Memorandum submitted by the Park Group
EXECUTIVE SUMMARY
— Park Group plc welcomes the opportunity
to respond to the Treasury Select Committee's call for evidence
as part of its inquiry into Shorter Term Savings Products and
to offer its views on the Christmas savings industry. Park Group
has been in the business of operating Christmas savings for 40
years.
— Park Group's Christmas savings are
based on the premise that by making regular small, manageable
payments throughout the year, customers can plan, budget and pay
for their Christmas in advance with no credit card or other large
bills to worry about in the New Year. Customers have the option
of purchasing hampers, vouchers (redeemable at a wide range of
high street shops), or other non-food products selected from a
catalogue.
— Customers predominantly make weekly
payments to an agent at a time and a place to suit them. However,
an increasing number are opting to order for themselves and to
manage and pay for their order over the internet or by direct
debit.
— Park Group customers use a number
of financial products. 94% of Park's customers have a bank account,
53% have a credit card and 73% have a debit card. Park Group's
customers make an informed choice to shop with Park for the convenience
of the service and the quality of the product.
— The nature of the Park Group savings
product means that customers have generally planned their spending
well in advance, and are consequently far more tightly in control
of their finances than those who choose to pay for Christmas in
other ways.
— Payments to Agents can be spread
over a period of typically 45 weeks. Agents are paid a commission
based on sales to customers and may also receive a variety of
gifts and other benefits for sales performance throughout the
year. Customers who choose to trade on their own behalf also receive
a commission.
— Whilst it is true that those who
make payments to Park do not receive any interest on the money
that they save, our customers are aware that this would constitute
a nugatory sum which would, in turn, be offset by other costs
and relative inconvenience—as acknowledged by Brian Pomeroy's
recent Treasury report.
— Park Group has worked closely with
the DTI since the demise of Farepak to create a regulatory framework
which offers agents and customers adequate protection against
any loss in the event of the company having to cease trading.
Accordingly, Park Group is currently moving forward to create
a series of Trust Accounts for customers' monies in accordance
with the agreed proposals, thus removing any customer risk.
— Park's customers are generally happy
with the service that they receive, as evidenced by the fact that,
historically, 80% return to Park the next year. Park Group welcomes
further competition in the market from mainstream providers and
credit unions and is confident that the strength of its brand
and the quality of the service that Park and its agents provide
will guarantee the company a long and prosperous future.
1. Park Group plc welcomes the opportunity
to respond to the Treasury Select Committee's call for evidence
as part of its inquiry into Short Term Savings and to offer its
views on the Christmas hamper scheme industry, both now and in
the future.
2. Park Group plc was first established
in 1967 as a Christmas hamper business. This company has since
evolved with the group's core business now being focused around
mail-order Christmas savings.
3. The Christmas savings side of the business
effectively incorporates three different businesses—Park
Christmas Savings; Country Christmas Savings; and Family Christmas
Savings. These operate through the sale of products based on a
simple principle—that by making regular small, manageable
payments throughout the year, customers can plan, budget and pay
for their Christmas in advance with no credit card or other large
bills to worry about in the New Year. Customers have the option
of purchasing hampers, vouchers (redeemable at a wide range of
high street shops), or other non-food products selected from a
catalogue. Customers who choose to purchase high street vouchers
receive one pound's worth for each pound that they save throughout
the year, meaning that they receive the full total of their payments
in voucher form. This allows them to purchase products on the
high street at the best price available, taking advantage of any
discount that might be on offer at the time. Those who choose
a hamper or other non-food goods from a catalogue receive their
chosen products, as ordered. All of these are delivered to the
agent in good time for Christmas. Each customer knows what he
or she is paying for from the outset.
THE DESIGN,
PROMOTION AND
REGULATION OF
PRODUCTS IN
THE SHORTER
TERMS SAVINGS
MARKET
4. Park Group's business is based on the
simple but effective idea of paying a fixed amount each week over
an agreed period of time in order to spread the cost of Christmas.
Customers choose the product that they wish to purchase, whether
a hamper of supplies for Christmas, vouchers redeemable on the
high street or other non-food products, and pay a fixed amount
each week in payment for that product. There are no hidden fees
involved at any stage and each customer receives the equivalent
amount back to that which he or she has paid over the year. If
a person saves £200 over the course of a year, he or she
will receive £200 worth of vouchers redeemable on the high
street or a hamper of food or products priced in the catalogue
at £200 that they have pre-ordered. All of these products
are delivered directly to the agent's door prior to Christmas.
5. Park Group operates a predominantly agent
based collection system, although increasing numbers of customers
are instead opting to order for themselves only and to manage
and pay for their order over the internet and by direct debit.
Park now has Agents and customers in virtually every corner of
the UK.
6. Agents are recruited between October
and February, by responding to press advertising, direct mail
campaigns, internet and direct response television advertising.
Agents then recruit customers (usually friends, family or colleagues)
who wish to purchase the various products on display in our annual
catalogue and on the internet, including grocery hampers, meat
packs, freezer packs, confectionery packs, drinks packs, shopping,
travel and leisure vouchers, jewellery and gifts and other non-food
products such as audio or TV equipment.
7. Payments to Agents can be spread over
a period of typically 45 weeks. Agents are paid a commission based
on sales to customers and may also receive a variety of gifts
and other benefits for sales performance throughout the year.
Customers who choose to trade on their own behalf also receive
a commission.
REGULATION
8. Park Group welcomes the Department of
Trade and Industry's inquiry into the collapse of Farepak. We
have cooperated fully and constructively with departmental officials
and look forward to seeing the fruits of the investigation.
9. At the time of its collapse, Farepak
was a profitable company. Its demise was a direct result of the
failure of European Home Retail (EHR) and the use of Farepak's
cash to reduce the group overdraft which was secured on the assets
of the Group. Park Group has since been working closely with the
Department of Trade & Industry to create a regulatory structure
to protect customers. Park Group welcomes the statement made by
Rt Hon Ian McCartney MP on 28 March 2007 announcing the creation
of trust arrangements to offer added protection of customers'
money and greater reassurance for consumers in the wake of the
collapse of Farepak. The establishment of Trust Accounts for Christmas
Savings Clubs will provide the security for customers' monies
in the future while affording the flexibility to allow the business
access to necessary finance in order to make purchases relating
to the provision of ordered services. Park is currently moving
forward to create Trust Accounts for customers' monies in accordance
with the proposals. We believe that this removes what Brian Pomeroy
describes as the "risks" of hamper schemes. [2]
10. Whereas Farepak kept no central record
of its customers details and account balance, Park Group closely
monitors its agents' activities and strongly encourages the submission
of customers' details in order that comprehensive records might
be maintained at the company's main offices in Birkenhead.
PARK GROUP'S
CUSTOMERS AND
FINANCIAL CAPABILITY
11. The 2006 Park Christmas Savings Agent
questionnaire elicited over 13,000 responses and provides a useful
profile of Park's customer base. It showed that Park Group's customers
are evenly spread over a number of age ranges and are not predominantly
restricted to any one age bracket. They are generally banked and
are familiar with using financial products—some 94% of our
customers have a bank account, 53% have a credit card and 73%
have a debit card.
12. In opting to pay for services with Park
over a number of months, customers make an informed choice over
the many other mainstream financial options open to them. Indeed,
the Christmas saving market has matured considerably in recent
years in terms of the relative affluence of those who purchase
Park's products. As an indicator of this, some 66% of our customers
own a computer, of which 56% have internet access, predominantly
through broadband (72%).
13. Park Group is successful for the simple
reason that it offers an excellent service. It is designed to
provide a convenient way to spread payments through the course
of the year for pre-chosen products, thus when Christmas arrives
our customers have everything they require delivered to their
door, fully paid for at a time to suit them. Unlike those who
choose to pay for Christmas on credit, there is no financial hangover
in the new year. Indeed, the nature of the Park Group savings
product means that our customers have generally planned their
spending well in advance, and are consequently far more tightly
in control of their finances than those who choose to pay for
Christmas in other ways, as Pomeroy acknowledges:
"4.17 Many customers said that they like
being able to compartmentalise their saving so that they can see
immediately what they have saved for a particular purpose. The
discrete nature of hamper schemes means that, throughout the year,
people can monitor exactly how much they have saved for Christmas."
[3]
14. Whilst it is true that Park Group customers
do not receive interest on the money that they invest, they choose
to pay instead for convenience and peace of mind. Customers are,
after all, ultimately buying a service which includes the provision
of a product with free delivery. Furthermore, Pomeroy acknowledges
that hamper scheme customers are aware of the interest that their
money could accrue if saved elsewhere, but that they consider
this to be a nugatory sum which would be offset by other costs
and relative inconvenience. [4]Qualitative
research for Brian Pomeroy's review of Christmas savings confirmed
that hamper scheme customers are generally aware that they are
paying for a product and a service rather than simply participating
in a savings scheme:
"Evidence from the workshops suggests that,
although hamper schemes are promoted as a way of saving and implicitly
used with that intention, many customers make a clear distinction
between them and formal savings products:
`I don't really look at it as saving.';
`You don't want to think you're saving—no-one
wants to save. With hampers you feel like you're getting something'."
[5]
15. For customers who are elderly or immobile
the delivery of all their Christmas supplies, pre-ordered and
paid for over 45 weeks, is an especially valuable offering which
the high street bank or credit union cannot possibly provide.
Others, as Pomeroy acknowledges, are attracted to the prospect
of not having to join the Christmas "hordes" at the
shops.
16. Should a customer wish to cease making
payments prior to having paid the full amount of the product that
they have ordered, they are able to trade down and change their
order to the level of that which they have already paid or request
a refund.
17. Our customers are generally happy with
the service that they receive, as evidenced by the fact that,
historically, 80% return to Park the next year. Park Group welcomes
further competition in the market from mainstream providers and
credit unions and is confident that the strength of its brand
and the quality of the service that Park and its agents provide
will guarantee the company a long and prosperous future.
April 2007
2 Brian Pomeroy, Review of Christmas Savings Schemes,
HM Treasury; p.27, paragraph 6.1 Back
3
Ibid; P.17, paragraph 4.17 Back
4
Ibid; P.18, paragraph 4.21 Back
5
Ibid; P.17, paragraph 4.16 Back
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