By Joseph Dobrian, special for today’s furniture
HIGHLIGHT — How are financing practices changing to respond to how and where young consumers shop? Are cash-equivalent offers resonating with younger consumers?
Consumer finance and leasing specialists generally agree that furniture retailers can take advantage of changing consumer practices. Retailers just need to stay alert to these practices, and the goods and services available to address them.
“Young shoppers continue to show a strong affinity for buy it now and pay later (BNPL) options and other forms of installment loans,” said Mike Rittler, managing director of TD Bank Retail Card Services. “They can be a valuable resource for furniture retailers to attract new customers. According to our annual Consumer Spending Index Survey, 31% of consumers have used BNPL to finance a purchase, including 45% of Millennials surveyed.
“While previous generations have used payment methods such as layaway, Millennials and Gen Z prefer newer payout and financing methods. However, the financial education and assurance that they fully understand the financing conditions are imperative.
Furniture retailers, Rittler said, must inform consumers of the terms they sign up for and their obligations. “Like any loan, the BNPL should be viewed as a tool.”
Vicki Turjan, President and COO of Versatile Credit, noted that merchants have developed omnichannel strategies and technologies to provide customers with the same inventory, experiences and offers whether in-store or online. line. Merchants have also begun to explore partnerships and strategies to drive financial inclusion and open their financing offerings to customers across the FICO spectrum.
“Technology like Versatile’s helps facilitate this by taking customers through a seamless self-service experience to find the financing offer that best suits their needs,” she said. “When merchants leverage a consumer’s mobile device, it can help facilitate exceptional self-service experiences for shoppers. We have seen strong adoption of technologies such as our Snap to Apply contactless technology across all age groups.
At Snap Finance, Executive Vice President Ryan Slobodian advises retailers to stay mindful of the shift from virtual engagement to physical presence and eventually back, throughout a sales cycle. Visual components are particularly important, as they allow the consumer to understand how new items will fit into their lifestyles and spaces.
“Engage these consumers with financial alternatives early in the buying cycle,” he said. “Giving them insight into approval amounts leads to an increase in average ticket size. Because they may have limited funding experience, transparency and easy-to-understand product constructions are important. The same goes for flexibility, which increases engagement and boosts close rates. »
Product choice is key, especially for younger customers, said Curtis Howse, CEO of payment solutions at Synchrony Financial. His company offers “about a dozen” financing options and uses data analytics to identify the right product for every customer and every situation.
“We use additional modeling techniques to predict the profitability of a given cohort, allowing us to identify the customers most likely to generate the greatest incremental returns,” he explained. “A young customer can start with SetPay (Synchrony’s BNPL system) for a purchase under $500 or an installment product for a larger purchase, then move to a private label product as their repayment capability matures, and finally switch to a double card proposal that can be used anywhere in the world.
Steve Jermier, senior vice president of relationship management for Wells Fargo Retail Services, said his company has added digital capabilities such as prequalification, payment estimating tools, prescreening throughout the checkout process and using the Wells Fargo card as a tender. type.
“When you combine these digital innovations with our traditional benefits of a private label credit card – branding, messaging, repeat purchases and flexibility on promotional offers – it becomes a powerful combination,” he said.
Given the average ticket size he sees in the furniture industry, Jermier doesn’t think the traditional “90 days like cash” offer has significant value. So, Wells Fargo offers a broader menu that includes deferred interest, no interest on full payment, longer-term 0% equal payout promotions, and reduced APR equal payout promotions.
“We found that young people are interacting with their personal finances differently than previous generations, using new products and technologies alongside legacy systems,” said Mike Giordano, chief commercial officer at Progressive Leasing. “As a result, consumers expect more flexibility and control over their payment options for larger items like furniture.
“Retailers offering omnichannel payment options that allow consumers to shop and pay how and when they want will be well positioned to attract the largest block of retail consumer buying power,” Giordano added.
“The biggest change we’re seeing is in the wide variety of places where consumers are discovering products and making purchases,” said Craig Leffew, vice president of sales at West Creek Financial. “They often interact with a retailer on Instagram, an influencer on Tik Tok, a company’s website or a store. Many distractions appear on social or mobile channels, making applying for funding extremely fast and simple is essential. Since a customer may frequently switch between channels, it is important that they can apply in one location and complete the transaction elsewhere.
“Clarity on the cost of financing and promotional interest periods or advance purchase options will always be compelling.”