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Myth busters: Credit misconceptions

July 7/14, 2014; Volume 28/Number 2

Why retailers increase sales with financing

By Jenna Lippin

Screen Shot 2014-07-14 at 11.58.03 AMDespite the popularity and widespread usage of credit by consumers and utilization of credit programs by most businesses, there are flooring dealers today who resist embracing these payment options.

Believe it or not, one of the credit myths to which skeptical retailers subscribe is that consumers are no longer utilizing credit. However, Mike Zoellner, vice president of marketing services for Mohawk, refuted this assumption. “Over the last 18 months, consumers have started using credit more regularly as the economy continues to rebound,” he said. “Research shows that a strong credit offer attracts customers. It drives store traffic as well as influences the entire buying process. Additionally, it has been proven that consumers are willing to spend more and upgrade their floors when they know there is a good consumer financing opportunity up for grabs.”

In fact, GE Capital Retail Bank (now operating as Synchrony Bank) reported that 72% of cardholders actually spent more on their purchases as the result of financing. Eighty-three percent of cardholders said having financing available influenced their final choice of a flooring retailer, meaning a credit program is a likely way of attracting more business.

Credit also helps flooring dealers maintain a competitive edge. By offering private-label credit cards, Zoellner explained, independent retailers are able to offer extended financing at competitive rates usually available only from big box retail stores. “These rates level the playing field by allowing dealers to advertise and promote at the same level as the larger home centers.”

Brian Copps, industry vice president, flooring, GE Capital Retail Bank, also noted how credit and financing brings independent retailers to the same level on which larger operations conduct business. “A financing program puts flooring retailers on par with larger merchants, generates top-of-mind awareness and encourages the customer to come back more often and make referrals. When a consumer is approved and makes a purchase, retailers may use this information to cultivate relationships and repeat business with them in the future,” instead of going directly to big boxes.

Another credit myth is that private-label financing is an additive cost of doing business. “In these cases, retailers are forgetting they are already paying MasterCard or Visa to process that card,” Zoellner said. “If a customer uses her private-label store card, then there is no bank card cost. For example, if 6-month financing costs the business 2.5% to process and Visa costs the business 3% to process, it actually saves the retailer money.”

Of course, choosing the right financing provider is a key part of the process. Companies like GE Capital Retail Bank help support retailers who may find themselves in a bind with their private-label programs.

For example, Zoellner noted that retailers mistakenly think they will be responsible if the consumer stops making her monthly payment. “While we cannot speak for all finance programs, Mohawk offers a non-recourse private-label program, underwritten by GE Retail Bank, which eliminates the store’s exposure and puts the risk back on the bank.”

Banks like GE Capital help eliminate the fear that retailers and salespeople will find it difficult to understand and communicate information about stores’ independent credits programs. For example, GE provides a list of all special financing options and required consumer documents, making them easy to understand and follow, and offers detailed training via its online Learning Center. “We also provide loyalty solutions and research and insights on consumer buying trends and the purchase journey,” Copps noted.

Some ideas resistant retails should consider:

•When applying for credit, a consumer provides information about herself such as her name, mailing address, phone number and email address. When a consumer is approved and makes a purchase, you may be able to use this information to cultivate relationships and repeat business in the future.

•More than 46% of those surveyed by GE Capital Retail Bank categorized their flooring purchases as a “need.” Customers who have a retailer’s credit card usually have room on their accounts for future projects, if they have moved or want to remodel an additional part of their home or are looking to upgrade to a better model— all top purchase triggers. Sixty-seven percent of GE cardholders surveyed indicated they are “extremely likely” to use the card again, and almost all GE cardholders are aware and open to using their credit card again in the future.

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How to successfully integrate financing into your business

Volume 27/Number 26; April 28/May 5, 2014

By Jenna Lippin

Screen Shot 2014-05-05 at 3.51.18 PMWith a promising economy prompting consumers to get out and buy, many are looking—and are encouraged to—spend “other people’s” money. Retailers need to be ready for the release of that pent-up demand, and with that comes providing credit and financing options to help seal the deal.

“[Credit utilization] absolutely correlates with the economy being up,” said Keith Spano, president of Flooring America. “During the recession you heard everywhere that credit is bad. People have come around, credit has eased a little bit, and shoppers have more control. Consumer debt is at a low, so people have a different mindset. The smart consumer is going to use someone else’s money, especially when it’s free.” Continue reading How to successfully integrate financing into your business

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GE spinning off retail financing unit

Screen Shot 2013-11-18 at 2.41.46 PMFairfield, Conn.—General Electric Co. plans to spin off GE Capital through an initial public offering. 
The unit provides store credit to many retailers and is prominent in the floor covering industry.
 GE said it plans to file with the Securities and Exchange Commission in the first quarter of 2014. Continue reading GE spinning off retail financing unit

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Consumer Research: GE Capital study outlines digital path to purchases

July 22/29, 2013; Volume 27/Number 7

81% research online before visiting store

Screen Shot 2013-07-29 at 12.10.49 PMPatience and the pursuit of information pay off, according to GE Capital Retail Bank’s (GECRB) second annual Major Purchase Shopper Study. Empowered by technology, flooring and other contributing factors, large-ticket shoppers extensively research and compare prices and financing offers before they make any major purchases. Continue reading Consumer Research: GE Capital study outlines digital path to purchases

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Financing encourages consumers to buy now

Volume 26/Number 25; April 29/May 6, 2013

By Jenna Lippin

Spring is one of the most popular seasons for home remodeling and rejuvenation. As such, it is a time when manufacturers and retailers stage promotions with the intent of incentivizing the consumer to purchase.

One successful strategy is offering special financing, which allows consumers to spread their payments out over a period of one to four years. Not only does this boost foot traffic, it also drives higher average tickets. Customer satisfaction and referrals also increase when payment options are available. Continue reading Financing encourages consumers to buy now

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Business Enrichment Center to debut at Surfaces 2013

Surfaces 2013 is introducing the Business Enrichment Center (BEC), a dedicated area on the show floor offering attendees a focused environment for education, networking, and socializing.

Within the BEC, sponsored by GE Capital, attendees will have the opportunity to sit and relax in a hip and comfortable atmosphere and hear from key industry speakers on the Education Stage as they share advice and ideas on topics retailers can benefit from and have the ability to easily and effectively implement in their business. Continue reading Business Enrichment Center to debut at Surfaces 2013

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Business Enrichment Center (BEC) to debut at Surfaces 2013

Surfaces 2013 is introducing the Business Enrichment Center (BEC), a dedicated area on the show floor offering attendees a focused environment for education, networking, and socializing.

Within the BEC, sponsored by GE Capital, attendees will have the opportunity to sit and relax in a hip and comfortable atmosphere and hear from key industry speakers on the Education Stage as they share advice and ideas on topics from which retailers can benefit and have the ability to easily and effectively implement in their businesses. Continue reading Business Enrichment Center (BEC) to debut at Surfaces 2013

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Credit gives retailers a boost in sales

By Emily J. Cappiello

One of the most important ways to increase floor covering sales is credit. When the economy dipped, consumers had a hard time getting credit, but now that consumer spending has increased, credit lenders like GE Capital, TD Retail Card Services and Wells Fargo are ensuring retailers have the means to create blossoming sales.

Private-label credit cards are one way retailers offer credit to consumers. “It gives the consumer an unencumbered line of credit that doesn’t impact her ability to use her Visa/Mastercard/Amex in her daily life,” said Marc Sczesnak, president of Mahwah, N.J.-based TD Retail Card Services, the private label credit card division of TD Bank N.A. “A private label card also provides lower-cost financing and longer-term payment options than a bank card.” He added that financing plans, such as no-interest programs from six to 60 months, can help a consumer pay less in interest and obtain a manageable monthly payment that enables her to make larger purchases. Continue reading Credit gives retailers a boost in sales

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J.J. Haines rockets to new heights

by Emily J. Cappiello

Baltimore—It takes more than a challenging economic climate to slow the Haines Loyalty Club’s momentum. The retail group arm of the nation’s No. 1 flooring distributor saw its membership increase from 272 to its current 288, according to Scott Roy, vice president of sales, marketing and customer service, and those members grew their businesses a collective 4% compared to the distributor’s retailers outside the program, who saw declines of about 5% in overall business. Continue reading J.J. Haines rockets to new heights