29 May 2024, 21:27
By Adam Hankinson Jul 26, 2021

Would you credit it?

When younger customers enter your store, there’s no lack of aspiration or ambition, writes Furniture Sales Solutions' Adam Hankinson – but there is often a price barrier that can prove unsurmountable, without the right payment options in place …

I always wanted a Bang and Olufsen TV. My dad inherited one from his dad in the 70s, and I remember what a big deal he made of having one.

Somewhere in my psyche, without a lot of conscious thought, this became embedded – but it was there, and every now and then I would stand outside the B&O shop in Southport and gaze longingly at the ‘Rolls-Royce’ of TV and hi-fi brands, never having the confidence to enter because I didn’t think I could afford it!

One summer day, around 25 years ago, both doors were wide open, and I ventured in with my two young sons. A Disney film was on at the back of the shop, and they ran to watch it. As I browsed longingly at the TVs on the floor stands, a TV in front of me swivelled, as if by magic, silently, slowly, and smoothly. My mouth dropped open. “Wow! That’s amazing!”

The salesman – who was stood behind me with a heavy, chrome remote control in his hand, obviously moving the TV with it – smiled at me, and said “yes, it is, I’ve sold six of those this week!” 

I wanted it all the more. I asked “how?”, he said “we do this brilliant interest-free offer where you pay a 10% deposit and pay the rest off, interest free, in a year.” 

Fifteen minutes later, I’d paid my deposit and agreed an installation date for the following week.

In my dealings with many retailers I often hear them say that “our customers don’t need credit to buy”, or “we don’t want to push interest-free credit, as it costs us a lot of money”. Now, this is, of course, a point of view that the owners, operators and managers of these (often independent) retailers are absolutely entitled to hold – and they can choose how and what they do in their business all day long. I ask them, though, to consider a number of facts and reasons that they might consider before finalising this (in my opinion) costly decision.

The first fact is that 25% of people who buy on finance – whatever type, interest-free, low-rate interest or normal credit terms – would not have bought at all if these ‘easy’ terms were not available. In the case of the market leader, DFS, that quarter of ‘finance’ customers is £125m per year. I repeat – these people say that they wouldn’t buy at all without a finance option being available.

The second fact is that the average order value of a three-year interest-free sale is +50% greater than an average cash order. At a 5% subsidy rate, that makes the gross margin £600 on a £1500 finance order, versus £450 for a cash order at £1000 (after the subsidy has been paid).

The third fact is that people don’t say “can we do it on finance please?” What they do say is “we’ll go away and think about it” or “we’ll go and measure up.” Unfortunately, people get really embarrassed talking about money – and especially about their own personal financial situation, and any possible hint that they need some type of ‘credit’ to buy what they want.

Easy terms or small monthly payments are the ‘bridge’ that the customer needs to get across the ravine of “I want that, but how can I get it?” 

There are many customers who want to buy what you sell – often because their parents or grandparents had bought from you – but they think that they can’t afford it!

As you struggle to see sub-35-year-old customers visiting and buying from you, consider why and how you might build a bridge for them to cross easily into owning your furnishings (“I’ve always wanted to buy from there, but really thought I couldn’t afford it – then they showed me a way that I could!”).

Before I forget, the fourth fact is that customers who buy from you on finance are more loyal – actually twice as likely to buy again in the same way – as “it’s so easy to pay monthly, we hardly miss it.”

Adam trains people to sell and manage more effectively, using techniques learned from his own experiences and working with some of the best salespeople and managers in the furniture industry. Whether a business needs help auditing and improving its product range, overhauling the presentation and promotion of its products, recruiting bright and knowledgable staff, implementing new finance solutions, or designing and utilising retail software programmes (SaaS) to help it track KPIs, Furniture Sales Solutions has the answer. This article was published in June 2021's issue of Furniture News magazine.

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