Andy Wallace, managing partner of point-of-sale finance provider Consumer Credit Solutions, explains how offering customers finance can help in tough market
The KBB market is undergoing a change. It’s partly a knock-on effect from a sluggish housing market, where fewer people are moving and immediately refitting their house.
People who want new kitchens, bedrooms or bathrooms find financing these improvements has become harder. Either they don’t have the money available or it’s tied up; or they have it, but there are competing claims on it. Their holiday, new car and home improvements funds are all taken from the same pot.
But it isn’t all bad news. With demands on the family home changing – children returning after university, or granny moving in – there is a market. There is plenty of interest, but even when they have money, home owners are looking for better value, and more financial protection. They often have to compromise on the dream.
It’s a commonly-held belief that customers purchasing high-end products don’t need help buying. But the same customers happily use finance to buy a new car. Furniture stores offer Buy Now Pay Later, or low-interest and interest-free loans, and most people have bought something using this type of finance.
Increasingly, KBB retailers are also offering credit, often using brokers who can negotiate better rates thanks to their bulk-buying power.
Very often, being able to offer attractive finance options is the difference between making and losing a sale, especially with big-ticket items, where it makes sense to spread repayments over a longer period to make it more affordable.
Most KBB retailers who use finance prefer to give home owners two credit choices – a low-interest loan and Buy Now Pay Later. Retailers make a contribution to these low-rate, ‘soft-sell’ options, as they want to make their margin on the actual product rather than the finance.
Taking just two loan options makes it easier for sales people to sell, and they can also use them for ad hoc tactical promotions, such as two years’ interest-free credit for home owners who buy in a certain month. For higher-end purchases, retailers can offer home owners unsecured loans of five to 15 years with a better rate than a mortgage.
Finance packages are typically tailored to the type and cost of products retailers offer, the home owners they target and how confident they are with selling credit.
Some sales people still avoid finance because they see it as a hassle. Working out designs, measurements and prices is one thing, but interest rates and repayment schedules are outside their comfort zone.
Retailers should ensure their chosen broker offers regular training, so their sales team are familiar with the figures and can concentrate on selling.
There are only a few credit brokers that serve the KBB market, but the number of retailers offering finance is growing. National and large independent retailers – including Avanti, Hammonds, Jacuzzi, Kutchenhaus, Siematic, Sigma 3 and Strachan – as well as smaller suppliers have recorded better sales and higher value orders using soft-sell finance, because their customers can buy exactly what they want, when they want it.
