The GE Money “America’s Carpet Card” program.

By Sarah Zimmerman
There are numerous advantages to using promotional credit in flooring purchases, according to Greg Pittman, vice president, sales and flooring for GE Money. Today’s economy is slacking with consumer budgets stretched thin and competition for customer’s disposable income held fierce between flooring retailers. So, how and why should shoppers use financing options to help them get the home improvements and flooring of their future today, and who’s offering what?
 
Why buy with credit?

According to a recent Harvard Joint Center for Housing Studies report, while the percentage of homeowners making improvements has declined since 1995, top home improvement spenders have increased their spending levels from an average of $5,800 in 1995 to $9,300 in 2005, and it just keeps growing.

“When partnered with the right provider, flooring retailers are able to level the playing field with indirect competitors like furniture and electronics dealers as well as home centers who typically offer promotional credit to all consumers,” Pittman said. When credit is offered to everyone regardless of perceived need, he explained, flooring retailers are able to increase profitability by doubling or even tripling average ticket sizes and up-selling consumers to higher margin products.

However, Pittman added that credit also works for the customer allowing her to expand purchasing options. “For consumers, a dedicated line of store credit helps them dream bigger without tying up other credit cards or savings, which may be needed for emergency or day-to-day purchases. Promotional credit allows smart money managers to protect cash flow while leveraging the bank’s money.”

It also increases buying power for other consumers while providing access to a variety of promotional terms and special offers, Pittman noted.

Lisa Ownby, director of marketing services for Mohawk, added that using extended financing allows the customer to spread the cost of a project out over time. “When a consumer takes advantage of a financing offer such as six or 12 months no payment options, she gets what she really wants instead of what she can actually pay for at the time of purchase.”
 
What’s out there?

Scott Humphrey, marketing manager for Shaw Flooring Alliance (SFA), said promotions are used throughout the year to spark consumer interest, and both manufacturers and dealers drive these programs. “Credit promotions are often attached to specific product categories to drive business in areas where we are down. For instance, a promotion might buy down the typical rate for 12 months no pay same as cash, but only on 4- and 5-Star hardwood products.”

Shaw’s Blane Haywood, director of retail marketing, added, Shaw holds two large credit promotion events each year—Spring Sale Event and Fall Flooring Days—but focuses on offering customers credit options throughout the year. “Right now we’re taking an aggressive stance with SFA and Shaw Design Center dealers, offering them significant buy down rebates on discounted rates for all 4- and 5-Star carpet products.”

Wells Fargo recently introduced its Home Improvement Program, which is designed to assist homeowners in getting the most of their home improvement dollars by providing planning and budgeting tools and professional resources for their remodeling projects—including flooring. The program provides customers with home equity financing accounts several added benefits including: Discounts from specific dealers, warranty coverage extensions and an online resource center for home improvement.

“This is about banking in the 21st Century,” said Doreen Woo Ho, president of Wells Fargo Consumer Credit Group. “It’s not enough to just offer good financial products any longer. Customers want us to provide simple solutions that ensure they get the most from their financing.”

According to Mohawk’s Ownby, the company offers Mohawk Anniversary Month, a nationally advertised sale for Mohawk ColorCenter , Mohawk Floorscapes and Mohawk Floorz dealers. “We provide them a very aggressive finance offer, and the company will buy down the discount rate on Floorscapes, ColorCenter and Floorz branded hard and soft surface products, Mohawk Select rugs, Select Quick-Step and Congoleum products and more.”

GE Money provides retailers a variety of simple and easy-to-use private label credit programs for consumers and other business customers, with credit limits up to $100,000. “Over the years, we’ve seen a trend in consumer offerings toward longer-term promotional credit,” said Pittman. “Some of the most popular terms have been 12 and 18 months no payment/deferred interest.”

The reason for this, he noted, is that deferred interest enables a customer to make a flooring purchase without incurring any finance charges if they pay off the sale amount before the promotional term ends.

Credit is no longer aimed at lower-income customers. “The biggest misconception is that the more affluent customers don’t want or need credit,” said Ownby. “Today’s consumer expects to be offered credit and views it as one of the many services a business should provide in order to win her ticket.”

Everyone is using credit, especially in times of tough economic conditions. “In the balance of 2007, we’re focused on innovation and developing imaginative tools that help our customers drive growth for their businesses,” said Pittman. “Promotional credit can be a powerful tool for retailers to use with all types of consumers to increase brand loyalty and sell higher margin flooring products.”