Online purchases using retail finance are growing at a rate of 39% per year and 9.5 million Brits say they avoided buying from retailers who don’t offer this. That’s why you need to make sure your alternative payment options at checkout are working hard to convert browsers into buyers.
You may already have a point-of-sale finance partner and be looking to add additional payment options for your customers or wondering whether the partner you have now meets all of your customers’ needs. Alternatively, this could be the first time you’re looking to provide customer finance in your eCommerce business. Whatever your situation we’ve rounded up ten things you should consider in your decision-making process, from partner flexibility and scalability to the cost to both you and your customers.
1. What is retail financing?
Retail financing (sometimes also known as customer financing) makes it easy for customers to shop by allowing them to spread the cost of their purchase over a period of time. Financing can be offered through the business itself or there are companies like DivideBuy which can plug in seamlessly to your online shopping cart and offer an interest free credit solution.
There are several benefits to offering retail financing at the point of purchase including boosting sales, increasing conversions, improving customer loyalty, and driving repeat business.
2. Is retail financing right for your business?
Retail financing can be complex and it’s important to understand whether it’s the right solution for your business and your customers. Providing a finance option is an opportunity to convert ‘browsers’ into ‘customers’, especially when you’re selling high-cost items. From your customers’ perspective, it means those who may have been deterred by a large upfront payment can now be savvy with their savings and spread the cost of their purchase.
It’s proven that eCommerce retailers who introduce financing options at the beginning of the sales process can eliminate issues around a high purchase price, with point-of-sale finance helping to increase sales by around 32%.
3. Will your customers qualify?
Some interest free credit and buy now, pay later providers have high rates of refusal because the finance provider they use doesn’t take a holistic, rounded approach to applications. DivideBuy doesn’t rely on third-party lenders, instead taking on all the fraud and credit risk. Your customers’ current circumstances are taken into consideration and because DivideBuy’s unique credit solution is not connected to multiple lenders, up to 35% more consumers are accepted than with other credit providers.
4. Are there any spending requirements?
Make sure to check that each provider’s minimum transaction amount aligns with your products and average order value as some providers only offer financing to customers on purchases that meet a minimum threshold. At DivideBuy, credit is available on online orders from £50 to £6,000. While offering a finance solution has been shown to increase average order value, you need to make sure it’s aligned with your business and the cost of your products.
5. What’s the cost to your customers?
The interest, fees and terms offered by finance providers can vary quite a bit and many buy now, pay later solutions have unclear fee structures. To deliver the best experience for your customers and to encourage loyalty, offering an interest free credit solution with no fees is the best approach. It means the customer knows exactly what they will pay (the same price as the product is listed at) and there are no surprises later on.
6. Will your customers use financing options?
You know your customers better than anyone. Offering a retail financing solution only makes sense if you know your customers will use it. If the finance provider charges fees or doesn’t offer competitive or interest free credit, it’s likely your customers won’t be interested and may shop elsewhere.
With the use of customer finance on the rise, making sure you choose a solution that works for your customers (interest free and no fees) means you can provide them with great service and turn that browser into a buyer.
7. How easily does it implement with your website?
The best solutions are easy to implement, don’t involve a lot of training for your staff and provide a seamless customer shopping experience. The platform shouldn’t disrupt or interfere with the checkout process, but instead should integrate with your brand.
Look at other retailers who use the finance solution you’re considering and establish how it (positively or negatively) affects the customer experience. DivideBuy has a demo store to show you the customer journey, and how it complements the purchase process.
8. How scalable is the finance solution?
One of the benefits of offering retail financing is that it should help you increase sales and grow your business. Make sure the finance solution you choose can grow with you, whether that’s online, in your brick-and-mortar store or over the phone.
9. What is the cost of retailer finance solutions?
All third-party finance companies will charge retailers a percentage of each financed transaction. Compare costs and weigh these up against other features and benefits of their solution. Some may charge a higher percentage, but their acceptance rate or sales conversion rates are often higher, so your increase in sales can outweigh the initial higher percentage.
10. How flexible is the finance solution?
Some finance providers have limitations on what can be financed, sometimes based on the nature of the product itself or the value of the product. Check your options with the providers you’re considering and make sure this is aligned with your product offering, prices, average order value and what you think your customers want.
Before you commit to a new retail financing partner, evaluate whether your customers will benefit from the service – does it offer interest free credit, no fees and high acceptance rates? Whilst also weighing up the benefits to your business – easy implementation, scalability and flexibility.
If you have any questions or want to know more about DivideBuy’s interest free credit solution, fill out the form below and our team will be in touch to help guide you.