Cashflow isn’t just a key consideration for retailers – customers, too, must assess whether they have the resources to commit to a big purchase before swiping their card. Retailers can help them say “Yes”, and smooth out their own cashflow, by providing the right kind of finance.
Offering a mixture of finance options allows shoppers to choose which best suits their needs at the time, says FlexiGroup New Zealand chief executive Chris Lamers. FlexiGroup’s stable of finance products includes Q Card, a credit card which offers a minimum of three months with no payments or interest, and Oxipay.
Oxipay is a finance product that’s about giving customers the freedom to buy what they want immediately, and split the payments over four easily-managed payments.
“For retailers, you get that sale now,” says Lamers.
Lamers believes consumers are moving away from traditional finance products towards new products like Oxipay in search of transparency. By spreading the purchase cost over four instalments, Oxipay gives customers more control over their cashflow, and it’s an easier product to understand than credit cards, cash loans or lay-by arrangements.
“I think there’s a real move towards that certainty and empowerment,” Lamers says. “We’re going to see a big increase in people choosing fixed instalment payment options.”
Oxipay is backed by FlexiGroup, an ASX-listed Top 200 company that was founded more than 25 years ago. It launched Oxipay in July in response to demand from younger consumers for a flexible payments solution that allows them to be smart with their cashflow.
Lamers says each consumer will have a different “retail flinch point”, or a threshold at which their intended spend crosses over from being a discretionary purchase into what they’d consider a significant expenditure. The shopper’s perspective on spending isn’t necessarily proportionate to their wealth, but always reflects their attitude to value.
Some shoppers won’t bat an eye at goods under $1,000, but would consider a $5,000 home theatre system to be a big spend. For these people, Q Card will be an appropriate financial product as it will allow them to pay their purchase off over several years with a low interest rate.
Other shoppers will need finance to help them rationalise buying a $150 pair of jeans. Oxipay is ideal for shoppers with this mindset. Customers must be 18 or older to sign up, and they undergo a real-time instant credit check. Oxipay has set a $1,000 limit across five separate purchases, with each fortnightly payment limited to no more than $250.
“For retailers, Oxipay is kind of a no-brainer,” says Lamers. “They get the money, the consumer gets their goods, we take the credit risk.”
Another trend Lamers has noticed can be characterised as the “need it now” shopper. Impatience is often ascribed to Millennials, but fast deliveries and efficient service are now an expectation from all consumers.
“For us, it’s about saying, ‘How do you do that in a way that’s good for the retailer, good for the customer and good for us?’”
Oxipay can be integrated into retailers’ ecommerce platforms, allowing shoppers to get their finance in place and order with fewer steps. Customers can sign up for Oxipay or Q Card in-store using their smartphones in a process that takes approximately five to 10 minutes. Most will receive instant approval.
“People are impatient and we have the product to make that happen.”
Quickly-implemented finance products can be a big help for retailers who rely on time-bound sale promotions. Lamers notes that shoppers who intend to return to the store later when they’ve saved up for a product that’s caught their eye don’t always follow through.
“People are in a moment, and I know it, and everyone who’s ever sold anything knows it,” says Lamers. “They might come back later, or they might walk down the street and see something just as good.”
However, Lamers says both FlexiGroup and its retail partners also have a duty of care towards customers.
“Credit is a contract and you to have to take it seriously, but how do you balance making it frictionless and really easy with making it simple for people to understand what they’re signing up to?”
Retailers should not consider finance products to be simply a means to a quick sale, but as the start of a relationship between their brand, the finance provider and the customer, Lamers says. The right finance product can even facilitate the retailer in recommending the right product for a customer’s needs by allowing the shopper to invest in a higher-quality item that their liquid cash may not stretch to.
“A lot of people look at credit as being about ‘want’, but sometimes credit can be about need,” Lamers says. “Coming up to Christmas, it’s a big spending time, not everyone has the money.”
If shoppers commit to an Oxipay repayment schedule now, they’ll be able to spread out their payments across the festive season, rather than using up funds which may be needed for Christmas expenses later on. Retailers seeking to help shoppers say “Yes” to a significant spend should give the customer some options for how they can smooth out the payments over a longer period, says Lamers.
Data provided by FlexiGroup illustrates how well-suited these products are for Christmas shopping. In 2016, FlexiGroup saw more consumers using its Q Card product in the month of December than any other month – 50 percent more than average, in fact. Q Card customers also increased their frequency of transactions by 32 percent over the same timeframe.
FlexiGroup says that in the lead-up to Christmas, frequency of card use increases month on month from October onwards and spikes in December. In January 2016, the number of customers using their Q Cards dropped by almost one fifth following the Christmas season.
Lamers recommends retailers take the time to understand Oxipay, Q Card and any other finance products they offer before recommending them to customers, as it’s important the customer clearly comprehends the product.
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What does a high-value purchase look like at your store?
This varies from location to location, city to city, but generally in the last year it’s been couples wanting to buy a ‘his and hers’ electric bike.
Do you have any tips for helping shoppers say “Yes!” to a big spend?
Finance does go a long way to breaking down barriers around the cost of high-value items. When it’s broken down as a per week or per month amount, customers can get their head around this a lot easier.
Is Christmas a time when more high-value purchases are made by your customers, or is the distribution of these even throughout the year?
We tend to see a higher turnover gross dollar amount at Christmas, but a lower average transaction value compared to other times of the year. This is mainly because people will spend less on gifts for other people as opposed to big purchases for themselves.
How important is Christmas spending to your business’s cash flow?
It’s massive. It’s the only reason most retailers can survive year to year.
What are your strategies for coping through slow periods at other times of the year?
A structured marketing plan. Bringing certain products to the market at certain times of the year at the right price point.