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How to manage a responsible in-store finance offer

In-store finance can be a great source of business-boosting cash and a point of contact to improve customer loyalty, but serious consequences await those who don’t comply with regulations. We consider what retailers need to know about store finance.

The benefits to a retailer in offering a finance programme are numerous, says Joel Jeevaratnam, national sales director for Gem powered by Latitude. Gem powered by Latitude works with a number of prominent New Zealand retailers such as Harvey Norman, Noel Leeming and Freedom to offer store finance. 

A finance programme can act as the “catalyst” to a sale by offering the customer another way to pay, Jeevaratnam says: “Is there a portion of your product line that’s not shifting due to cost?”

Customers often enter a store with a budget in mind that’s based on their savings or the limit on their credit card, having done online research and developed a preconceived idea of what they’re going to buy. For example, Jeevaratnam says, a customer wanting to upgrade their kitchen appliances may potentially only walk away with a microwave oven, but dream of one day buying a new fridge and oven as well.

 If the retailer can offer that customer an attractive deal using in-store finance, Jeevaratnam says, the customer may agree to “realise their dream” right there and then, instead of saving up over six months for the additional items.

However, there’s a fine line between upselling and pressuring the customer into overcommitting, and Jeevaratnam says it’s important that the customer be made aware of their obligations. Gem powered by Latitude carries out credit checks and risk assessments to be certain loans are appropriate and relevant for the customer.

Finance programmes also represent a way for the retailer to forge a deeper connection with the customer and create greater loyalty.

“Instead of that sale being quite transactional, finance provides an opportunity for it to be more personalised,” Jeevaratnam says. “If we don’t know much about a business, the sale will be transactional and cost-driven, but if we know more, [it’s individual.]”

Southland department store chain H&J Smith runs its H&J Smith Charge Card in-house, and H&J Smith managing director Jason Smith says it represents a “special relationship” between the customer and the store. The company keeps the channels of communication open with its cardholders, inviting them to exclusive events seven times per year.

These relationships are so long-term and significant, Smith says, that in many cases they’re multi-generational.

“We look to engage the customer as early as possible to ensure we treat them appropriately in-store, as they frequent our stores often, and we see them as an essential part of our ‘raving fans’ – something every retail business needs to thrive.”

In his time in the market, Jeevaratnam says he’s seen a shift in perceptions around in-store finance programmes. It used to be that in-store finance was considered to be a service primarily used by shoppers who would have struggled to pay for their items traditionally, but now, he says interest-free loans mean the programmes are used by shoppers of all levels of financial capability to manage their cashflow in much the same way a business would. 

“Customers are very savvy these days.”

A good finance provider should act in partnership with the vendor, says Jeevaratnam. It should express this approach by providing adequate support and training so that the retailer can discharge their responsible lending obligations on behalf of the lender. 

Retailers should do due diligence on any prospective finance provider, says Jeevaratnam, but Gem powered by Latitude itself undertakes a rigorous and thorough due diligence on new merchants. This can include looking at their products, financial considerations and management, along with other relevant matters to ensure the company is comfortable that the merchant is able to offer its products in a way that’s compliant with the law.

At Gem powered by Latitude, the finance team provides its merchants with full training for all staff, including annual refreshers, and provides onboarding for each new staff member. It also offers a merchant support team, an online merchant portal with resources and business development managers on hand.

Five Days of Finance is sponsored by Gem powered by Latitude.

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