How to successfully integrate financing into your business

Home Inside FCNews How to successfully integrate financing into your business

Volume 27/Number 26; April 28/May 5, 2014

By Jenna Lippin

With a promising economy prompting consumers to get out and buy, many are looking—and are encouraged to—spend “other people’s” money. Retailers need to be ready for the release of that pent-up demand, and with that comes providing credit and financing options to help seal the deal.

“[Credit utilization] absolutely correlates with the economy being up,” said Keith Spano, president of Flooring America. “During the recession you heard everywhere that credit is bad. People have come around, credit has eased a little bit, and shoppers have more control. Consumer debt is at a low, so people have a different mindset. The smart consumer is going to use someone else’s money, especially when it’s free.”

Buying groups like Flooring America and Abbey Carpet & Floor offer their members special financing deals and provide the tools needed to help promote financing to consumers. Flooring America works with GE Capital for their credit program and offers monthly promotions that incorporate financing into much of their business.  “It’s a huge advantage that our members have to capture more business,” Spano said. “Not only do you get a consumer to buy more, but she will also buy better quality. Our average ticket increases substantially when we utilize our private-label consumer financing.”

Abbey recently announced its partnership with Alliance Data Retail Services, a credit company that helps facilitate financing. Abbey’s credit program, called Credit Connect, gives retailers the opportunity to have a transaction funded when the sale is finalized. “From a cash-flow standpoint, you just can’t beat it,” noted Ted Dlugokienski, Abbey’s vice president of finance. The buying group has also teamed up with American Express—which many members usually don’t accept—for lower rates to help promote the use of credit.

According to Spano, the key to financing is offering it early in the sales process. “We promote talking about credit early and often in the process,” he said. “That’s a mistake some retailers make—they don’t talk about it until the end. It’s also about how you pitch it. If you ask a consumer, ‘Do you need financing?’ it sounds like she can’t afford the purchase. If you phrase it as, ‘Would you like to open an account with us?’ that’s more appealing, almost exclusive. If you’re able to run the application early in the process, it’s an incredible closing tool. You know the person’s credit limit, how much she can spend and make the most of the sale.”

When a customer applies for credit, she is also offering more information about herself and investing more time in the purchasing process. “Knowing more about your customers can help you build leads, boost sales and encourage referrals and repeat business,” explained Brian Copps, industry vice president, flooring, for GE Capital’s retail finance business. “If you have a branded credit card program or offer installment loans, ensure all your marketing efforts tell your whole story, including special financing options. Referencing payment options in every consumer advertising channel maximizes your message and opportunities, cultivates positive word-of-mouth about your business, and helps you generate a greater volume of marketing data that you can use for more effective and targeted consumer marketing campaigns.”

Rob Elder, owner of Hiller’s Carpet in Rochester, Minn., said about 33% of his customers use his 12-month financing plan, backed by Flooring America’s GE program, which allows the customer to make 12 minimum monthly payments and then pay the balance at the end of the contract. This option has helped him emerge from what he calls the “old school mentality” of the flooring industry—according to Elder, many small-town retailers allow customers to claim they are “good for it,” paying when they can.

“When we make a sale, we ask [the customer if she] wants to pay cash, credit or 12-month financing,” he explained. “Financing costs you nothing as long as it’s used appropriately. It would be hard to implement a 12-month financing program if you say people can just pay when they want to. It has to be the fabric of your store to do it right.”


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