“These days are very special for our business as we celebrate the relationships we build with our customers over the rest of the year, and look to engage many of our suppliers in the stores for these days so they can experience first-hand the feedback from our valued customers.”
Smith says the relationships between H&J Smith and its cardholders are so long-term and significant that in most instances, they’re generational. This gives the customer a sense of ownership of their card, and of their account with H&J Smith.
“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.”
Smith declined to release specific figures illustrating the charge card’s value to H&J Smith, but confirmed that cardholders’ annual spend was generally much higher than that of non-card customers. He noted that the share of business that went on the charge card varied significantly from category to category as the customer may use different payment methods depending on how discretionary their purchase was; what the occasion was; and the value of items being purchased. The ratio of card use is lower in newer markets, Smith says, but H&J Smith has been able to significantly develop this aspect of the business where it has specifically targeted it, as with the recently-acquired Dunedin store.
Asked about any downsides to running the card programme, Smith said H&J Smith managed all of its debt-recovery processes with a personal touch, and could usually find suitable solutions for any difficulties with customers.
He also spoke of the financials, saying funding the charge card ledger is an important part of H&J Smith’s overall funding, so this could add to the complexity of normal bank funding as it is a different type of funding.
Smith & Caughey’s and Ballantynes offer comparable programmes – Smith & Caughey’s offers a competitive 9 percent annual interest rate – but possibly the best-known in-store finance scheme is the Farmers Finance Card, operated by Flexi Cards. Unlike most other store cards, this is a credit-card-style scheme which is widely accepted at more than 12,000 retailers besides Farmers. As Farmers is a privately-owned company, like H&J Smith, it’s not required to release any details about the card and its performance.
A listed company like Smiths City, however, must open its books for the NZX, giving us a limited peek at Smiths City Finance. This wholly-owned subsidiary of Smiths City Group was founded in 1988 and boasts a commitment to “playing fair”. Smiths City owns its own loan book and while it’s changed funding partners once or twice, it’s always retained control of its financial services.
While Smiths City Group has chosen not to release details of Smiths City Finance’s performance, what it has said about its finance arm is that it provides “fuel for growth”. All profit earned from the division is retained within Smiths City Group, chief executive Roy Campbell said the company’s report for the six months to October 31, 2016.
“Retaining [Smiths City Finance] as a division is an aspect of Smiths City Group that is a unique, and I believe, envied advantage we hold over our competitors,” Campbell said. “Our launch of interest-free terms in July of this year has increased the attractiveness of our finance offer in the market and seen strong increases in profitability as a result. Our focus in 2017 will be to continue to enhance and expand the finance products we offer across the market.”
To facilitate this planned growth, Campbell says Smiths City has entered into a committed terms sheet with ASB to refinance the existing debt of Smiths City Group and its finance division. This change of provider from ANZ has resulted in savings for the group via improved interest rates and better transactional processing, Campbell says.
Speaking to NZ Retail, Campbell highlighted how retaining full control of Smiths City Group’s financial services has allowed the company to create a consistent customer experience across every part of the business.
“It’s always been [about] our relationship with our customers and finance is a natural extension of that.”
Like Smith, Campbell spoke of generational loyalty linked to in-store finance options, telling of how he once encountered a customer in the South Island who reported that both her mother and daughter had finance agreements with Smiths City. This represented three generations of a single family which had continuously used Smiths City Finance as part of their purchasing behaviour.
“We have finance customers that have been with us for many years, and families,” Campbell says.