

You've probably asked your favorite AI question lately. So have your customers. And increasingly, so have journalists, policymakers, and people trying to understand rent to own. That's why APRO launched this Generative Knowledge Initiative, a nationally recognized and award-winning effort to make sure that when AI talks about rent-to-own, it has accurate, credible, industry-authored information to learn from. APRO is building a stronger digital foundation for RTO through industry research and data. The RTO 101 knowledge base, decades of digitized industry history, customer and employee stories, and resources designed specifically for an AI-driven world. Why does it matter? Because if we don't define our industry online, someone else will. But April can't do it alone. Every member website, customer story, piece of local content, and accurate explanation of rent to home adds another credible voice to the digital conversation. Ready to get involved? Visit rtohq.org forward slash AI. There you'll find April's GEO toolkit, AI best practices, AI implementation playbook, and more practical resources built specifically for rent to home. That's rtohq.org forward slash AI, your starting point to help make sure the future of RTO is informed by the people who know it best. Us. We pick it up, we get the unit back, then we try to re-rent it or resell it. If somebody has uh built the model where the return itself is the advantage, I want to understand exactly how that works. Now, that might be the single biggest mindset shift of the whole conference, in my opinion. The third one is a Tuesday keynote, and it's called Overcoming Uncomfortable Conversations with Brandon Watchkovo. I hope I'm getting that right. If I'm not, again, hit me up, let me know. There is a follow-up breakout session right after that for anybody who wants to go a little deeper, and I think I'm going to be attending that one. I just want to stop it and see what it looks like. I think this applies most directly to your store on a Monday morning. Now, Monday mornings you know here are very critical. And here's why. What is a collections call? Is it an uncomfortable conversation? What is coaching a team member or manager who's not hitting their numbers? Uncomfortable. What is telling a customer that their account is about to be returned? Well, it's uncomfortable. What is telling a coworker that the performance is not where it needs to be? Same thing. In 20 plus years, I've watched a lot of good people struggle in this business. And most of them, if not all of them, struggle because they didn't understand the business and the way of leadership. They struggled because they avoided the hard conversation until it was too late to fix anything. So I'm going to sit in on that keynote. I'm going to take some really good notes, and I'll review it with you when I get back, just so you guys know. Another person who's also there is Nick Girard. He is running his legal session on both days, so I might be able to get into that, but he is someone that's also a friend of the show. And if I get the opportunity, I'd love to see Nick Gerard. Now he's a legal counsel to the NSRA, so I'd love to see him as soon as uh, you know, the time permits. I know that he's going to have a session that kind of crossovers maybe two days. I have to take a look at the schedule just to verify that, but I would love to see him and see what's

WoWBrands Built For RTO Growth

Pete Shau 11:56

going on. You know, on this podcast, I don't just talk about any company. So when it comes to rent to own, we talk about what works. If you're an RTO retailer and you're still running your marketing and your CRM like it's 2020, you need to talk to WoW brands. I've had their CEO, Ryan Krass, right here on the show. And what his team has built is the real deal. A full digital ecosystem made specifically for rent to own. Websites and e-commerce that actually convert. A CRM built for our industry, not just bent to fit it. Vendor inventory management that keeps your ordering and pricing dialed in. WoWBrands isn't a general marketing shop dabbling in rent to own. This is their whole world, just like it's ours. Head to WoWBrands.com and tell them the RTO show sent you. That's WoWbrands.com. All right, let's shift gears.

Four Q4 Numbers You Must Know

Pete Shau 12:48

Whether you rent sheds or sofas, whether you're in the Knoxville or the Tampa area, or somewhere in between, you are staring down the barrel of the fourth quarter right now. And I pulled four sets of numbers this week that I think should shape how you run the next 95 days. Let's talk about all four. Now, one, Deloitte released their holiday forecast on September 10th of this year. They're projecting holiday retail sales between 1.7 and $1.71 trillion for November through January. Now that is a growth of four to four point eight percent over last year. Now, e-commerce grows even faster than that number, somewhere between seven and eight percent. Now, the National Retail Federation has a full year of retail sales growing from four to five point six trillion dollars. So the headline is reading pretty steady. And for right now, this is what's happening. PWC surveyed 4,000 customers in June, and what they found is that customer confidence fell 18.5% year over year. The University Admission Index dropped from 60.7 all the way to 49.5%. And yet, projected gift spending only diffs about 2%. Now, on average, that's $708 per person. People are more worried about their money more than ever in the last few years. And they're gonna spend it anyway. Now, that gap right there between how people feel and what people actually do is a gap where rent to own lives. This is where we have always lived. Our customer has never had the luxury of waiting until the economy feels good. Life happens on its own schedule. You and I both know that. The refrigerator dies in October, whether the Consumer Confidence Index likes it or not. Number two, households with kids, this is your quarter for spending. Okay, so there is a PWC study that broke gift spending down by household type. Households with children are planning to spend $875. Households without children, $635. Now that's a $240 or 38% more difference. Now think about who walks through your front door, who walks onto your lot, working families, kids in the house. That's the profile of the rent-to-owned customer. And it has been literally for decades, which means your customer is already planning to spend more this quarter than the average American household. They aren't pulling back and they're actually leaning into it. We'll talk about that. The only question is whether that money comes to you or goes somewhere else. So look at your marketing calendar for October, November, and December. Is it aimed squarely at household with kids in it? Is the creative ad now showing a family? Is the offer built around what a percent needs to be in December? You know, just take a look at it, because if you're not, you're spending money and aiming it at the wrong target during the highest spending quarter of this year. Number three, the August Jobs report from the Bureau of Labor Statistics came in strong. 162,000 jobs were created, which is roughly double what economists expected. But the texture underneath is what matters a lot more to our business than the headline itself. So just stay with me. Long-term unemployment held at 1.9 million people. Now, that is 27% of everyone who is out of work. That's more than a quarter. Labor force participation is down half a percent since January. Fewer people are even trying. And here's the one thing that I think should change our behavior. 43% of unemployed workers have been searching for 15 weeks or longer. That's a five-year high. The job gains were also narrow. Food service, local government, and manufacturing carried most of it, but retail trade, warehousing, and professional services were essentially flat. Those first two sectors are where a lot of our customers work. If one of your customers loses their job in October, they're not finding another one in three weeks. Think about that. They're going to be looking for three months or longer. And that should change a lot about how you handle a pass to account this quarter. The old playbook says you call, you collect, and if they can't, you pick it up. Well, that playbook was built for a labor market where somebody could actually find a job in about two weeks and get back on their feet. Now, the current labor market says go out and find what happened first. A customer with a three-month employment gap and 18 months of clean payment history is a customer worth making a payment arrangement with. That is a relationship you protect. A customer with a three-month gap will not return your calls. That's a little completely of a different situation. If they're not calling you back, you make a move. And you handle that one just a little bit differently, but you see those two people on the same number on the same report. Two different people, though, and entirely different situations. Your team members need to know how to tell them apart. That leads us to number four. Equifax reported that customer debt hit an all-time high, trillions of dollars in March. And what drove the increase was subprime borrowers opening new bank cards and carrying higher balances on them. And Equifax used a phrase in that report that I still, honestly, I can't get out of my head. They said that for the lower economic tier, credit may have moved beyond a financial tool and may be coming a necessity for managing the rising cost of living. So credit is no longer a tool for the customer. It's how they get through their month. TransUn found that personal loan originations hit a record $7.6 million in a single quarter, up almost 22%. And they said it was driven disproportionately by subprime borrowers managing cash flow stress. Now, the New York Federal Reserve showed that delinquencies across all household debt rising to 4.8%, up from 3.6 a year earlier. Now that is the highest rate since 2017. Now let's take a look at those two facts side by side. Your customer is being offered more credit than any point in literal American history, and your customer is further behind on payments than they've been in nine years. The both of those are true and can be true at the same time. So what does that mean for you? Well, it means two things, and you have to plan for both. The first is competitive. Everybody now pay later app on your customer's phone is chasing the same exact person that you're chasing, and they're approving them. Klarna, Afterpay, Affirm, literally all of them. Your customer may walk onto your showroom or your lot and already be approved like three times over before they even say hello to you. Now the seconds is a collections warning. The money that your customer would have to catch up on their account in December, it's literally already spoken for. It is committed to four other possible payments they agreed to in October and November. So the competitive answer and the collections answer both point to the same place. Now hear

Four Moves For The Next 90 Days

Pete Shau 19:06

me out. Numbers are useless if you don't do something with them. So here are four moves in the next 90 days. I want you to write these down if you have the opportunity. Move one, work your pass through list right now. Don't just work it in December, but I want you to look at it, really look at it. Because you have 95 days until Christmas. Right now, today, your customer still has their full check available to them. Not the buy now pay later, not the affirmas and Klarnas, but right now they still have it available to them. By the third week of November, you're competing with gifts and travel and the possibility of four other payment plans. Literally four other payment plans. Every account you clean up in September and October is an account that doesn't roll into January. And that is what? Returns and charge offs. This is the window, but it closes fast. Move two, retrain the counter conversation. Assume your customer walks in already approved by three apps. In other words, you're gonna try you're gonna approach them as if they've already scrolled and they've already been approved before they even talk to you. Assume it every single time. Your coworkers need a clean, confident answer for what makes us different. That's the RTO model. And it comes down to basically, let's say, three things. No debt. If it does not work out, you return it and you get to walk away. You don't need to get a collections agency and you need you don't need to get a hit on your credit report. You can return it anytime and come back later with the same standing that you had before. Now, BNPL doesn't have that. And services included. That app on your phone is not coming out to fix the washer. Role play that at your next door meeting. Basically, have a conversation with your team. Role play that in your next door meeting. And not a script that anybody memorizes, but a conversation your team can literally own through roleplay. Now move three, watch payment dates. Now, this is the earliest warning sign of the system that you already have built into what you have as far as your POS system. But a customer has paid you on the first of the month for eight months straight and then starts paying on the fifth, and then they're telling you something. Then the seventh, then the tenth. Now, that is your window to make a friendly call while you're still in easy conversation instead of having a hard one. You know that the easier the closer they are to the due date, the better it is. And move number four, build your first quarter plan around the returning customer. January is when the fourth quarter bill comes due for all of your customers. Now, build your sales plans around that and work with your team to resell those agreement payment dates really, really aggressively. So make sure you role play, make sure you train. And that's where my head is going into Knoxville this year.

Knoxville Notes Invitation And Closing

Pete Shau 21:36

I'm going to sit in rooms with people who run the version of this business I have never literally been a part of or never operated. And I'm going to take a lot of notes and I'm going to bring all of it back here because I think the two sides of the industry have been running parallel for a long time without talking to each other nearly enough. And I would really like to know more about you guys. If you're on the shed side of RTO and you're listening to this, please reach out to me. I would generally like to hear how you run your business. This is an open invitation, literally for anyone, and I mean it. Contact me at Pete at the RTO Show Podcast.com. And if you are in a traditional RTO store, don't wait on my Knoxville recap to get started on the pass due list. Literally, you've got 95 days. Get on the newsletter, share this episode with one person who needs it. That's rtoshow podcast.com. Make sure that you hit that like and subscribe button so that you don't miss any notifications. And I will tell you guys, as always, get your collections low to get your sales high. Have a great one.