Credit: Using financing options to seal (larger) deals

HomeInside FCNewsCredit: Using financing options to seal (larger) deals

July 4/11, 2016; Volume 30, Number 27

By K.J. Quinn

The availability of financing can be a key factor for consumers when making large investments such as flooring. And unlike yesteryear, today’s shoppers are savvy, spending an extended period researching their options including credit and financing.

“Customers seeking flexible payment options consider financing during their flooring research and may proactively ask about promotions,” explained Glenn Marino, executive vice president and CEO of Payment Solutions, Synchrony Financial. “Dealers benefit by offering programs to help them stay competitive and help build a stable of loyal customers who may make higher-quality choices or return for future flooring purchases.”

There are many consumer credit options available to finance floor covering purchases. Choices range from private-label credit cards, deferred payments and same-as-cash, which provides consumers with low monthly payments and extended financing. “These programs allow the smaller independent retailer to better compete with the big box stores,” noted Mike Zoellner, Mohawk’s vice president of marketing services. “They can advertise extended-term consumer financing and pay rates that are comparable to large retailers with lots of buying power.”

Synchrony’s Fourth Annual Major Purchase Consumer Study, released in June 2015, underscores the importance of financing. The report found 87% of Synchrony’s flooring cardholders “always” seek promotional financing when making a major purchase (more than $500). What’s more, over one-third of flooring cardholders surveyed would not have made a major purchase if financing was not available. “Further, 91% of flooring cardholders surveyed said they feel promotional financing makes their large purchases more affordable,” Marino said.


Leveraging credit for upgrades

A promotional financing program arms consumers with buying power to purchase the products and services they want instead of settling for something less expensive. “When a customer provides her budget but realizes her project will be more than she had anticipated, financing becomes the perfect fit,” said Brian Witkin, executive vice president of sales, Avalon Flooring, Cherry Hill, N.J., which operates 14 locations in Delaware, New Jersey and Pennsylvania. “Our sales associates can then show more high style/price product options which the customer is open to as she understands the long-term investment.” A sales team can also take the opportunity to introduce complementary products customers may not have been initially shopping for such as window treatments, rugs and backsplashes.

Retail financing promotions have proven to increase the value of the average ticket. Case in point: The Synchrony study found its flooring cardholders spent 64% more for their average purchase than shoppers who did not have a card. “Financing allows our customers to get the floors that they want now and pay the balance later when the funds are available,” noted Kurt Duitsman, president, Floors for Living, which operates 20 locations in the Houston area.

Many plans allow financing to be funded at the time of sale. “To avoid problems, our contracts are very specific about the funding date and our customers initial it,” Duitsman added. “The customer gets free financing and we get the use of the cash prior to paying for the installation and the products.”

Other retailers are using credit to boost orders. “We find promoting long-term financing has helped to create more sales as well as increase the average order,” said Darren Braunstein, vice president, Worldwide Wholesale Floor Coverings, Edison, N.J.

The retailer, which utilizes Synchrony, usually offers 12 or 24 months of financing with 0% interest. “The main difference with financing today is the requirement for the consumer to pay a minimum monthly payment,” Braunstein added. “This has been a good change in that the consumer is more accountable for the transaction; they have an immediate obligation to start paying down the purchase.”

Financing spread out over 12 to 15 months is commonplace, industry members said, although some retailers are more inclined to offer longer credit payment plans. For example, Flooring America/Flooring Canada offers various consumer financing programs with most members preferring 18- and 36-month deferred payment/same-as-cash plans, explained Keith Spano, president of the Manchester, N.H.-based retail buying group. “Flooring America/Canada members benefit from not only our low-negotiated financing rates but also from the fact that we corporately buy down the rates, saving our members substantial financing charges.”

Groups such as Flooring America have the buying power that allows members to offer interest-free finance promotions throughout the year. “They are able to tie together product and finance [offers] to create [valuable] retail promotions that enable us to provide aggressive price discounts on our products,” said Kelby Frederick, co-CEO and owner, My Flooring Texas, baed in Denton. “Plus, they offer long-term finance offers instead of having to offer one or the other.”

While there is no “one-size-fits-all” credit program, lenders can recommend an approach that fits a retailer’s sales model and provide assistance for optimizing the results. “Our programs do more today than simply fund the purchase of goods and services,” Synchrony’s Marino said. “The proprietary tools, branded programs and promotional financing help attract flooring shoppers and foster loyalty among our partners’ customers.”

Both retailers and consumers want a smooth, seamless experience at every stage of the financing process. A major challenge is effectively communicating options to shoppers. “We mention it early and often throughout the sale and do not ‘sell it’ in the traditional fashion,” Avalon’s Witkin said.

When financing options are explained at the outset it makes it easier to use them as a closing tool. “It moves the focus off the per-unit price and moves it to the full-project price,” Frederick pointed out. “[This] typically allows the customer to seek out higher-quality products she really wants for her home.”

Store employees are advised to receive credit sales training, which includes guidance on how to offer financing in an effective manner. “We have Flooring America corporate staff working with Synchrony daily to ensure a good financing experience for our members and their customers,” Spano said. Synchrony employs a team of trainers dedicated to ensuring its partners have the necessary tools to help them successfully offer financing promotions. By consulting with retail partners, lenders can develop financing programs to help increase engagement, sales and loyalty.

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