Consumer credit demand keeps pace with product demand

By Joseph Dobrian, special for Furniture Today

HIGHLIGHTS – The economic effects of the pandemic, supply chain issues and proposed government spending continue to affect furniture retailing and consumer behavior, particularly with regards to buying furniture from home. credit. Are first and second tier consumer credit providers seeing many changes in the need for financing options or in the levels needed, as the country’s economic outlook remains volatile?

“While the pandemic initially put a damper on most travel and entertainment activities, we have seen consumers put their discretionary income into their homes, and there is still a strong demand in the furniture segment, for especially as the supply chain is working to catch up, ”said Valerie Greer, executive vice president and chief commercial officer of Alliance Data.

“When stores were closed at the start of the pandemic, consumers were forced to rely exclusively on digital channels,” she continued. “However, as things started to reopen, we saw a strong shift to omnichannel as customers used multiple channels to complete their purchase, often doing their homework online and ultimately buying in-store.

“For retailers and issuers, this demonstrates the importance of a clear, consistent and straightforward customer experience across channels and the need to capture, attract and educate consumers browsing online. Customers are always looking for financing to make their larger purchases, but they take steps to understand their budget and purchasing power before they visit a store. This is an important change that retailers need to understand. As customers become more comfortable with omnichannel purchases, they are also exploring alternative payment options, ”said Greer.

Record the volume of transactions

“Credit demand in the retail furniture industry peaked in the first quarter of 2021,” said Dave Caruso, commercial director of Fortiva. “Since then, the volume of requests has decreased slightly. While the volume of requests has decreased, delays in the delivery of goods have resulted in a record volume of transactions. We expect this trend to continue until 2022.

“The demand for second-look credit was also impacted by underwriting changes made by leading lenders at the start of the pandemic. Most major lenders have tightened underwriting, creating a wave of rejected applicants to second-tier providers. More recently, some of our retail partners have said that approval rates from top lenders appear to be on the rise as the industry continues to recover. “

Mike Rittler, head of retail card services at TD Bank, noted that furniture, lawn / garden items, jewelry and electronics appear to be particularly dependent on the availability of financing, especially for purchases of over $ 500.

“When it comes to supply chain issues affecting deliveries, financing becomes a more attractive option,” he says, “because you often don’t have to make a down payment and your invoicing will only take place. ‘at the delivery. Approved credit is usually sufficient to place the order, which is a greater benefit with today’s longer lead times.

Accessible credit

The COVID-19 pandemic appears to have caused consumers to spend less time in stores, Rittler added, making them more willing to pre-purchase through apps on their phones or computers. When the customer enters the store, the shopping experience continues seamlessly, with the furniture and consumer credit industries moving more towards automation and putting the buying process in their hands. client.

“When people couldn’t get to the stores, we had to improve our online game, and the retailers with the strongest online presence were doing the best, including fundraising,” he said. . “It is becoming increasingly important for us to adapt to the different needs of millennials and millennials. Millennials seem likely to shop the most over the next 12 months. When the price is right, they will take as much credit as possible.

TD Bank’s latest Retail Experience Index, a biannual survey that tracks shopping habits, reports that nearly half (46%) of consumers consider themselves more likely to buy from retailers that offer a variety of options financing, such as installment loans, now-pay-later solutions, and store-branded credit cards.

Vicki Turjan, President and COO of Versatile Credit, also works to reduce time spent in-store while making credit more accessible. Last year, Versatile launched a patented contactless finance solution called Snap Sign and Snap to Apply, which works on a consumer’s own mobile device without the risk of fraud or phishing typically associated with QR codes. Her retail partners, she said, call it “game-changing innovation.”

“More recently, we’ve seen an increased focus on data and analytics and the retailer’s desire to really understand how their credit program is performing,” she added. “We launched Versatile Insight so that they can, in real time, see where and how consumers are applying and the success rate of applications at all levels. Where in the past this information was provided in a piecemeal fashion by individual lenders, we present it in a simple, easy-to-digest format.

“Versatile has also extended our third-party integrations and improved platform extensibility to provide additional functionality, such as improved identity verification, soft checkouts, and prequalification. “

Turjan noted that Versatile incorporates dynamic cascading routing to effectively present the consumer with the best possible financing options.

“Our platform allows these options to be presented to buyers in a transparent manner while saving customer and retailer time, and keeping the experience safe and secure,” she said. “We have found that our merchant partners continue to focus on providing shoppers with a unified omnichannel experience, no matter how and where they choose to shop. “

Simple and transparent experience

Wells Fargo Retail Services recently launched its Scan to Apply process, which allows customers to access their credit application by scanning QR codes while shopping at a point of sale. According to senior vice president Steve Jermier, this combines better access to credit with reduced physical exposure during the payment process.

“In addition, we have launched a number of enhancements that improve the online shopping experience for consumers,” he said. “Our payment estimator, credit application, and payment process are now live and leveraging our SDK to provide a seamless experience for the buyer. It removes “redirects” and pop-ups, and makes customers feel like they’re staying on the merchant’s site for their entire shopping experience.

“We have not seen any significant change in the need for special offers from our respective customers,” he added. “We believe the migration to a more digital shopping experience is here to stay. In the furniture industry, over the past 18+ months, digital capabilities seem to be driving all conversations with our customers. Our job is to create a simple and transparent financial experience for our customers and to take advantage of this technology in their stores. “

Craig Leffew, vice president of sales at Koalafi, reports that his company has launched a new platform designed to help retailers serve more of their customers with a single, standalone financing solution. This platform, he said, offers a range of financial products to customers with excellent or no credit, through a streamlined app.

“We continue to see an increased need for an omnichannel presence,” he said. “However, in retail, e-commerce still only accounts for 15% of total sales. This is why you even see e-commerce focused companies like Amazon considering opening big stores. Financing providers need to deliver solutions that can respond to customers wherever they are and help them make a seamless transition between in-store and online purchases.

Retailers continue to see staff shortages, Leffew added, intensifying the need for financing solutions that a customer can access through a single app.

“This saves retailers the time spent managing different vendors, helping customers navigate multiple apps, and trying to track different products and platforms from different companies,” he said. “With Koalafi, retailers have more time for their customers or other pressing issues.”

Ready for everything

Ryan Slobodian, executive vice president of Snap Finance, concluded that the current outlook for consumer credit is volatile, due to declining demand for furniture caused by supply chain issues such as less selection, longer delivery times than customers are willing to tolerate and less foot traffic. .

“All of this affects furniture retailers of all sizes,” he said. “Next year, the arrears in the ports should normalize and we hope for some stabilization of energy prices. It will take some time.

“In the meantime, we continue to refine our decision-making model to deliver the best approval rates, so that retailers can close deals. Our SnapExpress product with the virtual card continues to intrigue retailers, and we see more desire to live with COVID-19, ”Slobodian said.

“People shop, have fun, live a normal life. They keep asking for higher approval amounts and longer terms. We have exciting software that gives them more flexibility, with a more personalized approach.