By Joseph Dobrian, Contributing Editor
HIGH POINT — Furniture sales are ticking up in some American markets, due in part to short supply of homes for sale and high mortgage rates. Homeowners for whom selling and moving isn’t feasible sometimes choose to upgrade their interiors instead, and they often need to finance big-ticket items like beds and dining sets.
Several providers of consumer credit and/or lease-to-own solutions weighed in on how the difficult housing market is impacting consumers’ need for (and use of) financing of big-ticket items such as furniture. They note that retailers may be able to attract interest-weary shoppers by offering more attractive financing options.
Ryan Slobodian, executive vice president of Snap Finance, noted that householders are constantly replacing furniture in any case, but with housing in short supply, demand for furniture may rise, he said, even though inflation has put upward pressure on furniture prices.
“That means more demand for financing,” he said. “Affordability of product might take precedence over features. Customers are noticing ‘shrinkflation,’ that is, the same price being charged for less value. But furniture has a finite lifespan; it has to be replaced. Retailers, fortunately, can find more opportunities to provide financing.”
Slobodian urged retailers to stay aware of the “three Ps”: price, product and payment. He noted that “late charges” have recently been cut through legislation, so lenders who are late-fee-dependent may have to raise interest rates to maintain profits. He urged retailers to stay on top of developments in preparation for rising sales at back-to-school time.
Limited-time offers
Danielle Vincent, head of retail card services at TD Bank, agrees that the housing market is impacting consumers’ need to finance furniture. She said a recent TD Bank survey conducted at High Point Market showed that living rooms and kitchen/dining rooms are the top two drivers of retail furniture sales.
“To navigate this challenging housing market and interest environment, retailers need to be more strategic,” she said. “They can’t rely only on ‘always on’ campaigns. We’ve found success by combining benefits, such as discounts and long-term financing options, and making these offers available for a limited time.
“Overall, we view our business as a team sport,” Vincent said. “Retailers need to work with their financing partners to leverage the data they possess to drive existing customers back in the store to purchase again. For example, perhaps a customer decided to not purchase the matching ottoman during the first purchase but might feel more optimistic a few months later. Communication between the retailer and the financing provider is critical.”
Critical option
“Promotional financing is critical for most retailers,” agreed Vicki Turjan, president and COO of Versatile Credit. “Options such as zero-interest financing can be pivotal in drawing in customers and closing sales. However, relying on a single lender is often insufficient to meet the diverse needs of all your shoppers once they are in the store.
“To cater to a full spectrum of shoppers, it’s important to partner with a range of lenders — from prime to near-prime and no-credit-needed options — to build a program that offers flexible and responsive financing solutions to accommodate shoppers. Versatile has built an unrivaled network of lenders, enabling retailers to build these comprehensive, full-spectrum programs.”
Versatile’s self-service application helps merchants guide customers through a seamless pre-qualification process and presents a variety of financing options tailored to their needs and budgets without affecting their credit scores, Turjan explained.
“Shoppers can preview their estimated payments and terms within the application, giving them a clear understanding of their options before accepting an offer,” she said.
‘Transparent path’
Reid Bork, chief revenue officer at Katapult, said his lease-to-own operation is not tied to interest rates, and thus offers a strong option in hard economic times. Katapult, he explained, offers a transparent path to purchasing durable goods, with clear terms and no hidden fees.
“Interest-weary shoppers are understandably seeking out deals and flexible payment options,” Bork said. “This is where Katapult and our merchant partners come in. Many of our partners are strategically running promotions on furniture, making these essential items even more affordable. By working closely with our retail partners, we can leverage these events in our own targeted marketing and amplify the reach of their marketing campaigns.
“Our goal is to help budget-conscious consumers find the deals they want and give them a flexible LTO option to fit their budgets.”
Time for a refresh
Curtis Howse, executive vice president and CEO of Synchrony, agreed that the current housing market has led to a slowdown in homebuying and, consequently, less need for new homeowners to start from scratch furnishing their homes.
Since more people are staying put, many are seeking to refresh the look and feel of their current homes with new furniture and other home décor.
“Consumer financing for big-ticket items like furniture gives homeowners greater buying power to make those purchases, despite broader economic conditions,” Howse said. “Consumers are more likely to seek financing options that offer flexibility and choice.
“Based on the successful practices of our partners, there are several strategies that furniture retailers should consider implementing to attract interest-weary shoppers and grow their businesses, such as offering promotional financing options, promoting flexible payment plans, and highlighting ease of application and approval processes.”
Omnichannel options
At ChargeAfter, Executive Vice President Mark Denman advised that, to attract shoppers who are put off by today’s interest rates, retailers must provide a fast and seamless omnichannel financing offering at all points of sale, that covers the entire credit spectrum and clearly communicates those options.
“ChargeAfter data show that merchants who adopt a multi-lender waterfall financing model with solutions for prime, near-prime and subprime shoppers achieve up to 85% approval rates,” he said. “Retailers should integrate multiple lenders that cover the entire credit spectrum and offer customers personalization and choice through different financing products.
“Of course, retailers need to communicate to buyers that financing is available within the shopping journey. For example, retailers can add promotional widgets on their e-commerce websites, embed financing into the checkout process and invite customers to apply for pre-qualification, which can also be applied in-store. In-store signage with QR codes enables customers to apply for financing on their mobile devices.”