Increasing sales in a declining retail sector
Posted on in Cycles News
Businesses with FCA authorisation sell five times more than those without.
After a winter of slowing sales in the cycle trade, independent retailers are finding it harder than ever to generate sales.
As customers grow more cautious, they are increasingly looking at ways to get the products they really want for less. Today's consumers are actively seeking out shops that offer retail finance, an area which continues to grow despite declining sales elsewhere.
According to the Bank of England, demand for consumer credit has never been higher, and PwC says that British consumers show more credit confidence now than at any point since its survey began in 2009. Consumers aren't scared of credit so retailers certainly shouldn't be either.
It is often reported that "customers only want interest free credit" however, recent figures show that 20% of all loans are interest bearing and this has grown by 6.6% from 2016 to 2017. Customers are often only offered 0% finance as the retailer hasn't considered other options, however many customers would prefer an interest-bearing loan if it allowed them to spread the cost over a longer period of time and in doing so resulted in a lower monthly repayment figure.
By offering your customer a choice of short term interest free or longer-term interest bearing options, they can decide for themselves which is best for them and businesses can maximise their sales potential.
Interest free credit is a great way to attract the attention of potential customers, however the businesses which have the most success with finance use minimum spend thresholds to allow customers to access longer term interest free credit or move to interest bearing credit over 24 months.
These strategies are supported by the fact that businesses who offer interest bearing finance and terms longer than 12 months (by having FCA authorisation) sell over 5 times more on finance per month than businesses who don't!
Customers are becoming much more aware of shopping to their monthly budget when buying on finance, so retailers should take advantage of this by displaying monthly repayment prices whenever possible. Offering 15.9% APR over 48 months not only allows retailers to promote the lowest possible monthly payments, but also means retailers can offer finance on items with tighter margins since there are no subsidies involved.
Due to changes made by the Financial Conduct Authority (FCA) in recent years, costs involved in getting authorised (previously known as a Consumer Credit Licence) have dropped dramatically and you can now become authorised for just £100 with an annual fee from c.£150. ACT members are also offered support through the FCA authorisation and reporting processes.
To book in a call to run through the application process or to discuss FCA authorisation give the ACT a call today on 01273 427 700 or email info@theact.org.uk.
If you don't currently offer retail finance then we can also discuss the criteria to get started - get in touch today or click here to find out more.
