July 6/13; Volume 30/Number 2
By Nadia Ramlakhan
Over the years, retailers have offered many types of financing options to consumers; some have been successful, while others go as quickly as they come. Although consumers have learned to expect a financing offer on large purchases, dealers wrestle with finding those that will close the sale.
Generally speaking, financing options bring in more money for dealers. “People are accustomed to large purchases being financed whether it’s automobiles, furniture or flooring,” said Ed Cross of Ed’s Flooring America in Hooksett, N.H. “Just offering financing has allowed us to close sales on products that aren’t on sale; consumers actually get what they want at an affordable price.”
Retailers can offer anything from 12-, 18-, 24-, 36- and even 48-month plans; however, 18-month terms seem to be the sweet spot for most successful dealers. “Research says longer terms (three years or more) are more compelling to consumers and motivate them to come into the store but cost [the retailer] more than one-year financing,” said Mike Zoellner, vice president of marketing services for Mohawk. “For the most part, 18-month financing is used most often by our aligned dealers.”
Bret Lowder, vice president of The Floor Store with multiple locations in California, agreed that 18-month plans have proven to be most effective. “People like 24-month terms, but we don’t see an exponential result increasing from 18 to 24 because the interest the dealer is charged jumps. People may appreciate it more, but we don’t see an uptick on returns.”
On the other hand, some retailers find success with longer terms. “The longer the terms the better,” said Kurt Duitsman, owner and president of Floors For Living with 16 locations in Texas. “Four years works best for us because after the 10% deposit we can say, ‘For every $1,000 you invest in flooring it’ll cost you less than $20 per month.’ It’s really about how low you can get the payments.”
For Shaw aligned dealers, there is a significant increase in the average ticket when a consumer chooses to finance a purchase. “Larger purchases are being made when credit is used,” said Aaron John, director of Shaw Flooring Network and its retail programs. While the average ticket is typically about $1,000, Shaw’s 12-month plan with minimum payments and deferred interest is its most popular initiative, increasing the average ticket to about $3,200.
Most dealers always run one financing program or another but make sure to switch it up during busy buying seasons. Some suggest combining special offers with financing options. “During certain events we bring out the big three: interest-free financing, up to 50% off, plus no sales tax,” Lowder said. “You have to be careful because if you constantly run one promotion it loses its effect.” For example, because Memorial Day and Independence Day hit during the peak of construction season, Lowder emphasizes those deals a little more in-store and online.
Bill Wissler, vice president of strategic sales for Carpet One Floor & Home, also noted the importance of combining financing offers with sales. “We encourage our members to offer financing year round as a way to drive incremental sales. We provide additional support with special financing promotions during key sales times and in coordination with new product launches and product-specific sales.”
Flooring America dealers have more success when financing offers are open to multiple products, according to the group, and recently started to vary the terms of plans based on quality of product. “When we offer a financing promotion on one product or brand, it puts the salesperson at a disadvantage,” said Keith Spano, president of Flooring America. “Now we’re doing things a little bit differently. For example, a four-star product may be at one rate, while a five-star product may be at a lower rate.”
Glenn Marino, executive vice president and CEO, payment solutions, Synchrony Financial, urges retailers to take advantage of digital marketing. “Financing is foundational to a retailer’s sales and marketing plans, proven to increase sale amounts and drive repeat purchases. We encourage dealers to communicate available financing programs consistently across all channels—in-store and online.”