Examination of Witnesses (Questions 160-175)|
6 JUNE 2007
Q160 Mr Newmark: Following on from
Mr Cousins' question, one aim of the OFT's campaignand
I appreciate you have not had much dialogue with themis
"inform and educate people who lost money from the collapse
of Farepak to help them understand what options are available
to them to save for this Christmas". What would you expect
such a campaign to say about products such as yours?
Mr Houghton: I would hope that
it would portray us in a reasonably positive light, but also it
is key that people's cash is protected and that they should trade
with members of the CPA or another regulated body because there
are lots of organisations that offer savings schemes, such as
dairies and shops.
Q161 Mr Newmark: But in language
that is understandable to your target audience that is quite a
convoluted way of putting the message.
Mr Houghton: Yes. We are offering
what is in effect a budgetary plan to enable people to put small
sums away for a large expense at Christmas.
Q162 Mr Newmark: What health warnings
attach to that then?
Mr Houghton: If we have Trust
Accounts in place and the business is sound I do not see what
health warnings we can put in place other than that the cash is
as safe as we can possibly make it, and with Trust Accounts nobody
within Park Group can take it for another purpose.
Q163 Mr Newmark: The OFT also aims
"to carry out a consumer education programme that will help
consumers to choose the most appropriate short-term saving vehicle
for their needs". Do you accept that it is likely than an
official campaign such as this is likely to emphasise the value
of financially regulated products?
Mr Houghton: The value.
Q164 Mr Newmark: The benefit of.
Mr Houghton: I think it should
emphasise that if something is regulated, be it by a trade body
or by the FSA then it is inherently more secure than a business
that is not regulated and informed, for instance a local butcher
or newsagents who also may run a savings scheme for Christmas.
So I think it should emphasise that those entities are more secure
than any other form and they should trade with companies that
are actually in one of those types of bodies.
Q165 Chairman: The OFT said last
December that "many Farepak customers appear to come from
households on low or irregular incomes, possibly benefit dependent,
and do not appear to use mainstream banking, credit or savings
products". In your memo to us you have mentioned that 94%
of your customers have bank accounts, 73% have a debit card and
53% have a credit card. Does that reflect a difference between
the Park Group and the Farepak Group or was the OFT simply wrong?
Mr Houghton: I do not know; I
do not know if Gary wants to comment?
Mr Woods: I think there is a slight
difference between ourselves and Farepak in the sense that for
a number of years now one of the main mediums we have used to
recruit agents is direct response television and I think that
that has actually raised the profile of the customers that we
actually have. Equally, I do think that the analysis of the Farepak
database is probably slightly outdated; I think it is something
that you may have been able to say 15 or 20 years ago, certainly,
but I think times have changed. We do have over 94% of our people
with bank accounts; a lot of our people are professional people,
they are teachers, policemen, and they do the scheme because it
is fun, it is convenient, it is transparent and it gives them
an excellent way to enjoy Christmas without going into debt. I
think they are probably closer to C1s and C2s now, whereas 15
to 20 years ago they may have been more Ds and Es and I think
that is the sort of inference.
Q166 Chairman: Do you have any evidence
of how many of your customers choose your products because of
difficulties with financial institutions including, say, outstanding
Mr Woods: None whatsoever; it
is not something we would know.
Mr Houghton: 40% of our agents
actually are registered to trade online now.
Mr Woods: We have 85,000 agents
who are registered to monitor their accounts online and 40,000
currently for 2007 are doing that. So, again, they have PCs, they
all have mobile phones, they are not financially illiteratemost
of them, as I say, have bank accounts and we know that some of
them have ISAs, et cetera. I think it is an outdated perception
of a hamper customer.
Mr Houghton: And make an informed
judgment, I think that is the thing.
Q167 Chairman: The OFT also argued
that there were parallels between the market which Farepak operated
and the home credit market. Do you think that the two markets
attract the same kind of customers?
Mr Houghton: I think certainly
the home credit market does offer a similar product to oursin
fact I have a brochure from one of the home credit companiesbut
I think the customer base is typically different. Our customer
base tends to be people who like to plan and save and avoid debt
and home credit company customers are people who are actually
using the financial service provided by those companies.
Q168 Chairman: Has your business
expanded since the collapse of Farepak in the areas where Farepak
was strong, for example in Scotland and northeast of Scotland?
Mr Woods: There has not been a
great change in the geographical profile of the database; we are
still very strong, as we always have been, in what we call our
hotspot areas, which is northwest, northeast. Scotland is reasonably
strong for us but it was before the collapse of Farepak.
Q169 Chairman: What proportion of
your business reflects your geographical location? You mentioned
the northwestare you all over the country now?
Mr Woods: We are all over the
country. I think Chris mentioned earlier that we supply the Scottish
Islands, we supply Jersey, we supply Northern Irelandwe
are all over the country. The south of England has never been
as strong as the north of England for us although we have made
inroads, again probably down to television advertising. The northwest
is about 26% of our business, 23% in the northeast and Scotland
is about 10%. So we have hotspots but we are completely national.
Q170 Chairman: Has your relationship
with retailers changed over the last few years? Have they asked
upfront for monies earlier than Christmas?
Mr Houghton: I think the failure
of Farepak has made a lot of people nervous, but fundamentally
it was European Home Retail and not Farepak that the problem was,
so we are in constant dialogue with all our suppliers and partners.
Q171 Chairman: But have the business
arrangements changed with your retailers?
Mr Houghton: Not particularly,
I do not think. We certainly pay on time.
Q172 Chairman: You would not be here
if you did not. "Save Christmas" with OFT, somebody
made the point earlier, would it not have been quite good if you
had been consulted by them? We have them coming before us.
Mr Houghton: We are happy to work
Q173 Chairman: We could have been
able to have a good, positive input for them, something to tell
Mr Houghton: I would hope so.
Mr Woods: I would have thought
Q174 Chairman: Last question, gentlemen,
so that you answer for the public record. Some people have said
that this is a bum business model, that people do not get a great
deal; they give their money to you, it is kept until Christmas
and they do not get any interest, boy! you guys are doing well.
You tell meyou are here, you market yourselves to uswhy
is it such a great thing for people?
Mr Woods: I think it is important
for yourself and the Panel to understand that if you look at our
sales they are 90% vouchers and we sell vouchers at a pound for
a pound, so two of the largest retailers in the UK, we sell their
vouchers and we sell them at exactly the same price that the consumer
could go into the store and buy them for. Over and above that,
if they are dealing direct with us or if they are an agent we
give them a commission for doing that as well and we deliver them
to their home, so it is excellent value. It is fun, it is convenient,
it is transparentas I say, we produce a catalogue and everything
is clearly priced and clearly photographed. I think the reason
that we have so many people that save with these schemes are testimony
to the fact that they like us, they like what we have to offerwe
offer great value for money, we offer great service.
Q175 Chairman: Right, Chris, what
do you say?
Mr Houghton: People talk about
hampers, hampers are a small part of our business but still reasonable£10
million worth of turnover. They are quite an exciting thing and
a Christmas tradition for a lot of people, I think. When you get
the hamper you open it up, it is full of shredded cellophane,
it comes out sparkly for Christmas and it is very exciting.
Chairman: Can I thank you for your appearance
here? We have finished two minutes ahead of time, so if your Christmas
sales match your timing with this Committee you will be doing
very well! Thank you very much.