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By Joseph Dobrian, Special to Furniture Today
HIGH POINT — Most industry insiders advise furniture retailers to work with third-party credit providers. But which offers more upside for the retailer: offering financing options through a single provider, or through several? Opinions vary.
Mark Denman, executive vice president at ChargeAfter — which offers a network of lenders — said that “consumers are more protective of personal resources in this era of inflation and high interest rates. Some consumers who were eligible for prime loans at the start of 2022 now need alternative financing products, and this is happening across the credit spectrum.”
Creating and managing an exceptional financing offer, in-house, is almost impossible, Denman added.
“Gone are the days when a retailer wants to integrate a lender directly into the ERP or point of sale,” he said. “The benefits to working with a single lender are minimal. If a furniture retailer fails to provide adequate financing offers that cover all credit spectrums, customers will shop elsewhere.”
Vicki Turjan, president and CEO of Versatile Credit, said the biggest benefit furniture retailers gain from offering financing options is that they enhance the customer experience by addressing shoppers’ needs and helping them make informed decisions based on their budget.
“Merchants also benefit from the ability to offer promotional financing options and integrate financing into the sales process,” she added. “This equips sales associates to utilize financing strategically, either to drive the sale or save it, in a manner that benefits the business and the customer. With Versatile’s technology, shoppers who may not be eligible for a prime financing option can be seamlessly transitioned to secondary and tertiary options. This full spectrum leads to higher approval rates, more closed sales and satisfied customers.”
Mike Rittler, head of TD Bank’s retail card services, said one of the biggest benefits furniture retailers gain from offering financing options is the predictability it provides customers.
“Financing options put control back in the hands of both the customer and the retailer,” he explained. “With more people cutting their discretionary spending, it’s more important than ever for retailers to offer options.
“The most obvious advantage to third-party credit providers is that they help retailers get paid faster. Another is elimination of the inherent risks associated with financing. Third, by offering several financing options, retailers build customer loyalty.”
Rittler recommendd using multiple credit providers to cover different spaces. However, multiple credit providers in the same space can be confusing and difficult to navigate, he warned.
Curtis Howse, executive vice president and CEO for home and auto at Synchrony, agreed that financing drives sales and customer conversion.
“Using a third-party credit provider can offer retailers several benefits over handling financing in-house,” he advised. “It allows retailers to focus on core business operations. Additionally, partnering with established credit providers like Synchrony means access to a much wider range of financing options and potentially more competitive interest rates.
“Retailers that offer a range of options, such as credit cards, promotional financing or installment loans, can cater to diverse customer needs and preferences. By partnering with a company that provides each of these options, retailers can tap into various customer segments while working seamlessly with a single team.”
“A customer might be window-shopping or waiting on a bonus or tax refund—so provide flexibility,” urged Ryan Slobodian, executive vice president of Snap Finance. “Outsource the stuff you’re not great at. Have the right product on the floor at the right price, then partner with someone else to handle the payment. You need the capital base to provide the financing. If your capital is tied up in inventory you might not have that base.
“Have options and flexibility across the credit spectrum. It costs less to retain a customer than to find a new one, so look at reviews of these credit providers to see how they’ll treat your customers.”
Reid Bork, CRO of Katapult (which offers a lease-to-own platform), said that by offering LTO, furniture retailers can drive incremental sales to consumers who don’t have access to traditional financing.
“With an LTO financing option, retailers often see higher conversion and lower cart abandonment rates,” he asserted. “Cart abandonment is a significant challenge for online retailers, with unexpected extra costs at checkout being a leading cause. By offering alternative payment options, retailers can address this pain point, giving customers a flexible purchase plan and avoiding sticker shock.
“By concentrating solely on LTO solutions, we have honed our processes, technology and customer service to meet current and emerging needs of our retail partners.”
“Retailers can maximize conversion rates by promoting their financing options to customers early and often, making it easy for customers to apply, and working with financing partners who can approve a high number of applicants,” concluded Shawn Sieck, chief sales officer at Koalafi. “Third-party credit providers have the expertise and capabilities in key areas such as underwriting, customer support and application UX design necessary to maximize the program’s performance.
“They can also bear the costs and risks associated with financing, including credit and fraud risk as well as managing returns and collections. Compared with an individual retailer, providers such as Koalafi have access to much larger data set across thousands of merchants.”
See also: How are credit providers urging retailers to be ready for second half of 2023?
