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Innovate Now: Bigger-Ticket Items Require Bigger Capabilities (MAG Quarterly- Volume Six, Issue Two)

Fortiva_Retail_Credit_RGB  
By Joe Ferguson, Director of New Business Development, Fortiva Retail Credit

June 7, 2018

Customers are more discerning when deciding where to buy big-ticket items, so retailers with strategies in place to make the purchasing process seamless and effectively inform and engage shoppers across channels have an advantage. This includes consumer financing options for customers across the credit spectrum and new technology that enhances the customer experience and integrates a flexible credit program.

Consumers considering purchases that require a significant financial commitment are more deliberate in doing their homework to ensure they are getting exactly what they want while avoiding undue financial stress. Whether you are selling HD televisions, furniture, appliances, home improvement equipment and services, jewelry or some other costly product, retailers must go the extra mile to ensure that the customer has the information and financial options available to make a purchase decision. 

This article will address one simple practice merchants can implement to strengthen their business overall: Implementing flexible financing offerings to help ease the cash-burden for the entire credit spectrum of customers, alongside innovative solutions developed by pioneering retailers in recent years to better engage customers for more cost-prohibitive merchandise.
 
Alternative Financing 

Offering financing for major purchases is a great way to close more sales, achieve larger ticket sizes and earn loyal, repeat customers. Store-branded credit cards issued by prime providers like Synchrony or Wells Fargo are not a new concept in the retail space to accommodate these purchases, yet to get the most out of a financing program, such prime offerings should be paired with a second look financing option to approve customers across the credit spectrum. 

Prime financing providers are more likely to decline customers whose scores fall below the prime FICO score of 700, which FICO.com projects to be more than 43 percent of Americans, though second look financing providers help close more sales by approving many of these customers. Experienced second look credit providers are able to assess data beyond FICO standing to approve customers with scores even below 500, which saves sales for approximately 30 to 50 percent of applicants initially declined by prime credit providers.

Offering a second look option to these customers helps improve credit-impaired customers’ experience whereas a store that only has prime financing cannot. This segment includes customers with solid cashflow who may have experienced a credit-damaging situation a few years ago, which does not affect their current ability to repay a financing plan for furniture, electronics or even major home renovation projects. It could also include a family with an emergency home improvement need that requires a big purchase without the time to save up the cash, such as broken appliances or a broken air conditioning unit in the middle of July. 

Regardless of the reason, the ability to help these customers yields customer satisfaction, customer loyalty and repeat business – in addition to the revenue growth from making more large-ticket sales.

Flexible Terms

Just as it is important to offer financing options to fit customers of different credit standings, their credit terms should adapt to match debt repayment needs while simultaneously maximizing opportunity for customer satisfaction and loyalty.

Installment loans are commonly offered as a standard alternative financing repayment plan, and while some may prefer the set end-dates these installment plans offer, they can be restrictive for other customers who may want deferred interest options, higher credit lines, longer payback terms or the potential to make future purchases with the same retailer.

Revolving lines of credit allow customers to return for years to purchase other items they need with an established source of financing. Customers who may be resistant to submitting more credit applications are encouraged by credit lines to return for other large-ticket needs down the road. Retailers can even market directly to current credit holders, offering special deals that encourage repeat business sooner rather than later. Consider a recent homebuyer who will need to make multiple purchases of furniture, home improvement equipment, appliances and other items – lines of credit can keep them coming back for years as they build their lives in their new home.

New home owners are also great examples of customers who might need more flexible monthly payment plans than installment loans offer. Deferred interest loans, for example, allow customers to save on monthly payments in the short-term, which helps customers who may be tight on cash now, such as someone who recently made a big down payment on a home.

There are several financing terms to consider in your credit offerings, but flexibility is key to fit different customers’ needs.

New Technology for Selling Specialty Items

Maximizing the omnichannel experience is also more crucial than ever to close large-ticket sales, especially as 1.66 billion people made online purchases in 2017. Because people are more concerned with the aesthetics, longevity and quality of expensive items than they are of daily consumer goods, it is vital that websites, mobile apps and other digital tools do a great job of providing the information needed to make a big purchase. 

From a practical standpoint, in-depth descriptions and customer reviews are basic online tools to inform customers. Buyers shopping for computers on Amazon are treated to comparison charts that provide an easy, detailed analysis of what other options are available at similar price points. Lowes.com offers PDF guides, instructional videos and project tips for much of Lowe’s inventory. For merchandise that is aesthetic in nature, like furniture, the website should be built with extreme focus on visual branding. Ethan Allen’s website, for example, opens with a video on “The Art of Making Home” and offers easy navigation to see different versions of the retailer’s catalog.  

Going beyond these basics, retailers are leveraging technology to move to the next level of informing customers. Haverty’s 3D room planner mobile application allows shoppers to replace existing furniture from photos of their rooms with Haverty’s furniture and accessories. eBay offers a visual search engine to let shoppers find items that closely match goods they see in photos or in the world. And Target is leveraging CGI to give shoppers a 360-degree virtual reality-like experience to visualize what items will look like in their homes.

Technology in Financing and Communications

Retailers must tie together all financing and the informative tech options outlined in this article into a seamless omnichannel experience. 

In addition to making websites and mobile apps more informative and bringing innovative tech solutions to engage customers, the full financing program must also be integrated into the technology platforms retailers use. This includes a fast application process and instant approvals with digital applications via mobile checkout, website shopping carts and in-store kiosks. Leading prime and second look financing providers partner with each other and payment technology platforms like Versatile Credit, Vyze,LendPro and ChargeAfter, to automatically and seamlessly transition customers to a second look application, which often leads to an instant approval upon being declined by a prime lender without additional applications.

Conclusion

Offering second look financing to support your prime credit card helps close more sales on large-ticket items by reaching the significant portion of the U.S. population who might need more flexibility. Revolving lines of credit and deferred interest programs offer alternatives to installment loans that can breed more loyalty and help a more financially-diverse customer base. As advances in technology help retailers engage customers more effectively while they consider the best use of their finances, it is just as important to ensure financing applications are seamless across all channels where purchases can be made.

Joseph Ferguson is the Director of New Business Development at Fortiva Retail Credit, the only second look consumer financing program serviced by a publicly traded company with decades of experience servicing credit-challenged consumers (issued by Mid America Bank and Trust Company). He may be contacted atjoe.ferguson@fortivafinancial.com