In the world of retail, it’s common knowledge that consumers will likely spend more on a big-ticket purchase if they can spread out those payments over time. This was particularly true during the out-set of the COVID-19 pandemic where many people were not only spending more time at home but also more of their disposal income on home improvement projects. But as other sectors of the economy return to some sense of normalcy, it’s incumbent on retailers to employ all the tools in their arsenal to seize a greater share of available dollars. Consumer financing is certainly one of those tools.
“In retail today, we’re experiencing a return to the new normal,” said Keith Spano, president of Flooring America/ Flooring Canada. “We’re back to people being cost conscious, especially with inflation affecting everything we purchase. We’re back to having shoppers we need to sell, neither of which was the case over the last two years where people were heavily nesting and investing in their homes.”
For these reasons, Spano stressed the importance of making the process of purchasing flooring easy and affordable, which can be done through consumer financing. When financing is discussed early in the sales process and the customer’s credit line is established, it’s easier to upgrade the flooring, add more rooms to the job and more.
“It’s been proven time and time again in all industries that the use of credit increases average tickets by facilitating the sale of better-quality product or more product than originally anticipated,” Spano explained. “It’s a win-win for everyone saving both the consumer and our retailer money versus a standard credit card purchase.”
Finance companies like Synchrony and Wells Fargo, for example, are working with their retail partners across a variety of industries to provide dealers with the data, tools and means to educate consumers on the availability as well as the benefits of credit.
“The customer is thinking about credit already,” said Vince Lowe, senior vice president/general manager of home specialty at Synchrony Financial. “As they come into the store to make that final selection, it’s critically important that they’re made aware of credit again so [retailers can] upsell in that purchase path.”
According to Lowe, broaching the subject of financing early on in the sales process can provide consumers with the flexibility that makes larger purchases possible, he noted.
Comfortable with credit
In order to ensure retailers are getting the most out of the slew of financing programs available, experts encourage store owners and RSAs to become more comfortable with the financing process. “Financing has always been proven as a way for the RSA to upsell the customer,” said Steve Sieracki, senior vice president, sales, Shaw, which partners with Wells Fargo on its consumer financing programs. “It has a proven record of working because, if it is presented correctly, consumers can easily see that they can get a better product for their home and pay over time at an aggressive rate rather than compromising style for what they can afford at that moment.”
Flooring retailers who have successfully promoted credit it their stores agreed. Case in point is Hiller’s Flooring America in Rochester, Minn. “We’ve noticed with 12-month financing, the tickets are bigger because people can spend more because they’re not having to pay $15,000 out of their pocket right away,” said Joe Elder, president. “It gives the consumer the ability to go a little bit outside of their budget knowing they have more time to pay for it.”
Elder credits in-store financing to higher close rates. With Elder requiring that buyers submit 100% of the payment up-front, financing provides a more expedient way to collect that payment.
Another plus to offering in-store financing is retailers have options to choose from. According to Synchrony, most retailers will offer multiple options, including 18-, 24- and 36-month programs. Then there are “pulse events,” which offer a single promotion, such as 18-month with no interest, that can be used for to draw more traffic to the store, according to Lowe.
