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06/27/2022
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Leverage financing innovation to attract more big-ticket purchasers to your showroom, whether bricks or clicks

Today’s consumers have higher incomes, but rising inflation means tight liquidity for households. Central banks are raising interest rates to combat inflation, but that then diminishes purchasing power for traditionally financed big-ticket purchases, and mortgage rates are also rising, making homeownership more costly. Nevertheless, people still need to buy furniture, home appliances, tires, computers, and other necessities. With tight budgets, planning is essential but there is always the inevitable unexpected expense due to appliances that unexpectedly break down, tires damaged by road hazards, or the television that succumbs to a power surge.

Even when such items are covered by homeowner’s insurance, policyholders are afraid to file claims and affect their future rates. In any case, high deductibles of several hundred to a couple thousand dollars eliminate the benefit of filing claims for minor to moderate damages. CNBC reports that 40% of Americans would struggle to come up with 400 dollars for an unexpected expense.

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Sales consultant and customer

Despite liquidity challenges, when consumers do need to make a  purchase, they have more options than ever before. That means that retailers must be innovators, finding ways to differentiate themselves in order to both stand out from competitors and develop a loyal relationship with their customers.

 

  • Amazon built a strategy around ease of purchase, even patenting their 1-click purchase button. For registered customers, one click and the product just shows up…sometimes even same day. Amazon has made ease of purchase trump low-prices, and the online retailing giant has also streamlined and removed much of the pain from inevitable returns.
  • Home furnishings retailer Wayfair focuses on customer loyalty with a paid premium loyalty program for frequent shoppers called “MyWay” that connects its most reliable customers to members-only sales, discounts on installation and assembly, free shipping and priority delivery. The program also extends to Wayfair’s affiliated brands, AllModern, Birch Lane, and Joss & Main. Critically, Wayfair has an internal credo that a customer’s purchase should never be halted due to payment issues. Wayfair’s Arnaud Lucas explains “The Loyalty and Financing team empowers everyone, anywhere, to make their ideal home more attainable by rewarding them for choosing Wayfair. We do this via Wayfair credit cards, alternative financing, and gift cards.”
  • Competing furniture vendor Ikea makes visiting one of its mammoth stores a destination experience. The stores are laid out like a giant maze, and even when a shopper has a particular item in mind, it’s an experiential adventure with accessories at accessible price points, children’s’ play areas, and the on-site restaurant and food shop, both offering Ikea’s world famous Swedish meatballs.
  • Outdoors lifestyle retailer Bass Pro Shops and sister brand Cabela's also makes shopping an experience, with massive destination stores that feature walk-around aquariums with local aquatic fauna. Just as importantly, they provide innovative financing options that allow customers to break up purchases into multiple future payments, without having to go through a credit check.
     

Savvy customers are credit conscious
Many sophisticated consumers tend to use credit cards as charge cards, that is to say they try to pay their balances off every month and use the credit line and monthly payment option as an “emergency option.” In a worst-case scenario, these consumers can finance big-ticket purchases with traditional credit cards, but sophisticated consumers are wary about the costs of carrying high card balances, and don’t want to tie up credit lines that may be needed for emergencies. 

In addition, credit savvy customers are wary about “hard pulls” or credit checks with the major credit bureaus that can significantly affect credit scores in a negative way. 
 

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Sales consultant and customer

Today’s consumers pay attention to factors that earlier generations didn’t worry about, or maybe were not even aware of. According to an Affirm survey, 61% of respondents say that pandemic life made younger generations more financially savvy. This means that dealing with today’s savvier buyer means offering options that make financial sense to them and to you.

These savvy consumers understand that they have options that go beyond credit cards and traditional consumer finance. Traditional payment out of pocket is often an option—less so for online retailers—but this creates logistical challenges and security risks.

Beyond the problems that credit cards pose to consumers, they can also be costly to retailers. Giant retail chains have the purchasing power to push back against American Express, Visa and Mastercard, but transaction costs for “the rest of us,” can approach 5% of the purchase price with some of the premium rewards cards.

The traditional rent-to-own stores are still around, but they primarily focus on furniture, and have both a stigma, and a reputation for only offering low-end options.

There are attractive alternatives
“Buy Now, Pay Later” options such as Snap Finance are becoming more and more popular. Snap Finance empowers retailers to offer painless financing options that don’t rely solely on the credit bureaus  when the customer applies for or receives financing. Snap Finance uses its own proprietary risk assessment that is flexible and friendlier to purchasers that may have a limited credit history or even past challenges.

One thing that is unique about Snap Finance is that it goes beyond purchase financing to serve as a marketing partner for retailers. Snap Finance’s EDGE marketing qualified leads program pairs merchants with preapproved customers who are ready to purchase.

For example, a purchaser may obtain approval for $5,000 while making a purchase that only costs $1,000. That means that the purchaser still has $4,000 of preapproved credit with Snap Finance. That customer, already able to make a purchase with the remaining credit without requalification, is then introduced to participating Snap retail partners based on factors such as customer needs or geography. 

Snap Finance creates a win-win solution for customers and retailers alike, enabling customers to purchase what they need or desire, and enabling retailers to close 30-40% more big-ticket sales. Both traditional and online retailers can help their customers to check out with bigger baskets.

Snap Finance was established with the belief that financing should be painless and easy, and should be a win-win for both the consumer and the retailer. By partnering with Snap Finance, the retailer is seen as helping the consumer, by providing an attractive option for purchasing needed or desired big-ticket items.