October 10/17, 2016: Volume 31, Number 9
By K.J. Quinn
Retailers are challenged to increase awareness of opportunities to finance flooring purchases, which plays an important role in the shopping experience. Promoting these programs is a necessity during a time when most customers conduct research, including credit options, before stepping foot inside the store.
“Our retailers continue to tell us that offering consumer financing in today’s retail landscape is a must,” said Susan Hahn, director of new business development at Mohawk, which offers a private-label credit card. “Finance plays a major role in the consumer’s decision-making process and is a determining factor in where they shop and ultimately buy.”
More importantly, the availability of credit programs raises the potential for larger purchases. “On average, a finance transaction is eight times the size of an order paid in cash and four times the size when paid with a credit card,” said Aaron John, director of flooring network and retail programs at Shaw.
The proof is in the pudding, as evidenced by Synchrony Financial’s Fifth Annual Major Purchase Consumer Study. The Synchrony cardholders survey, conducted June to July 2016 by a third party, found 65% of respondents in the flooring category “always” seek promotional financing options when making a major purchase while 72% indicated promotional financing makes large purchases more affordable. “Research snows 32% of flooring shoppers who are not Synchrony Bank cardholders reported awareness of financing options, compared to [58%] last year, indicating retailers need to do better at integrating credit information across multiple channels,” said Glenn Marino, Synchrony executive vice president and CEO, payment solutions. (Both Shaw and Mohawk work with Synchrony Financial to provide credit options to the consumer.)
As consumers become more decisive, they may be influenced by the amount of information found during their research process. “Consumer financing should be part of your consistent messaging in all advertising mediums, whether traditional or digital,” said Keith Spano, president, Flooring America/ Flooring Canada, a Manchester, N.H.-based retail group. “Obviously, the best scenario occurs when—through our advertising—a customer comes onto our site and gets approved online for a Flooring America/Canada credit line.”
The consideration cycle for flooring shoppers is significantly shorter—dropping from 90 days in 2015 to 67 days this year, according to the study. As a result, dealers are encouraged to integrate credit and financing offers early and often, especially on their websites. “[This] makes it easy for flooring shoppers to find the information they are looking for during their search and can help ensure a flooring retailer is part of the customer’s consideration set,” Marino said.
Communicating the availability of financing consistently across all marketing channels is important and helps build greater awareness among flooring shoppers. “Using Facebook, websites, radio, mailers, banners, TV and newspaper advertising to promote our branding shows our customers we are consistent with our ability to finance effectively,” said Tom Garvey, president and CEO, Garvey’s Flooring America, with locations in Northumberland and Bloomsburg, Pa. These marketing efforts are successful, he said, noting approximately 30% of business from purchases financed over 12 to 24 months.
Jim Jensen, owner of Carpet Mill Outlet Flooring Stores, Denver, cites the importance of promoting credit opportunities through a variety of media. “We have found success with web and social promotions along with salespeople and POP materials. When you add mentions in the mass media like broadcast TV, cable and radio, we find the blanket coverage of all available media the most effective approach.”
The vehicles retailers employ to promote financing options are ever changing. “Much of the traditional ways of advertising, like newspapers and inserts, do not work as well as they did years ago,” reports Tom Urban, general manager, Great Lakes Carpet & Tile, with three locations in central Florida. “Finding ways through social media and in-store events can be challenging.”
The survey reports roughly two-thirds of flooring shoppers conduct research through search engines, the retailer’s website and manufacturer sites. Another 34% also leverage third -party online review sites. “Integrated campaigns across email communication and retail site advertising also reinforce dealer participation and broader brand messages to help build incremental awareness among consumers,” Marino said.
All of which makes it important for credit options to be readily visible with all product specials, sales and promotions. Approximately two-thirds of flooring shoppers decide on their payment method before entering the store to buy, an indication salespeople must be prepared to address queries on financing options. “Sales associates are always asking for payments or deposits from consumers and need to make sure financing options are offered right from the beginning,” Urban said.
While prime lending offers help lure customers inside the store, educating consumers about how financing options can increase their buying power is an integral part of the selling process. “Proper training of your staff, coupled with ensuring they offer financing at every customer touch, is crucial to any credit program’s success,” said Michael Fredricks, senior vice president of business development at Fortiva Retail Credit.
Lending plans range from private-label credit cards, deferred payments and same-as-cash, which provide consumers with low monthly payments and extended financing. “We have seen retailers creating a buzz to drive traffic in the door via extended deferred interest periods—no payments for ‘X’ amount of years, product discounts [such as] ‘buy one room, get another room free,’ seasonal messaging, etc.,” Fredricks said.
It’s not uncommon for shoppers to leverage credit to upgrade to better quality products or purchase additional flooring. The study found cardholders spend an average of $416 more than non-cardholders. “The fact remains, when a customer engages with our consumer financing, she’ll buy better product than she anticipated, or will purchase more product for more areas of the house than she originally planned,” Canada’s Spano said.
Financing plans make it easier for most consumers to spread out payments for their flooring purchase over a number of months while helping dealers create a platform for building their business. For example: Great Lakes’ Urban recalled a situation involving a couple who initially chose a one-year, no-interest financing option to purchase carpet for their master bedroom. “I also mentioned to them that I had the measurements for the other rooms to see if they were interested, at that time, to do more flooring. They said no, but they would keep it in mind for possibly later next year.”
Fast forward 45 days later, Urban said the couple called after receiving their paperwork from Synchrony and decided to purchase the rest of the flooring that was measured. “My original order was for $1,138, but the last invoice was $2897.30,” he noted.
While there is no one-size- fits-all credit program, lenders can recommend an approach that fits a retailer’s sales model and provide assistance for optimizing results. “Synchrony Financial’s marketing teams understand flooring shoppers’ path to purchase and work with flooring retailers to help build customer awareness across multiple channels, including integrating financing options with online advertising, retailer site finance landing pages, print advertising, retailer POP materials, and any radio or television advertising,” Marino said.
Fortiva’s retail credit program allows participants to close one out of three customers they are losing today. “[This] equates to a 10% to 20% increase in financed revenues to your bottom line,” Fredricks explained. “This simultaneously promotes employee retention with higher sales commissions and increases customer satisfaction and loyalty.”