GE Capital Financing: win-win for retailers and consumers

Home Inside FCNews GE Capital Financing: win-win for retailers and consumers

Bruce Cummings is a big fan of the merits of credit financing. The owner of Cumming’s Carpet One Floor & Home in Springfield, Ill., knows it works—with both retailer and customer benefiting—and wants the world to know it also.

“We’re located on a main corner in Springfield,” he said. “We put up financing signs on either side of our windows facing the street and on our marquee outside. We have two different signs—one black and white, one in color—just to make it different. If you go through our town, you can’t help but see the signs, even if it is subliminally.”

Between January and May of this year, Cummings Carpet One Floor & Home signed 21 more shoppers onto GE Capital’s 36-month, special financing offer than it did a year ago. Cummings confirmed the average ticket price of those consumers selecting the 36-month special financing offer at his store was $5,000.

Don Roberts, vice president of sales at CAP Carpet in Wichita, Kan., is another dealer whose business has been enriched by GE Capital’s financing options. “About half of our financing customers upgrade to better goods. My average ticket either doubled or tripled, depending on the type of retail business, by offering financing.”

A recent Major Purchase Shopper study research commissioned by GE Capital’s Retail Finance business confirms financing plays a key role in helping consumers research and plan for flooring purchases. The research was conducted with both random shoppers and GE Capital Retail Bank (GECRB) account holders, who had made recent purchases valued at $500 or more. Greater than 60% of GECRB account holders said the availability of financing drove their choice of retailer. This was especially true of flooring, where 79% of GECRB account holders said financing was a factor in retailer choice.


Financing options that fit

Cummings said his customers are extremely careful with their money during these economic times, and for them, keeping monthly payments within a certain budget is crucial. That is why GE Capital’s 36-month special financing offer works better than a 12- or 24-month offer, he noted.

One customer of Cummings chose to upgrade from a $5,100 purchase to a $6,500 purchase by spreading it over 36 months. “Once the customer saw there wasn’t much difference in the monthly cost—and how much better a product she was getting—she thought it made sense,” he said.

Cummings said having the right financing product available is often the difference in making a sale. “I am competing not just with other carpet stores, but with home centers and furniture stores, which is another reason financing has become an integral part of our business and much more important in a soft economy.”

The consumer research process for a major purchase is extensive as validated by GE Capital’s Major Purchase study, which found 76 days on average is spent on research and 102 days for a flooring purchase. The study also revealed 60% of consumers start their research process online; however, 89% purchase in-store and this is especially true of flooring shoppers with 94% making a purchase in the store.

Cummings Carpet One Floor & Home changes its finance advertising about every two weeks—even if it is merely the coloring of the signage, just to keep things fresh. The owner knows the financing provided by GE Capital generates foot traffic to his store because, as a test, he stopped all finance advertising for a two-week period and said traffic dropped noticeably.

“We’re not a big retailer, but in the last three years financing from GE Capital has increased sales in the hundreds of thousands of dollars,” Cummings said.

Roberts advertises all different types of financing options, from 6 months to 36 months, with each financing promotion having its own specific requirements. The bulk of his business is on 12-month special financing with the average ticket price around $2,000. For 36-month special financing offers, the average ticket price is between $2,500 and $3,000.

Both dealers agree that 36-month special financing offers have boosted foot traffic and driven higher average tickets. Customer satisfaction and referrals also increase when payment options are available.


Meeting payment preferences

Around 2008, amid the worst of the housing market downturn, the financial markets made it harder for businesses and consumers to get loans. Flooring retailers, who were used to seeing 90% approval ratings for their customers seeking credit approval, saw that number dip, Roberts said.

However, the credit crunch began easing last year, the retailers said, and approval rates are back to nearly pre-2008 levels. “Today, there are very few turndowns,” Cummings said. “Today’s customer, with the economy the way it is, wants to keep their payments down, which is why 36 months works.”


A business-building tool

“I hear other retailers say to me, ‘Well, financing doesn’t work for us,’” Cummings said. “I tell them that you can’t give up… This is not a magic wand you wave; you have to work it, and, of course, you still have to have the store traffic in the first place.

“You have nothing to lose with financing; you just have to keep trying it,” he added.

Roberts said there is a broad scope of consumers in the market—from the customer who wants to pay everything in cash and wants a discount to do it, to the person who without financing wouldn’t make the purchase. “What lies in between is a lot of gold.”

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