Article Number : 1395 |
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| Date | 10/12/2006 11:55:30 AM |
| Written By | LGM & Associates Technical Flooring Services |
| View this article at: | //floorbiz.com/BizResources/NPViewArticle.asp?ArticleID=1395 |
| Abstract | By Louis Iannaco In recent years retailers are getting more involved in using credit in their businesses. Many are seeing that being able to offer special deals to their customers as another way to make a profit, which is obviously why they are in business to begin with... |
| Article | By Louis Iannaco In recent years retailers are getting more involved in using credit in their businesses. Many are seeing that being able to offer special deals to their customers as another way to make a profit, which is obviously why they are in business to begin with. And when the competition is selling electronics and other desirable, high- tech items, sometimes a flooring dealer needs every advantage he can get in attracting the consumers’ attention. “We like to leverage credit as a differentiator,” said Gary Cissell, director of flooring for the Nebraska Furniture Mart. “We like to provide the customer with a compelling offer, and add credit as the difference maker, hopefully pushing her to make a major purchase that could just as easily be postponed.” According to Mike McAllister, vice president of marketing for Beaulieu of America, “there is a big difference between types of credit offered. If one is talking about bank cards (Visa, MasterCard, etc.), I believe most retailers already use these. The problem with bank cards is that everyone has a credit limit and in ‘live for today USA’, most people continually bump the limit. “For the flooring retailer to take advantage of credit he needs to offer a private label credit package,” he explained. “This would establish a new credit line for the consumer with a card that could be used only at the issuing retailer. The consumer signs the form, the retailer sends in the information to the credit company and; hopefully, a new credit line can be established in minutes.” McAllister goes on to mention that once the consumer has a new line of credit, she can be easily upgraded to a better, but more expensive product. “Oftentimes, the retailer can get them to add more rooms to their project or invest in add-ons. When the consumer upgrades it benefits everyone. The consumer is happy because she is getting a superior product and warranty that she may not have been able to without the credit program. The retailer is happy because he increased the amount of the ticket and was able to sell at a higher profit margin. The credit company is happy because it gets to finance the sale.” Mike Zoellner, vice president of marketing services for Mohawk Industries said, “a branded store credit card like Mohawk Credit has a number of advantages. First and foremost, studies show the average ticket sale with a branded store credit card is $2,600, compared to $600 for a cash sale or $750 for a bank card. Also, the initial purchase on a new private label credit card is typically even higher than the average ticket sale. Dealers can use store branded credit cards to increase credit options for some customers, and to increase cash management options for others. Many customers who may not “need” more credit will use store credit cards as a cash management tool, and are more likely to use private label cards for “same as cash” offers. They generally spend more as well. “Store credit programs also tend to create more loyal, repeat customers,” he added, “and they encourage new customers to buy. They also let dealers compete with other durable consumer goods that offer credit programs— electronics, appliances, furniture, and other items.” When asked what do credit companies do, aside from offering credit, to help dealers out, for example, education on how to use it, Zoellner answered. Mohawk provides a comprehensive program for its dealers that includes consumer education, salesperson training through Mohawk University, demographic information so dealers can target customers, open line of credit marketing, offers to pre-approved consumers, statement stuffers, and other advertising tools. Mohawk also establishes special promotional rates during the year to help the dealer drive store traffic.” Greg Pittman, senior vice president, sales, GE Money Sales Finance, said, “Today’s most successful flooring retailers see financing as a vital tool to sustain a competitive advantage. For example, with a private label credit card program, also known as a store branded program, the card itself serves as a powerful marketing tool and helps keep the retailer’s brand identity top-of-mind for the consumer. Dealers who offer private label credit programs often enjoy greater repeat purchases and brand loyalty with their consumers. “Of course, for financing to be effective it has to be communicated to customers. The customer needs to know how this service—financing—will make a difference for them. The answer is affordability. Financing is a service that the retailer offers that helps consumers get the flooring they need and want. From a business standpoint, financing is foundational to a retailer’s marketing plan. Smart dealers communicate to the consumer that financing can help them get the flooring they really want and fit within their monthly budget.” McAllister noted the benefits to the retailer who uses credit as: • Able to compete with other retailers in their market. • Can increase the amount of the ticket. • Can more easily upgrade the consumer to a better and higher margin product. • Can tie a private credit promotion with their advertising. • Can use a private-label credit program to offer “sameas-cash” promos. • Can give consumers reason to buy “Now,” and • Can give the consumer a reason to come back to his store at later date. Said Cissell, “We provide our own credit. We spend extensive re-sources educating all staff, sales to cashiering on the benefits our credit plan offers.” He also mentioned some other unique ways dealers are using credit today. “I see some very long term financing offers, but I don’t believe the consumer is naive enough to believe them. Stair step offers, the more you spend the longer the financing offer.” Pittman commented, some of the smartest consumers use promotional credit and extended terms and promotions as a way to pay for their purchase and manage their money. “Dealers are responding to these money-managing consumers who are typically eager to ‘spend someone else’s money’ at no cost and proactively inquire about financing if the subject isn’t introduced. “As a result, we’ve seen a shift toward more sales reps bringing up the topic of financing early in the sales presentation to every customer. This way, the customer does not feel as though he or she is being ‘closed,’ and any discomfort with the topic is completely diffused. It also helps change what is considered ‘affordable’ in the mind of the customer by providing greater buying power. “Financing can make the entire project more affordable and enable the customer to select preferred upgrades and materials,” he concluded. “It helps the customer feel more comfortable and in control, not as though they are being sold.” |