Strong Partnerships and Better Data Will Help Retailers Weather Changing Times
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Certainty in partnerships helps businesses navigate uncertain times. This is particularly true for home furnishing retailers who offer promotional sales financing. This sector of retailers require a strong understanding of their customers and their customers' credit needs, as well as clarity on how their financing partners will lend during times of both strong and diminished economic stability.
Over the past several months, rising expectations of an economic slowdown combined with market turmoil have given consumers who may have typically purchased larger ticket items some pause. Stock market volatility, the government shutdown and the Federal Reserve’s halt on interest-rate increases shook consumers and investors and prompted questions about the economy’s strength. These unforeseen events dampened consumer confidence and pushed down sales numbers for furniture and home furnishings retailers.
Confidence has slowly rebounded as the stock market recovered, the government reopened and several prominent retailers reported stronger-than-expected quarterly growth. Even as that conviction ticks higher, economic uncertainty leads to slower purchasing volume, especially when it comes to big-ticket items like furniture. Those retailers who have established partnerships with reputable financing partners and data strategies in place as demand fluctuates will be the ones that end up on top.
Help consumers understand the benefits of financing
Anecdotally, we've heard furniture retailers estimate that shoppers buy as much as 50 percent of merchandise on credit, using either standard credit cards, store cards or promotional sales financing. But a downward shift in the economic cycle could fuel delinquencies and tighten credit conditions. When consumers cut spending, furniture retailers can respond by more effectively targeting their financing promotions and offering financing options that provide value to consumers by being budget friendly. Lines of credit provide purchasing possibilities for consumers by breaking payments down into more manageable chunks without substantial additional costs.
For this to work well for the customer, financing must be easy, convenient and available when they want it. It must also fold into consumers’ evolving expectations for buying furniture. Nowadays, many consumers are shifting to purchase pieces that serve a more immediate need, function or taste. As some consumers opt for furniture they expect to replace sooner, they demand different price points and financing options, which help determine how long they structure their loans.
Quite simply, having the right lending partners provides retailers with more options and flexibility. Lenders should offer a broad selection of financing plans with payment possibilities that work with consumers’ budget constraints. Plans such as revolving credit, installment loans, equal payment and deferred interest, for starters, each play a different role in the way a customer can pay down their balance.
Better customization through data
In addition, data helps retailers match customers to furniture and financing. The most effective way to leverage data is by combining data from lenders and retailers. Marrying this information helps to best meet a customer's specific needs.
In practice, this can mean applying data on prior purchases and available credit to suggest complimentary products to drive the customer back to finish his living room, or by tailoring marketing based on previous purchases and spending. Lenders and retailers can also use data to determine when to adjust credit lines to enable future purchases. For example, a consumer who reports a salary increase could earn a credit line increase.
Ultimately, financing must be easy, convenient and available when the customer wants it. It must also be consistent across in-store, online and mobile channels, and accessible in a way that doesn’t disrupt the sales process. Furniture retailers can outsmart an economic slowdown by providing financing options that boost their chances of making big-ticket sales.
By Mike Rittler is General Manager of Retail Card Services, Unsecured Lending and Business Development at TD Bank
More about TD Bank: TD
Cards and Merchant Solutions is a top 10 card issuer in North America
with over $24B in card receivables. TD Bank's credit cards are
distributed nationally, leveraging our retail distribution network,
direct response channels and through hundreds of partnership programs
with financial institutions, retailers and other third party
organizations, including private label financing. For more information
on TD Bank's programs and services for home furnishings retailers, Click Here.