Aarons 2015 Annual Report Download - page 22

In addition, certain consumer advocacy groups and federal and state legislators have asserted that laws and regulations should be tightened regarding lease-
to-own transactions. The consumer advocacy groups and media reports generally focus on the total cost to a consumer to acquire an item, which is often
alleged to be higher than the interest typically charged by banks or similar lending institutions to consumers with better credit histories. This "cost-of-rental"
amount, which is generally defined as lease fees paid in excess of the "retail" price of the goods, is from time to time characterized by consumer advocacy
groups and media reports as predatory or abusive without discussing benefits associated with our lease-to-own programs or the lack of viable alternatives for
our customers’ needs. If the negative characterization of these types of lease-to-own transactions becomes increasingly accepted by consumers or
Progressive’s or DAMI’s retail and merchant partners, demand for our products and services could significantly decrease, which could have a material adverse
effect on our business, results of operations and financial condition. Additionally, if the negative characterization of these types of transactions is accepted
by legislators and regulators, we could become subject to more restrictive laws and regulations, which could have a material adverse effect on our business,
results of operations and financial condition. The vast expansion and reach of technology, including social media platforms, has increased the risk that our
reputation could be significantly impacted by these negative characterizations in a relatively short amount of time. If we are unable to quickly and
effectively respond to such characterizations, we may experience declines in customer loyalty and traffic and our relationships with our retail partners may
suffer, which could have a material adverse effect on our business, results of operations and financial condition.
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We believe that we have benefited substantially from our current executive leadership and that the unexpected loss of their services in the future could
adversely affect our business and operations. We also depend on the continued services of the rest of our management team. The loss of these individuals
without adequate replacement could adversely affect our business. Further, we believe that the unexpected loss of certain key technical talent in the areas of
information technology and analytics in the future could adversely affect our business and operations. We do not carry key man life insurance on any of our
personnel. The inability to attract and retain qualified individuals, or a significant increase in the costs to do so, would materially adversely affect our
operations.
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The industries in which we operate are highly competitive and highly fluid, particularly in light of the sweeping new regulatory environment we are
witnessing from regulators such as the CFPB and the FTC, among others, as discussed above.
In the sales and lease ownership market, our competitors include national, regional and local operators of lease-to-own stores, virtual lease-to-own companies
and traditional and e-commerce retailers. Our competitors in the traditional and virtual sales and lease ownership and traditional retail markets may have
significantly greater financial and operating resources and greater name recognition in certain markets. Greater financial resources may allow our competitors
to grow faster than us, including through acquisitions. This in turn may enable them to enter new markets before we can, which may decrease our
opportunities in those markets. Greater name recognition, or better public perception of a competitor’s reputation, may help them divert market share away
from us, even in our established markets. Some competitors may be willing to offer competing products on an unprofitable basis in an effort to gain market
share, which could compel us to match their pricing strategy or lose business.
Our Progressive business relies heavily on relationships with retail partners. An increase in competition could cause our retail partners to no longer offer the
Progressive product in favor of our competitors which could slow growth in the Progressive business and limit profitability.
In addition, as a result of changes to the regulatory framework within which we operate, among other reasons, new competitors may emerge or current and
potential competitors may establish financial or strategic relationships among themselves or with third parties. Accordingly, it is possible that new
competitors or alliances among competitors could emerge and rapidly acquire significant market share. The occurrence of any of these events could
materially adversely impact our business.
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