In our prior installment, back on April 3rd, we discussed the transformative nature of technical innovation on the retail lending landscape. So, where is the money to fund all this innovation coming from? Whenever there is significant disruption like there is right now in the consumer lending and financing industry, the innovators must be paid. In this industry, there is the additional hurdle that the funds to be offered must be secured.
Articles tagged with: financing
So you want to grow? Building a successful business and growing the revenue is in the bloodline of every entrepreneur involved in startups, middle market companies and even billion dollar giants. However, growth not tied to a scalable strategy or business plan has left many CEOs concerned about the direction of their business. Wall Street has driven public opinion that every good company must show a consistently smooth growth trend, triggering many CEOs to push for immediate quarterly growth not necessarily tied to their company’s current capabilities or risk exposure.
We are entering a period of some significant financial uncertainty. While the stock markets and the economy continue their upward momentum, at the same time there are signs of nervousness about the underpinnings of our country’s infrastructure, financial systems, and the ability of future generations to create and consolidate wealth as past generations did. In this environment, retailers must make everyday decisions that may make or break their businesses – decisions about inventory levels to keep, prices to charge, and credit to offer their customers. This is nerve-wracking stuff. It has to be right.
That last item, how much credit to offer and how to offer it, has become one of the key levers of financial success in the retail trades. There is hard evidence that having the right credit partners and offering the right credit programs can add 50% to the number of transactions and 33% to the amount a consumer will buy.
You’ve offered consumer financing from one of the large prime credit lenders for years and feel as though you are competitive by doing so. Then along comes those consumers (a majority of Americans, by the way) who don’t have prime credit. Being interested in making a sale, you decide to expand your consumer financing offerings by bringing in a no-credit-check or no-credit-required option. After all, this type of program costs you very little, if anything, so, why not – can’t hurt, can it?
There are many options in the marketplace for this type of offering – typically a lease-to-own program. So, now that you have your "alternative" financing program, you are ready to ring the register with sales previously lost from prime credit lender declines.
The best chess players think 5 moves ahead. In our experience, the best retailers do too.
The Christmas / Holiday sales season is a busy time for us all. So, first, thank you for spending a few moments reading this viewpoint. If you’re like our customers across a variety of retail industries, your sales floor right now shows all the signs of a profitable season, but also some of the following stresses:
- sales people stressed out at all demands on their time
- customers queued up to talk to sales people about products
- financing conversations and paperwork taking up too much time
- customers walking out the door unsatisfied with the sales experience and/or the financing options available to them
Are your store’s consumer financing options a well-kept secret?
Many retailers do not advertise that they have financing options. If they do, they advertise their long-term 0% interest program. The problem is, most consumers know their credit score, and many know they probably do not qualify for that attractive offer.
I’ve listened to quite a few retailers over the years talk about how their customers just don’t need financing, or so they think. Therefore, they tend not to promote consumer financing or discuss it with their customers during the shopping process. With the exception of a few high-end retailers, most retailers have a fairly high percentage of consumers walking through their doors that have less than great credit and/or not much available credit (“purchasing power”) to use on a purchase in the store. By not promoting and discussing financing, including near-prime credit and no-credit-check financing, the retailer has inherently shrunk its potential target customer base to those that have the means AND desire to purchase on their existing credit lines or with cash. You see, just because an individual has an available balance on their credit card of, say $3,000, doesn’t mean they want to use all or most of it on a furniture, jewelry, appliance, or bedding purchase today. Consumers tend to view their credit card as that primary money source to be used for essential or “staple” purchases (e.g., gas, groceries, clothing, etc.) or for emergencies, such as medical or dental, automotive repair, or some other unexpected expense.
You would be very surprised how low the average FICO score is in your town or city.