In the ever-evolving retail landscape, businesses constantly seek innovative ways to enhance customer satisfaction and boost sales. One such approach that has gained significant traction in recent years is retail finance. This strategic initiative benefits retailers by increasing their customer base and empowers consumers by providing them with convenient and flexible payment options. Some studies estimate that 35% of Americans have used some kind of retail financing platform in the past.
This blog post will delve into retail finance. We will explore its various facets and impact on retailers and consumers.
Understanding Finance in Retail
At its core, retail finance refers to the provision of financial services by retailers to their customers, enabling them to spread the cost of their purchases over a longer term. This can include credit facilities, interest-free finance offers, and other financing options tailored to meet the diverse needs of your target consumers.
By offering financing options, businesses cater to a broader audience, especially those looking to buy high-ticket items without straining their finances.
The Benefits of Retail Finance for Consumers
Retail financing can be an excellent option for several different niches of retail shoppers. Here’s how retail financing helps shoppers and, ultimately, inspires them to make a purchase.
1. Spreading the Cost
One of the primary advantages of financing is the ability for consumers to spread the cost of their purchases. This means that instead of paying the entire amount upfront, they can pay in manageable installments over a specified period. Flexibility makes purchasing expensive items more accessible to a broader range of customers.
2. Interest-free Finance Offers
Many platforms provide interest-free finance offers, allowing customers to purchase without incurring any additional costs. This incentive attracts budget-conscious consumers and encourages them to buy more, knowing high-interest rates won’t burden them.
3. Managing Finances Effectively
Retail finance empowers consumers to manage their finances more effectively. Offering different financing options, retailers cater to various budgetary constraints, ensuring customers can purchase without compromising their financial stability.
This, in turn, fosters customer loyalty, as individuals are more likely to return to a retailer that understands and supports their financial needs.
The Impact of Retail Finance on Retailers
Much like any retail solution, financing benefits both the buyer and the seller. Here are some of the benefits for retail businesses.
“Offering flexible payment options empowers our shoppers to make significant purchases without hesitation, which actually strengthens loyalty to our brand. Retail financing isn’t just about transactions; it’s about creating meaningful relationships and ensuring our customers feel supported and valued throughout their buying journey.”
Robert M. – Green Valley Furniture –
1. Boosting Sales and Average Order Value
Financing platforms can significantly boost sales for businesses. When customers can spread the cost of their purchases, they are more likely to buy higher-ticket items. Additionally, the availability of credit facilities often increases the average order value, contributing to a retailer’s overall revenue.
Some retailers said that adding financing options increased their average order value by 30%.
2. Enhancing Customer Loyalty
Offering financing options enhances customer loyalty. When consumers can manage their finances effectively and make purchases without straining their budget, they are more likely to return to the same retailer for future transactions.
This loyalty can result in repeat business and positive word-of-mouth referrals, further expanding the retailer’s customer base.
3. White Label and Customization
Many platforms often offer white-label solutions, allowing retailers to customize the financing options according to their brand image and customer base. This customization ensures that the financing options align with the retailer’s offerings and appeal to their target demographic, further enhancing customer engagement.
Types of Retail Finance
The idea of retail financing isn’t very new. Nonetheless, it has evolved and developed over time. Here are the most significant types to consider in the current retail environment:
1. Credit Cards
Traditional credit cards remain a popular form financing, offering customers the flexibility to make purchases and pay off the balance over time. Many retailers partner with credit card companies to provide branded cards with exclusive offers, further incentivizing customer spending.
Consumers often see this with big box stores like Macy’s or Best Buy. These retailers incentivize customers to open store credit cards with zero interest periods and storewide discounts or instant cash back.
2. Retail Finance Platforms
Dedicated financing platforms specialize in providing tailored financing solutions to retailers. These platforms offer various options, from interest-free finance offers to longer-term credit facilities, enabling retailers to cater more effectively to the diverse needs of any customer base.
For example, PayPal Credit allows users to make purchases at any merchant that accepts PayPal, both online and in some physical stores. With PayPal Credit, users can defer payments for their purchases, often with promotional financing offers such as interest-free periods, giving them the flexibility to pay off their balance over time. This service is actually the most popular of all retail financing options, with almost double the market share of its competitors.
3. Spread the Cost Models
Spread the cost models allow customers to divide their purchases into equal monthly installments, making budgeting and planning their expenses easier. Retailers offering this type of finance can attract price-conscious consumers looking for predictable payment plans.
Three major players in this realm are Affirm, Afterpay, and Klarna. These companies offer consumers “buy now pay later” (BNPL) purchase options. Retailers can incorporate such platforms into their payment options to give their customers more flexibility. Some studies show that these retail financing loans can increase conversion rates by as much as 30%.
Conclusion: Point of Sale and Retail Financing
Retail finance has revolutionized the way consumers shop and manage their finances. By offering flexible financing options, businesses can expand their customer base, increase sales, and foster long-term customer loyalty.
KORONA POS supports flexible payment financing solutions by providing a hassle-free experience for customers and retailers. With quick and efficient credit checks, customers can receive approval for retail financing options within minutes, ensuring a smooth and expedited checkout process.
To learn more about KORONA POS retail financing options, click the link below!
FAQs:
Retail finance, encompassing credit facilities, interest-free offers, and spread-the-cost models, empowers consumers to manage their finances effectively while boosting sales and customer loyalty for retailers. Businesses enhance customer satisfaction and encourage repeat purchases by providing flexible payment options for high-ticket items. Retail finance platforms streamline the process, integrating seamlessly at the point of sale, creating a win-win situation for retailers and consumers in the competitive retail market.
Retail finance companies are specialized financial institutions that offer various financing solutions, such as credit facilities and interest-free payment plans, to retail businesses and their customers. These companies enable consumers to spread the cost of their purchases over time, making high-ticket items more accessible and affordable. Some examples of companies offering these services include Affirm, Klarna, and Afterpay.
An example of retail finance is the “buy now, pay later” (BNPL) model offered by companies like Afterpay and Klarna. In this system, customers can make purchases and defer payment, either by spreading the cost across several installments or by delaying the payment to a later date, often without incurring interest. This approach provides consumers flexibility and convenience while encouraging higher spending and customer loyalty for retailers.
