Why buy when you can rent? Phone rental startup targets gadget-obsessed

Three people with a healthy obsession for cellphones; that’s all it took to start Rentobile, a young company that rents popular handsets to U.S. consumers who want a shiny new device, but are stuck in the middle of a lengthy contract.
Two years was much too long for Seungcheol Lee, one of Rentobile’s partners, to wait to get his hands on a different handset. Lee and Rentobile’s two other partners, all of whom all spring from design and graphics backgrounds, decided to take their love of the latest technology and turn it into a business plan. The company is not a mobile operator; it doesn’t offer service plans, usage charges, etc.
“The three of us are really obsessed with phones,” Lee laughed. “We want a new phone every month and one day we thought wait, maybe there are more people who want to rent instead of buy.”
It works quite simply. New Jersey-based Rentobile buys certain phones from each carrier, at full price, and then rents them to the carriers’ customers for a monthly fee.
“With each provider, you have a two-year contract and cannot really change your phone unless you purchase it [at full price],” Lee said. “Rentobile gives them the choice to keep their provider, but switch around phones.”
Phones are not interchangeable between operators, Lee said, but he did note T-Mobile USA Inc. customers can rent certain AT&T Mobility devices while remaining a T-Mobile USA subscriber, since both are GSM operators. If the renter is with a CDMA-based carrier, once they receive the new device, they must call or visit a retail store to have their phone number switched to the new device.
Obsessive customers
Only three months old, Rentobile has a select target market, Lee said.
“We are not marketing to everybody, but to people obsessed with new phones, the people who want to change and get a new device all the time,” he said. “People want to get an iPhone all the time and then maybe two months later another new phone comes out and they want to change, but can’t because of a contract.”
Lee said Apple Inc.’s 3G iPhone is most popular among renters with increased attention for Research In Motion Ltd.’s BlackBerry Storm. Rentobile has some devices on hand, but will go out and get phones from a carrier’s retail store if a customer should want a device that is not in stock.
“If you don’t see a phone you want, you can request it and we’ll find it for you,” Lee added.
Rentobile currently lists between two and five devices for rent from each carrier that range in price from $20 to $50 per month. If renters sign up to be a “member” they’ll initially pay a deposit, but will enjoy cheaper rental rates each month. Even though renters can rent as long as they want, Rentobile avoids that inner battle by making customers switch out their device over time.
“After one year we will take it back and try to give them another phone,” Lee said. “They’re paying $30 or $40 a month so I don’t think they’d want to keep it. We don’t want them to keep it longer than a year because then there’s no point in renting.”
Expansion planned
At this point, Rentobile said it has just under 50 customers, and as a startup nabbing those few customers wasn’t the easiest process. Lee said they literally went to their friends and friends’ friends to find out who might be interested in this type of deal and then sent out e-mails.
The next step for Rentobile is to increase marketing and advertising efforts and cut out the middle man when purchasing devices.
“Everything is limited so we’re trying to get more connections,” Lee said. “We’re trying to contact manufacturers directly and get a special deal with them. We’re trying as many possible ways as we can.”
Lee said they’ll be placing advertisements in newspapers, magazines and other outlets next year. The company consists of about five people and Lee said they’re busy trying to bring in tenants and prove their case as a landlord.